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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Institutional Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 5
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Institutional Shares 14
Administration of the Fund 14
Brokerage Transactions 14
Net Asset Value 15
Investing in Institutional Shares 15
Share Purchases 15
Minimum Investment Required 15
What Shares Cost 15
Systematic Investment Program 16
Confirmations and Account Statements 16
Dividends 16
Capital Gains 16
Redeeming Institutional Shares 16
Through a Financial Institution 16
Telephone Redemption 16
Written Requests 16
Systematic Withdrawal Program 17
Accounts with Low Balances 17
Shareholder Information 17
Voting Rights 17
Tax Information 17
Federal Income Tax 17
State and Local Taxes 17
Performance Information 18
Other Classes of Shares 18
Financial Highlights -- Select Shares 19
Financial Statements 20
Report of Independent Public Accountants 44
Appendix 45
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
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<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.25%
12b-1 Fee None
Total Other Expenses 0.55%
Shareholder Services Fee (after waiver)(2) 0.05%
Total Operating Expenses(3) 0.80%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholders services fee. The shareholder
service provider can terminate this voluntary waiver at any time at its
sole discretion. The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.50% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see Investing in Institutional Shares and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period
1 Year $ 8
3 Years $26
5 Years $44
10 Years $99
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
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FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 44.
YEAR ENDED NOVEMBER 30,
----------------------------------------------------
1997 1996 1995 1994(A)
------- ------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.56 $10.54 $ 9.76 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.60 0.59 0.62 0.31
- ---------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency, and futures contracts 0.30 0.12 0.78 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 0.90 0.71 1.40 0.06
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from
net investment income (0.62) (0.62) (0.62) (0.30)
- ---------------------------------------------
Distributions from net realized gain
on investments and foreign currency
transactions, and futures contracts (0.07) (0.07) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.69) (0.69) (0.62) (0.30)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.77 $10.56 $10.54 $ 9.76
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 8.88% 6.98% 14.74% 0.55%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.80% 0.80% 0.75% 0.67%*
- ---------------------------------------------
Net investment income 5.63% 5.72% 6.26% 6.02%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.70% 0.80% 1.06% 1.01%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $71,058 $67,122 $50,852 $34,692
- ---------------------------------------------
Average commission rate paid(d) $0.0053 $0.0003 -- --
- ---------------------------------------------
Portfolio turnover 99% 164% 165% 153%
- ---------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from the start of business,
January 18, 1994 to May 24, 1994, the net investment income was distributed
to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
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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 Portfolio 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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longermaturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested.
The Fund will invest only in CMOs which are rated AAA or Aaa by an NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICs")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed-income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's Investors Service, Inc. ("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);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
EQUITY SECURITIES
Common stocks represent ownership interest in a corporation. Unlike bonds, which
are debt securities, common stocks have neither fixed maturity dates nor fixed
schedules of promised payments.
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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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.
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 been a portfolio
manager of the Fund 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.
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:
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE
FEE FEDERATED FUNDS
- ---------- ------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 44.
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1997 1996 1995 1994(A)
------- ------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.56 $10.54 $ 9.77 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.51 0.53 0.48 0.28
- ---------------------------------------------
Net realized and unrealized gain (loss) on
investments, foreign currency transactions,
and futures contracts 0.31 0.10 0.83 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 0.82 0.63 1.31 0.03
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.54) (0.54) (0.54) (0.26)
- ---------------------------------------------
Distributions from net realized gain
on investments, foreign currency transactions,
and futures contracts (0.07) (0.07) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.61) (0.61) (0.54) (0.26)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.77 $10.56 $10.54 $ 9.77
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 8.14% 6.23% 13.76% 0.26%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.50% 1.50% 1.50% 1.42%*
- ---------------------------------------------
Net investment income 4.93% 5.02% 5.56% 5.24%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.75% 0.85% 1.06% 1.26%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets,
end of period (000 omitted) $36,608 $25,459 $13,927 $3,198
- ---------------------------------------------
Average commission rate paid(d) $0.0053 $0.0003 -- --
- ---------------------------------------------
Portfolio turnover 99% 164% 165% 153%
- ---------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from the start of business,
January 27, 1994 to May 24, 1994, the net investment income was distributed
to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED INCOME FUND
NOVEMBER 30, 1997
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
STOCKS -- 14.6%
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- 10.0%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
7,100 Archer-Daniels-Midland Co. $151,763
--------------------------------------------------------------------------------------------------
1,300 Dow Chemical Co. 128,375
--------------------------------------------------------------------------------------------------
7,600 LTV Corporation 84,550
--------------------------------------------------------------------------------------------------
4,400 Louisiana-Pacific Corp. 88,825
-------------------------------------------------------------------------------------------------- ------------
Total 453,513
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,400 Eastman Kodak Co. 84,875
--------------------------------------------------------------------------------------------------
1,800 General Motors Corp., Class H 120,600
--------------------------------------------------------------------------------------------------
1,200 General Motors Corp. 73,200
--------------------------------------------------------------------------------------------------
4,100 Rubbermaid, Inc. 99,425
-------------------------------------------------------------------------------------------------- ------------
Total 378,100
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
1,000 CPC International, Inc. 103,375
--------------------------------------------------------------------------------------------------
25 (a)Hosiery Corp. of America 175
--------------------------------------------------------------------------------------------------
5,600 PepsiCo, Inc. 206,500
--------------------------------------------------------------------------------------------------
1,800 Philip Morris Cos., Inc. 78,300
--------------------------------------------------------------------------------------------------
2,100 RJR Nabisco Holdings Corp. 76,519
--------------------------------------------------------------------------------------------------
5,400 Russell Corp. 165,038
--------------------------------------------------------------------------------------------------
2,600 Sara Lee Corp. 137,475
--------------------------------------------------------------------------------------------------
3,600 Unilever N.V. 209,025
-------------------------------------------------------------------------------------------------- ------------
Total 976,407
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
1,200 Atlantic Richfield Co. 97,800
--------------------------------------------------------------------------------------------------
2,000 Chevron Corp. 160,375
--------------------------------------------------------------------------------------------------
2,500 Exxon Corp. 152,500
--------------------------------------------------------------------------------------------------
4,300 Occidental Petroleum Corp. 127,656
--------------------------------------------------------------------------------------------------
1,600 Royal Dutch Petroleum Co., ADR 84,300
--------------------------------------------------------------------------------------------------
4,900 Sun Co., Inc. 198,144
--------------------------------------------------------------------------------------------------
2,800 Texaco, Inc. 158,200
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,000 USX-Marathon Group $171,250
--------------------------------------------------------------------------------------------------
3,600 YPF Sociedad Anonima, ADR 120,825
-------------------------------------------------------------------------------------------------- ------------
Total 1,271,050
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
2,300 Allmerica Financial Corp. 111,550
--------------------------------------------------------------------------------------------------
1,348 Allstate Corp. 115,760
--------------------------------------------------------------------------------------------------
3,000 Bear Stearns Cos., Inc. 124,500
--------------------------------------------------------------------------------------------------
2,800 Block (H&R), Inc. 114,800
--------------------------------------------------------------------------------------------------
2,900 Boston Properties, Inc. 94,613
--------------------------------------------------------------------------------------------------
1,200 CIGNA Corp. 200,700
--------------------------------------------------------------------------------------------------
500 General RE Corp. 99,250
--------------------------------------------------------------------------------------------------
2,200 Marsh & McLennan Cos., Inc. 163,763
--------------------------------------------------------------------------------------------------
2,200 Morgan Stanley, Dean Witter, Discover & Co. 119,488
--------------------------------------------------------------------------------------------------
2,400 Travelers Group, Inc. 121,200
-------------------------------------------------------------------------------------------------- ------------
Total 1,265,624
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
2,200 Abbott Laboratories 143,000
--------------------------------------------------------------------------------------------------
6,800 (a)Beverly Enterprises, Inc. 115,600
--------------------------------------------------------------------------------------------------
2,600 Bristol-Myers Squibb Co. 243,425
--------------------------------------------------------------------------------------------------
1,200 Merck & Co., Inc. 113,475
--------------------------------------------------------------------------------------------------
3,400 (a)Perrigo Co. 48,450
--------------------------------------------------------------------------------------------------
5,800 Pharmacia & Upjohn, Inc. 195,750
--------------------------------------------------------------------------------------------------
2,000 Smithkline Beecham, ADR 99,250
--------------------------------------------------------------------------------------------------
4,000 U.S. Surgical Corp. 105,500
--------------------------------------------------------------------------------------------------
1,900 United Healthcare Corp. 98,919
-------------------------------------------------------------------------------------------------- ------------
Total 1,163,369
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
6,600 ITT Industries, Inc. 209,550
--------------------------------------------------------------------------------------------------
4,200 Ingersoll-Rand Co. 171,675
--------------------------------------------------------------------------------------------------
2,900 Johnson Controls, Inc. 132,856
--------------------------------------------------------------------------------------------------
4,100 (a)Lexmark Intl. Group, Class A 130,688
--------------------------------------------------------------------------------------------------
800 Loews Corp. 84,900
--------------------------------------------------------------------------------------------------
2,000 PACCAR, Inc. 110,000
-------------------------------------------------------------------------------------------------- ------------
Total 839,669
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
2,400 Dayton-Hudson Corp. $159,450
--------------------------------------------------------------------------------------------------
15,300 (a)K Mart Corp. 192,206
--------------------------------------------------------------------------------------------------
6,300 Wal-Mart Stores, Inc. 251,606
-------------------------------------------------------------------------------------------------- ------------
Total 603,262
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
900 ABB AB, ADR 111,600
--------------------------------------------------------------------------------------------------
2,800 Browning-Ferris Industries, Inc. 99,925
--------------------------------------------------------------------------------------------------
800 News Corp., Ltd., ADR 17,350
--------------------------------------------------------------------------------------------------
10,900 News Corp., Ltd., ADR 215,275
--------------------------------------------------------------------------------------------------
5,300 Readers Digest Association, Inc., Class A 126,869
--------------------------------------------------------------------------------------------------
2,348 (a)TCI Ventures Group, Class A 53,124
--------------------------------------------------------------------------------------------------
560 (a)Tricon Global Restaurants, Inc. 18,935
--------------------------------------------------------------------------------------------------
2,800 (a)Viacom, Inc., Class A 97,300
--------------------------------------------------------------------------------------------------
1,800 (a)Viacom, Inc., Class B 63,000
--------------------------------------------------------------------------------------------------
7,700 Waste Management, Inc. 189,613
-------------------------------------------------------------------------------------------------- ------------
Total 992,991
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
3,200 AMP, Inc. 139,000
--------------------------------------------------------------------------------------------------
2,800 (a)Cabletron Systems, Inc. 64,400
--------------------------------------------------------------------------------------------------
5,600 First Data Corp. 158,550
--------------------------------------------------------------------------------------------------
1,200 International Business Machines Corp. 131,475
--------------------------------------------------------------------------------------------------
900 Matsushita Electric Industrial Co., ADR 139,556
--------------------------------------------------------------------------------------------------
12,400 (a)Novell, Inc. 114,700
--------------------------------------------------------------------------------------------------
1,300 Raytheon Co. 72,719
--------------------------------------------------------------------------------------------------
4,300 (a)Seagate Technology, Inc. 97,556
--------------------------------------------------------------------------------------------------
2,600 (a) Storage Technology Corp. 167,863
-------------------------------------------------------------------------------------------------- ------------
Total 1,085,819
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
38 (a)NEXTEL Communications, Inc., Class A 960
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
3,000 CNF Transporation, Inc. 130,500
--------------------------------------------------------------------------------------------------
2,935 KLM Royal Dutch Airlines 105,660
--------------------------------------------------------------------------------------------------
2,700 Ryder Systems, Inc. 98,044
-------------------------------------------------------------------------------------------------- ------------
Total 334,204
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITIES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
2,300 CMS Energy Corp. $ 90,563
--------------------------------------------------------------------------------------------------
1,700 Coastal Corp. 99,556
--------------------------------------------------------------------------------------------------
1,600 Columbia Gas System, Inc. 116,400
--------------------------------------------------------------------------------------------------
4,300 Entergy Corp. 111,800
--------------------------------------------------------------------------------------------------
1,700 GTE Corp. 85,956
--------------------------------------------------------------------------------------------------
4,300 Houston Industries, Inc. 101,856
--------------------------------------------------------------------------------------------------
5,700 MCI Communications Corp. 250,444
--------------------------------------------------------------------------------------------------
4,900 P G & E Corp. 138,425
--------------------------------------------------------------------------------------------------
2,900 Public Service Enterprises Group, Inc. 84,644
--------------------------------------------------------------------------------------------------
6,852 (a)Tele-Communications, Inc., Class A 156,954
--------------------------------------------------------------------------------------------------
2,700 U.S. West, Inc. 122,006
-------------------------------------------------------------------------------------------------- ------------
Total 1,358,604
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE COMPANY 10,723,572
-------------------------------------------------------------------------------------------------- ------------
UTILITY STOCKS -- 4.6%
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: CENTRAL -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
4,300 American Electric Power Co., Inc. 213,119
--------------------------------------------------------------------------------------------------
5,200 CMS Energy Corp. 204,750
--------------------------------------------------------------------------------------------------
5,200 Cinergy Corp. 185,250
--------------------------------------------------------------------------------------------------
7,500 DPL, Inc. 196,875
--------------------------------------------------------------------------------------------------
4,400 NIPSCO Industries, Inc. 205,975
--------------------------------------------------------------------------------------------------
1,700 Northern States Power Co. 93,288
-------------------------------------------------------------------------------------------------- ------------
Total 1,099,257
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: EAST -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
3,400 Baltimore Gas & Electric Co. 104,338
--------------------------------------------------------------------------------------------------
6,600 DQE, Inc. 219,038
-------------------------------------------------------------------------------------------------- ------------
Total 323,376
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: SOUTH -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
2,500 Carolina Power & Light Co. 93,438
--------------------------------------------------------------------------------------------------
2,500 Dominion Resources, Inc. 97,188
--------------------------------------------------------------------------------------------------
5,800 Duke Energy Corp. 301,600
--------------------------------------------------------------------------------------------------
4,900 FPL Group, Inc. 274,094
--------------------------------------------------------------------------------------------------
6,300 Houston Industries, Inc. 149,231
--------------------------------------------------------------------------------------------------
12,500 Southern Co. 300,000
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
SHARES OR UNITS
OR PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITY STOCKS-- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: SOUTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
7,200 TECO Energy, Inc. $184,500
--------------------------------------------------------------------------------------------------
4,000 Texas Utilities Co. 160,000
-------------------------------------------------------------------------------------------------- ------------
Total 1,560,051
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: WEST -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
5,600 Edison International 150,150
--------------------------------------------------------------------------------------------------
7,500 P G & E Corp. 211,875
--------------------------------------------------------------------------------------------------
6,200 Pacificorp 144,538
--------------------------------------------------------------------------------------------------
6,100 Pinnacle West Capital Corp. 235,231
-------------------------------------------------------------------------------------------------- ------------
Total 741,794
-------------------------------------------------------------------------------------------------- ------------
NATURAL GAS DISTRIBUTION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
2,500 Consolidated Natural Gas Co. 150,938
--------------------------------------------------------------------------------------------------
5,900 MCN Corp. 225,306
--------------------------------------------------------------------------------------------------
4,100 Pacific Enterprises 145,038
-------------------------------------------------------------------------------------------------- ------------
Total 521,282
-------------------------------------------------------------------------------------------------- ------------
OIL/GAS TRANSMISSION -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
1,700 Coastal Corp. 99,556
--------------------------------------------------------------------------------------------------
2,000 Columbia Gas System, Inc. 145,500
--------------------------------------------------------------------------------------------------
5,400 Enron Corp. 209,250
--------------------------------------------------------------------------------------------------
2,600 Sonat, Inc. 113,263
--------------------------------------------------------------------------------------------------
4,300 Williams Companies, Inc. 229,781
-------------------------------------------------------------------------------------------------- ------------
Total 797,350
-------------------------------------------------------------------------------------------------- ------------
TOTAL UTILITY STOCKS 5,043,110
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $13,545,781) 15,766,682
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 87.7%
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 44.7%
- --------------------------------------------------------------------------------------------------------------------
U.S. TREASURY -- 36.0%
- --------------------------------------------------------------------------------------------------------------------
$6,060,000 United States Treasury Bond, 7.25%, 5/15/2004 6,503,350
--------------------------------------------------------------------------------------------------
4,200,000 United States Treasury Bond, 8.125%, 5/15/2021 5,226,522
--------------------------------------------------------------------------------------------------
11,698,000 United States Treasury Note, 5.75%, 8/15/2003 11,635,065
--------------------------------------------------------------------------------------------------
1,000,000 United States Treasury Note, 5.875%, 2/15/2004 1,001,490
--------------------------------------------------------------------------------------------------
6,840,000 United States Treasury Note, 6.125%, 8/15/2007 6,975,637
--------------------------------------------------------------------------------------------------
7,125,000 United States Treasury Note, 6.50%, 10/15/2006 7,410,998
-------------------------------------------------------------------------------------------------- ------------
Total 38,753,062
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
(D)REPURCHASE AGREEMENTS -- 8.7%
- --------------------------------------------------------------------------------------------------------------------
$7,380,000 BT Securities Corp., 5.730%, dated 11/28/1997, due 12/1/1997 $7,380,000
--------------------------------------------------------------------------------------------------
2,000,000 (e)UBS Securities, Inc., 5.700%, dated 11/24/1997, due 1/14/1998 2,000,000
-------------------------------------------------------------------------------------------------- ------------
Total (at amortized cost) 9,380,000
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 48,133,062
-------------------------------------------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES -- 26.9%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 26.9%
- --------------------------------------------------------------------------------------------------------------------
45,554 Federal Home Loan Mortgage Corp., 9.50%, 6/1/2021 49,497
--------------------------------------------------------------------------------------------------
105,103 Federal Home Loan Mortgage Corp., 9.50%, 4/1/2021 113,347
--------------------------------------------------------------------------------------------------
405,055 Federal Home Loan Mortgage Corp., 7.50%, 5/1/2024 415,307
--------------------------------------------------------------------------------------------------
214,598 Federal Home Loan Mortgage Corp., 7.00%, 7/1/2024 216,542
--------------------------------------------------------------------------------------------------
927,004 Federal Home Loan Mortgage Corp., 6.50%, 9/1/2025 915,130
--------------------------------------------------------------------------------------------------
942,107 Federal Home Loan Mortgage Corp., 7.00%, 2/1/2026 947,703
--------------------------------------------------------------------------------------------------
3,050,000 Federal Home Loan Mortgage Corp., 6.00%, 11/1/2027 2,986,133
--------------------------------------------------------------------------------------------------
810,908 Federal Home Loan Mortgage Corp., 6.50%, 4/1/2026 802,297
--------------------------------------------------------------------------------------------------
811,484 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 829,491
--------------------------------------------------------------------------------------------------
1,100,169 Federal Home Loan Mortgage Corp., 6.50%, 3/1/2011 1,097,419
--------------------------------------------------------------------------------------------------
294,334 Federal Home Loan Mortgage Corp., 8.00%, 9/1/2010 304,635
--------------------------------------------------------------------------------------------------
640,090 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 648,488
--------------------------------------------------------------------------------------------------
217,045 Federal Home Loan Mortgage Corp., 6.50%, 5/1/2011 216,502
--------------------------------------------------------------------------------------------------
888,649 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2011 910,314
--------------------------------------------------------------------------------------------------
583,363 Federal Home Loan Mortgage Corp., 6.00%, 5/1/2003 577,529
--------------------------------------------------------------------------------------------------
396,177 Federal National Mortgage Association, 7.00%, 5/1/2001 400,138
--------------------------------------------------------------------------------------------------
441,526 Federal National Mortgage Association, 7.00%, 7/1/2024 444,701
--------------------------------------------------------------------------------------------------
688,082 Federal National Mortgage Association, 8.50%, 7/1/2024 721,413
--------------------------------------------------------------------------------------------------
531,956 Federal National Mortgage Association, 7.50%, 10/1/2011 544,425
--------------------------------------------------------------------------------------------------
986,519 Federal National Mortgage Association, 7.00%, 8/1/2027 988,058
--------------------------------------------------------------------------------------------------
359,388 Federal National Mortgage Association, 8.00%, 11/1/2024 372,617
--------------------------------------------------------------------------------------------------
332,222 Federal National Mortgage Association, 9.00%, 2/1/2025 353,610
--------------------------------------------------------------------------------------------------
122,572 Federal National Mortgage Association, 8.50%, 2/1/2025 128,394
--------------------------------------------------------------------------------------------------
772,417 Federal National Mortgage Association, 7.50%, 7/1/2025 790,523
--------------------------------------------------------------------------------------------------
875,656 Federal National Mortgage Association, 7.00%, 7/1/2025 880,857
--------------------------------------------------------------------------------------------------
906,614 Federal National Mortgage Association, 6.00%, 3/1/2011 891,455
--------------------------------------------------------------------------------------------------
887,172 Federal National Mortgage Association, 6.50%, 2/1/2026 871,833
--------------------------------------------------------------------------------------------------
954,143 Federal National Mortgage Association, 7.50%, 10/1/2026 974,419
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$409,875 Federal National Mortgage Association, 7.00%, 8/1/2011 $414,486
--------------------------------------------------------------------------------------------------
1,155,724 Federal National Mortgage Association, 8.00%, 5/1/2027 1,196,394
--------------------------------------------------------------------------------------------------
282,026 Federal National Mortgage Association, 10.50%, 1/1/2021 315,429
--------------------------------------------------------------------------------------------------
2,000,000 (c)Federal National Mortgage Association TBA, 8.00% 2,068,740
--------------------------------------------------------------------------------------------------
891,834 Government National Mortgage Association, 8.00%, 6/15/2022 927,507
--------------------------------------------------------------------------------------------------
823,193 Government National Mortgage Association, 7.00%, 10/15/2023 828,083
--------------------------------------------------------------------------------------------------
405,694 Government National Mortgage Association, 8.50%, 10/15/2024 426,741
--------------------------------------------------------------------------------------------------
1,437,992 Government National Mortgage Association, 7.50%, 3/15/2026 1,468,103
--------------------------------------------------------------------------------------------------
579,234 Government National Mortgage Association, 7.00%, 7/15/2024 582,675
--------------------------------------------------------------------------------------------------
1,229,833 Government National Mortgage Association, 9.00%, 11/15/2017 1,334,369
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES 28,955,304
-------------------------------------------------------------------------------------------------- ------------
HIGH YIELD BONDS -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
38,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 42,370
--------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 56,750
-------------------------------------------------------------------------------------------------- ------------
Total 99,120
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 First Nationwide Escrow , Sr. Sub. Note, 10.625%, 10/1/2003 55,875
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 262 PIK Pfd., 11.375% 30,916
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 500 PIK Pfd., Series A, 12.25% 70,250
--------------------------------------------------------------------------------------------------
50,000 (b)Fox/Liberty Networks, LLC, Sr. Disc. Note, 8/15/2007 31,375
--------------------------------------------------------------------------------------------------
(b)Sinclair Broadcast Group, Inc., 500 Pfd., $11.625 55,250
--------------------------------------------------------------------------------------------------
25,000 Sullivan Broadcasting, Sr. Sub. Note, 10.25%, 12/15/2005 26,750
-------------------------------------------------------------------------------------------------- ------------
Total 214,541
-------------------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)Dialog Corporation PLC, Sr. Sub. Note, 11.00%, 11/15/2007 51,125
--------------------------------------------------------------------------------------------------
32,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 35,840
--------------------------------------------------------------------------------------------------
17,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 19,423
-------------------------------------------------------------------------------------------------- ------------
Total 106,388
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 54,375
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
50,000 (b)Diamond Cable Comm. PLC, Sr. Disc. Note, 2/15/2007 33,250
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$25,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 $20,875
--------------------------------------------------------------------------------------------------
50,000 International Cabletel, Sr. Defd. Cpn. Note, 2/1/2006 38,375
--------------------------------------------------------------------------------------------------
25,000 Pegasus Media , Note, 12.50%, 7/1/2005 28,625
--------------------------------------------------------------------------------------------------
25,000 Rogers Cablesystems Inc., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 27,375
--------------------------------------------------------------------------------------------------
50,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 38,375
--------------------------------------------------------------------------------------------------
50,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 32,750
-------------------------------------------------------------------------------------------------- ------------
Total 329,750
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 52,625
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Hosiery Corp. Of America, Sr. Sub. Note, 13.75%, 8/1/2002 27,125
--------------------------------------------------------------------------------------------------
25,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 25,188
--------------------------------------------------------------------------------------------------
25,000 Revlon Consumer Products, Sr. Sub. Note, 10.50%, 2/15/2003 26,531
--------------------------------------------------------------------------------------------------
25,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 26,250
-------------------------------------------------------------------------------------------------- ------------
Total 105,094
-------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 54,750
-------------------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 27,875
--------------------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 56,375
-------------------------------------------------------------------------------------------------- ------------
Total 84,250
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 27,875
-------------------------------------------------------------------------------------------------- ------------
FOOD SERVICES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)AmeriServe Food Dist. Inc, Sr. Sub. Note, 10.125%, 7/15/2007 52,000
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 26,750
--------------------------------------------------------------------------------------------------
25,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 27,375
-------------------------------------------------------------------------------------------------- ------------
Total 54,125
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 55,875
--------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 8.625%, 1/15/2007 51,375
-------------------------------------------------------------------------------------------------- ------------
Total 107,250
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HOTELS, MOTELS, INNS & CASINOS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
$25,000 Courtyard By Marriott, Sr. Note, 10.75%, 2/1/2008 $27,188
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 28,125
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 39,000
--------------------------------------------------------------------------------------------------
25,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 27,125
--------------------------------------------------------------------------------------------------
50,000 Premier Parks, Sr. Note, 12.00%, 8/15/2003 55,750
-------------------------------------------------------------------------------------------------- ------------
Total 121,875
-------------------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 53,250
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Forcenergy, Inc., Sr. Sub. Note, 8.50%, 2/15/2007 50,500
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 56,250
-------------------------------------------------------------------------------------------------- ------------
REAL ESTATE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
17,000 Trizec Finance, Sr. Note, 10.875%, 10/15/2005 19,210
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 27,625
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 26,375
--------------------------------------------------------------------------------------------------
25,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 27,531
--------------------------------------------------------------------------------------------------
50,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 54,688
-------------------------------------------------------------------------------------------------- ------------
Total 108,594
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
50,000 American Communications, Sr. Disc. Note, 0/12.75%, 4/1/2006 35,750
--------------------------------------------------------------------------------------------------
50,000 (b)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
50,000 Intermedia Communications, Sr. Disc. Note, 0/12.50%, 5/15/2006 39,000
--------------------------------------------------------------------------------------------------
50,000 (b)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
25,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 21,688
--------------------------------------------------------------------------------------------------
25,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 25,938
--------------------------------------------------------------------------------------------------
50,000 (b)Qwest Communications, Inc., Sr. Disc. Note, 10/15/2007 32,500
--------------------------------------------------------------------------------------------------
50,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 39,813
--------------------------------------------------------------------------------------------------
50,000 (b)Telesystem International, Sr. Disc. Note, 11/1/2007 27,500
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$50,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 $52,375
-------------------------------------------------------------------------------------------------- ------------
Total 386,314
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 27,125
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 604 PIK Pfd., Series A, 11.40% 66,138
-------------------------------------------------------------------------------------------------- ------------
Total 93,263
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 2,315,837
-------------------------------------------------------------------------------------------------- ------------
INVESTMENT GRADE BONDS -- 9.4%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 McDonnell Douglas Finance, Note, 9.40%, 10/15/2001 265,000
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 Chase Manhattan, Sub. Note, 8.00%, 5/1/2005 252,175
--------------------------------------------------------------------------------------------------
200,000 National Bank of Canada, Sub. Note, 8.125%, 8/15/2004 216,458
--------------------------------------------------------------------------------------------------
285,000 PNC Funding Corp, Sub. Note, 6.875%, 7/15/2007 290,273
--------------------------------------------------------------------------------------------------
350,000 Santander Finance Issuances, Bank Guarantee, 7.875%, 4/15/2005 372,761
-------------------------------------------------------------------------------------------------- ------------
Total 1,131,667
-------------------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
100,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 97,881
--------------------------------------------------------------------------------------------------
100,000 Philip Morris, Deb., 8.625%, 3/1/1999 102,933
-------------------------------------------------------------------------------------------------- ------------
Total 200,814
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
175,000 SCI Television, Sr. Secd. Note, 11.00%, 6/30/2005 182,313
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
515,000 TKR Cable Inc., 10.50%, 10/30/2007 573,092
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
350,000 (b)Bayer Corp., Deb., 6.50%, 10/1/2002 353,056
-------------------------------------------------------------------------------------------------- ------------
EDUCATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
300,000 Boston University, 7.625%, 7/15/2097 323,741
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
200,000 Harris Corp, Deb., 10.375%, 12/1/2018 217,546
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- RETAIL -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 Household Finance, Deb., 6.45%, 2/1/2009 244,650
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
$250,000 Green Tree Financial Corp, Sr. Sub. Note, 10.25%, 6/1/2002 $287,138
--------------------------------------------------------------------------------------------------
325,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.375%, 1/15/2007 334,633
--------------------------------------------------------------------------------------------------
100,000 Salomon, Inc., Note, 7.20%, 2/1/2004 102,674
-------------------------------------------------------------------------------------------------- ------------
Total 724,445
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
400,000 Quno Corp., Sr. Note, 9.125%, 5/15/2005 431,000
--------------------------------------------------------------------------------------------------
250,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 272,975
-------------------------------------------------------------------------------------------------- ------------
Total 703,975
-------------------------------------------------------------------------------------------------- ------------
GOVERNMENT AGENCY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 Federal National Mortgage Association, 8.59%, 2/3/2005 251,228
-------------------------------------------------------------------------------------------------- ------------
INSURANCE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
250,000 AFC Capital Trust I, Bond, 8.207%, 2/3/2027 270,660
--------------------------------------------------------------------------------------------------
85,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 89,476
--------------------------------------------------------------------------------------------------
350,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 420,273
--------------------------------------------------------------------------------------------------
265,000 Continental Corp, Note, 8.25%, 4/15/1999 272,637
--------------------------------------------------------------------------------------------------
250,000 Delphi Funding, LLC, 9.31% Capital Securities, Series A 271,665
--------------------------------------------------------------------------------------------------
250,000 Sunamerica Inc, Medium Term Note, 7.34%, 8/30/2005 260,775
--------------------------------------------------------------------------------------------------
250,000 USF&G Corp., Company Guarantee, 8.47%, 1/10/2027 264,578
-------------------------------------------------------------------------------------------------- ------------
Total 1,850,064
-------------------------------------------------------------------------------------------------- ------------
METALS & MINING -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
225,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 237,227
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 USX Corp., Note, 6.375%, 7/15/1998 251,118
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
400,000 News America Holdings, Sr. Note, 7.50%, 3/1/2000 408,924
-------------------------------------------------------------------------------------------------- ------------
RETAILERS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
200,000 Harcourt General, Sr. Deb., 7.20%, 8/1/2027 201,128
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 259,523
-------------------------------------------------------------------------------------------------- ------------
SOVEREIGN GOVERNMENT -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2009 314,919
--------------------------------------------------------------------------------------------------
100,000 Republic of South Africa, Global Bond Deb., 9.625%, 12/15/1999 105,750
--------------------------------------------------------------------------------------------------
250,000 Republic of Colombia, Note, 7.25%, 2/15/2003 238,625
-------------------------------------------------------------------------------------------------- ------------
Total 659,294
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
PRINCIPAL
AMOUNT
OR FOREIGN
CURRENCY VALUE IN
PAR VALUE U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SURFACE TRANSPORTATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
$300,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, $345,825
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
300,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 305,085
--------------------------------------------------------------------------------------------------
250,000 Enersis S.A., Note, 7.40%, 12/1/2016 251,295
--------------------------------------------------------------------------------------------------
300,000 Gulf States Util, FMB, 6.75%, 10/1/1998 300,582
-------------------------------------------------------------------------------------------------- ------------
Total 856,962
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENT GRADE BONDS 10,241,592
-------------------------------------------------------------------------------------------------- ------------
FOREIGN BONDS -- 4.5%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
165,000 Federal National Mortgage Association, 6.50%, 7/10/2002 114,994
--------------------------------------------------------------------------------------------------
74,000 Queensland TreasGlobal Notes, Deb., 10.50%, 5/15/2003 60,571
--------------------------------------------------------------------------------------------------
25,000 West Australia Treas Corp, Local Gov't. Guarantee, 8.00%, 7/15/2003 18,541
-------------------------------------------------------------------------------------------------- ------------
Total 194,106
-------------------------------------------------------------------------------------------------- ------------
BELGIUM FRANC -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
514,000 Belgian Govt., Bond, 6.50%, 3/31/2005 15,024
--------------------------------------------------------------------------------------------------
2,000,000 Belgium Kingdom, 7.75%, 10/15/2004 62,356
-------------------------------------------------------------------------------------------------- ------------
Total 77,380
-------------------------------------------------------------------------------------------------- ------------
CANADIAN DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
167,000 Canada Government, Deb., 6.50%, 6/1/2004 124,050
--------------------------------------------------------------------------------------------------
200,000 Ontario Hydro, 9.00%, 6/24/2002 161,126
--------------------------------------------------------------------------------------------------
34,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 26,919
-------------------------------------------------------------------------------------------------- ------------
Total 312,095
-------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
898,000 Denmark -- Bullet, Bond, 8.00%, 3/15/2006 152,806
--------------------------------------------------------------------------------------------------
600,000 Denmark, 8.00%, 5/15/2003 100,149
-------------------------------------------------------------------------------------------------- ------------
Total 252,955
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
28,000 France O.A.T., Deb., 8.25%, 4/25/2022 39,628
--------------------------------------------------------------------------------------------------
270,000 France O.A.T., Bond, 7.25%, 4/25/2006 51,637
--------------------------------------------------------------------------------------------------
73,000 France O.A.T., Bond, 7.50%, 4/25/2005 91,939
-------------------------------------------------------------------------------------------------- ------------
Total 183,204
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
FOREIGN
CURRENCY VALUE IN
PAR VALUE U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DEUTSCHE MARK -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
45,000 DG-HYPBK 5.75%, 1/22/2007 $ 25,798
--------------------------------------------------------------------------------------------------
79,000 Deutschland Republic, Deb., 6.25%, 1/4/2024 46,083
--------------------------------------------------------------------------------------------------
38,000,000 KFW International Finance, 6.00%, 11/29/1999 329,457
--------------------------------------------------------------------------------------------------
100,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 60,675
--------------------------------------------------------------------------------------------------
600,000 KFW International Finance, 7.00%, 5/12/2000 107,304
--------------------------------------------------------------------------------------------------
700,000 Treuhandanstalt, 7.75%, 10/1/2002 442,149
--------------------------------------------------------------------------------------------------
408,000 Treuhandanstalt, Foreign Gov't. Guarantee, 6.875%, 6/11/2003 250,121
-------------------------------------------------------------------------------------------------- ------------
Total 1,261,587
-------------------------------------------------------------------------------------------------- ------------
GREEK DRACHMA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
11,400,000 Hellenic Republic, FRN 10/23/2003 39,188
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
80,000,000 Btps, Bond, 10.50%, 11/1/2000 52,647
--------------------------------------------------------------------------------------------------
95,000,000 Btps, Deb., 12.00%, 5/18/1999 59,829
--------------------------------------------------------------------------------------------------
480,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 337,027
-------------------------------------------------------------------------------------------------- ------------
Total 449,503
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
24,000,000 Export-Import Bank Japan, 4.375%, 10/1/2003 218,327
--------------------------------------------------------------------------------------------------
10,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 90,842
-------------------------------------------------------------------------------------------------- ------------
Total 309,169
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS GUILDER -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
40,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 21,205
--------------------------------------------------------------------------------------------------
30,000 Bk Ned Gemeenten, Bond, 7.75%, 12/20/2004 17,058
--------------------------------------------------------------------------------------------------
60,000 LKB-global Bd, Bank Guarantee, 6.00%, 1/25/2006 34,857
--------------------------------------------------------------------------------------------------
350,000 Netherlands Government, 5.75%, 1/15/2004 181,314
--------------------------------------------------------------------------------------------------
60,000 Netherlands Government, 6.00%, 1/15/2006 31,430
-------------------------------------------------------------------------------------------------- ------------
Total 285,864
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
41,000 New Zealand Government, 8.00%, 2/15/2001 26,092
--------------------------------------------------------------------------------------------------
70,000 New Zealand Government, Bond, 8.00%, 7/15/1998 43,381
-------------------------------------------------------------------------------------------------- ------------
Total 69,473
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE--0.1%
- --------------------------------------------------------------------------------------------------------------------
330,000 NGB, Bond, 9.00%, 1/31/1999 48,219
--------------------------------------------------------------------------------------------------
420,000 Norwegian Government, Bond, 7.00%, 5/31/2001 62,112
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FEDERATED MANAGED INCOME FUND
FOREIGN
CURRENCY VALUE IN
PAR VALUE U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NORWEGIAN KRONE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
315,000 Norwegian Govt., Foreign Gov't. Guarantee, 5.75%, 11/30/2004 $44,608
-------------------------------------------------------------------------------------------------- ------------
Total 154,939
-------------------------------------------------------------------------------------------------- ------------
PORTUGUESE ESCUDO -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
6,500,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 41,186
-------------------------------------------------------------------------------------------------- ------------
SPANISH PESETA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
20,000,000 Spanish Government, 10.00%, 2/28/2005 168,902
--------------------------------------------------------------------------------------------------
12,000,000 Spanish Govt, Bond, 8.80%, 4/30/2006 96,907
--------------------------------------------------------------------------------------------------
4,340,000 Spanish Govt, Bond, 9.40%, 4/30/1999 30,914
--------------------------------------------------------------------------------------------------
4,950,000 Spanish Govt., Deb., 10.10%, 2/28/2001 38,165
-------------------------------------------------------------------------------------------------- ------------
Total 334,888
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
1,000,000 Stadshypotekskas, Foreign Gov't. Guarantee, Series 1551, 7.50%, 3/17/1999 132,257
--------------------------------------------------------------------------------------------------
900,000 Sweden, 6.00%, 2/9/2005 115,272
-------------------------------------------------------------------------------------------------- ------------
Total 247,529
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
80,000 British Gas PLC, 8.875%, 7/8/2008 150,059
--------------------------------------------------------------------------------------------------
29,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 54,748
--------------------------------------------------------------------------------------------------
175,000 U.K. Conversion, 9.00%, 3/3/2000 306,898
--------------------------------------------------------------------------------------------------
20,000 United Kingdom Treasury, Bond, 7.5%, 12/7/2006 35,942
--------------------------------------------------------------------------------------------------
30,000 United Kingdom Treasury, Bond, 8%, 12/7/2015 58,805
-------------------------------------------------------------------------------------------------- ------------
Total 606,452
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 4,819,518
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $92,921,428) 94,465,313
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $106,467,209)(F) $110,231,995
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $1,062,725 which represents 1.0% of net assets.
(c) These securities are subject to dollar roll transactions.
(d) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Fede rated funds.
(e) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(f) The cost of investments for federal tax purposes amounts to $106,471,306.
The net unrealized appreciation of investments on a federal tax basis
amounts to $3,760,689 which is comprised of $4,528,456 appreciation and
$767,767 depreciation at November 30, 1997.
Certain securities may be classified in multiple categorizations, based on
purpose of individual purchases.
Note: The categories of investments are shown as a percentage of
net assets ($107,665,821) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt FRN -- Floating Rate Note LLC -- Limited
Liability Corporation PIK -- Payment in Kind PLC -- Public Limited Company TBA
- -- To Be Announced
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED INCOME FUND
NOVEMBER 30, 1997
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------
Total investments in securities, at value
(identified and cost $106,467,209, tax cost $106,471,306) $110,231,995
- -----------------------------------------------------------------------------------------
Cash 3,586
- -----------------------------------------------------------------------------------------
Income receivable 1,084,235
- -----------------------------------------------------------------------------------------
Receivable for investments sold 36,127
- -----------------------------------------------------------------------------------------
Receivable for shares sold 378,134
- -----------------------------------------------------------------------------------------
Deferred organizational costs 54,744
- -----------------------------------------------------------------------------------------
Other assets 13,489
- ----------------------------------------------------------------------------------------- -------------
Total assets 111,802,310
- -----------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------
Payable for investments purchased $ 2,000,000
- --------------------------------------------------------------------------
Payable for shares redeemed 9,725
- --------------------------------------------------------------------------
Payable for dollar roll transactions 2,070,000
- --------------------------------------------------------------------------
Payable for taxes withheld 620
- --------------------------------------------------------------------------
Accrued expenses 56,144
- -------------------------------------------------------------------------- ------------
Total liabilities 4,136,489
- ----------------------------------------------------------------------------------------- -------------
NET ASSETS for 9,992,430 shares outstanding $107,665,821
- ----------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------
Paid in capital $102,572,001
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 3,762,617
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investments,foreign currency transactions, and
futures contracts 1,304,978
- -----------------------------------------------------------------------------------------
Undistributed net investment income 26,225
- ----------------------------------------------------------------------------------------- -------------
Total Net Assets $107,665,821
- ----------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -----------------------------------------------------------------------------------------
$71,057,985 [DIVIDED BY] 6,594,928 shares outstanding $10.77
- ----------------------------------------------------------------------------------------- -------------
SELECT SHARES:
- -----------------------------------------------------------------------------------------
$36,607,836 [DIVIDED BY] 3,397,502 shares outstanding $10.77
- ----------------------------------------------------------------------------------------- -------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FEDERATED MANAGED INCOME FUND
YEAR ENDED NOVEMBER 30, 1997
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $937) $ 350,921
- -------------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $1,468) (net of foreign taxes withheld of $1,431) 5,652,834
- -------------------------------------------------------------------------------------------
Total income 6,003,755
- ------------------------------------------------------------------------------------------- ------------
EXPENSES:
- ---------------------------------------------------------------------------
Investment advisory fee $ 696,806
- ---------------------------------------------------------------------------
Administrative personnel and services fee 154,890
- ---------------------------------------------------------------------------
Custodian fees 16,234
- ---------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 97,638
- ---------------------------------------------------------------------------
Directors'/Trustees' fees 4,188
- ---------------------------------------------------------------------------
Auditing fees 16,794
- ---------------------------------------------------------------------------
Legal fees 3,504
- ---------------------------------------------------------------------------
Portfolio accounting fees 72,311
- ---------------------------------------------------------------------------
Distribution services fee -- Select Shares 198,031
- ---------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 166,258
- ---------------------------------------------------------------------------
Shareholder services fee -- Select Shares 66,010
- ---------------------------------------------------------------------------
Share registration costs 37,303
- ---------------------------------------------------------------------------
Printing and postage 39,258
- ---------------------------------------------------------------------------
Insurance premiums 1,474
- ---------------------------------------------------------------------------
Taxes 1,470
- ---------------------------------------------------------------------------
Miscellaneous 20,182
- --------------------------------------------------------------------------- ------------
Total expenses 1,592,351
- ----------------------------------------------------------
Waivers --
- ----------------------------------------------------------
Waiver of investment advisory fee $ (461,157)
- ----------------------------------------------------------
Waiver of distribution services fee -- Select Shares (66,010)
- ----------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (133,007)
- ---------------------------------------------------------- -----------
Total waivers (660,174)
- --------------------------------------------------------------------------- ------------
Net expenses 932,177
- ------------------------------------------------------------------------------------------- ------------
Net investment income 5,071,578
- ------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- -------------------------------------------------------------------------------------------
Net realized gain on investments, foreign currency transactions,
and futures contracts 1,301,274
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency, and futures contracts 1,480,118
- ------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments, foreign currency,
and futures contracts 2,781,392
- ------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $7,852,970
- ------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED INCOME FUND
YEAR ENDED NOVEMBER 30,
-----------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------
OPERATIONS --
- ---------------------------------------------------------
Net investment income $ 5,071,578 $ 4,425,589
- ---------------------------------------------------------
Net realized gain on investments, foreign currency transactions and futures
contracts ($1,326,866 and $629,064, net gains respectively,
as computed for federal tax purposes) 1,301,274 649,318
- ---------------------------------------------------------
Net change in unrealized appreciation/depreciation
of investments and translation of
assets and liabilities in foreign currency
and futures contracts 1,480,118 410,861
- --------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 7,852,970 5,485,768
- --------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS --
- ---------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------
Institutional Shares (3,897,404) (3,457,532)
- ---------------------------------------------------------
Select Shares (1,379,778) (1,037,906)
- ---------------------------------------------------------
Distributions from net realized gains on investments,
foreign currency transactions
and futures contracts
- ---------------------------------------------------------
Institutional Shares (457,124) (332,234)
- ---------------------------------------------------------
Select Shares (172,678) (91,563)
- --------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions
to shareholders (5,906,984) (4,919,235)
- --------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS --
- ---------------------------------------------------------
Proceeds from sale of shares 42,602,074 48,463,331
- ---------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 2,996,006 2,121,547
- ---------------------------------------------------------
Cost of shares redeemed (32,459,813) (23,349,415)
- --------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share transactions 13,138,267 27,235,463
- --------------------------------------------------------- ---------------- ----------------
Change in net assets 15,084,253 27,801,996
- ---------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------
Beginning of period 92,581,568 64,779,572
- --------------------------------------------------------- ---------------- ----------------
End of period (including undistributed net investment
income of $26,225 and $246,961, respectively) $ 107,665,821 $ 92,581,568
- --------------------------------------------------------- ---------------- ----------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED INCOME FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Income Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to seek current income.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are valued at prices furnished by an
independent pricing service. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
With respect to the valuation of foreign securities, trading in foreign
countries may be completed at times which vary from the closing of the New York
Stock Exchange. Therefore, foreign securities are valued at the latest closing
price on the exchange on which they are traded prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the foreign exchange rate in effect at noon,
eastern time, on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
- ---------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET
NET REALIZED GAIN INVESTMENT INCOME
- ----------------- -----------------
$15,132 $(15,132)
Net Investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transactions costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. As of November 30, 1997, the Fund had no outstanding futures
contracts.
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund enters into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date. At November 30, 1997, the Fund had no
outstanding foreign currency commitments.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
- -------------------------------------- --------------------- -----------
AmeriServe Food Dist., Inc. 10/16/1997 $ 52,750
Bayer Corp. 3/21/1996 - 4/17/1996 345,302
Dialog Corporation, PLC 11/10/1997 50,000
Diamond Cable Comm. PLC 2/21/97 32,316
Fox/Liberty Networks, LLC 8/15/1997 32,077
Freeport Terminal (Malta) 7/19/1994 284,196
Hermes Europe Railtel B.V. 8/14/1997 51,094
Metronet Communications 7/18/1997 50,000
Sinclair Boradcasting Group, Inc., Pfd. 3/5/97 50,000
Telesystem International 10/22/1997 30,363
Qwest Communications, Inc. 10/22/1997 33,353
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by Government National Mortgage Association, Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation, in which the
Fund sells mortgage securities to financial institutions and simultaneously
agrees to accept substantially similar (same type, coupon and maturity)
securities at a later date at an agreed upon price. Dollar roll transactions
involve "to be announced" securities and are treated as short-term financing
arrangements which will not exceed twelve months. The Fund will use the proceeds
generated from the transactions to invest in short-term investments, which may
enhance the Fund's current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ---------- ------------ ---------- ------------
Shares sold 2,242,410 $ 23,562,794 2,995,976 $ 31,129,010
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 185,324 1,941,234 135,176 1,403,094
- ------------------------------------------------
Shares redeemed (2,190,519) (22,927,532) (1,600,230) (16,630,503)
- ------------------------------------------------ ---------- ------------ ---------- ------------
Net change resulting from
Institutional Shares transactions 237,215 $ 2,576,496 1,530,922 $ 15,901,601
- ------------------------------------------------ ---------- ------------ ---------- ------------
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ---------- ------------ ---------- ------------
Shares sold 1,793,074 $ 19,039,280 1,668,304 $ 17,334,321
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 100,754 1,054,772 69,234 718,453
- ------------------------------------------------
Shares redeemed (907,794) (9,532,281) (648,056) (6,718,912)
- ------------------------------------------------ ---------- ------------ ---------- ------------
Net change resulting from
Select Share transactions 986,034 $ 10,561,771 1,089,482 $ 11,333,862
- ------------------------------------------------ ---------- ------------ ---------- ------------
Net change resulting from
share transactions 1,223,249 $ 13,138,267 2,620,404 $ 27,235,463
- ------------------------------------------------ ---------- ------------ ---------- ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses of up to
0.75% of average net assets, annually, to compensate FSC. The distributor may
voluntarily choose to waive any portion of its fee. The distributor can modify
or terminate this voluntary waiver at any time at its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $91,334 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five year period following the Fund's effective
date. For the year ended November 30, 1997, the Fund expensed $23,608 of
organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $98,358,513
- ------------------------------------------------ -----------
SALES $88,081,235
- ------------------------------------------------ -----------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
PERCENT OF PERCENT OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- ------------------------ ---------- ------------------------ ----------
Aerospace & Defense 0.3 Healthcare 1.2
Automobile 0.1 Hotels, Motels, Inns & Casinos 0.1
Banking 1.1 Industrial Products & Equipment 0.1
Basic Industry 0.4 Insurance 1.7
Beverage & Tobacco 0.2 Leisure & Entertainment 0.1
Broadcast Radio & T.V. 0.4 Machinery & Equipment 0.1
Business Equipment & Services 0.1 Metals & Mining 0.2
Cable Television 0.9 Natural Gas Distribution 0.5
Chemicals & Plastics 0.3 Oil & Gas 0.3
Clothing & Textiles 0.1 Oil & Gas Transmission 0.7
Consumer Durables 0.4 Printing & Publishing 0.4
Consumer Non-Durables 0.9 Producer Manufacturing 0.8
Consumer Products 0.1 Real Estate 0.1
Ecological Services & Equipment 0.1 Retail Trade 0.8
Education 0.3 Services 1.2
Electrical Utilities 3.5 Sovereign 4.5
Electronics 0.2 Sovereign Government 0.6
Energy Minerals 1.2 Steel 0.1
Finance 1.2 Surface Transportation 0.4
Finance -- Retail 0.2 Technology 1.0
Financial Intermediaries 0.7 Telecommunications & Cellular 0.4
Food Services 0.1 Transportation 0.3
Forest Products & Paper 1.0 Treasury Securities 36.0
Government Agency 24.4 Utilities 2.1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Income Fund (an investment portfolio of Managed Series Trust,
a Massachusetts business trust), including the schedule of portfolio
investments, as of November 30, 1997, and the related statement of operations
for the year then ended, and the statement of changes in net assets, and the
financial highlights (see pages 2 and 19 of the prospectus) for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Income Fund, an investment portfolio of Managed Series Trust,
as of November 30, 1997, the results of its operations for the year then ended,
and the changes in its net assets and its financial highlights for the periods
presented in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] FEDERATED INVESTORS
FEDERATED MANAGED INCOME FUND
Institutional Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust, an Open-End
Management Investment Company
FEDERATED MANAGED
INCOME FUND
INSTITUTIONAL SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank
and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K107
3122013A-IS (1/98)
[RECYCLE LOGO]
RECYCLED PAPER
3160 FMIF/IS PAGE 5 TO FEDERATED INVESTORS
3160P Final.edg Page 79 To Federated Investors
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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Select Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 5
Investment Limitations 10
Trust Information 11
Management of the Trust 11
Distribution of Select Shares 13
Administration of the Fund 14
Brokerage Transactions 14
Net Asset Value 14
Investing in Select Shares 15
Share Purchases 15
Minimum Investment Required 15
What Shares Cost 15
Systematic Investment Program 15
Confirmations and Account Statements 16
Dividends 16
Capital Gains 16
Redeeming Select Shares 16
Through a Financial Institution 16
Telephone Redemption 16
Written Requests 16
Systematic Withdrawal Program 17
Accounts with Low Balances 17
Shareholder Information 17
Voting Rights 17
Tax Information 17
Federal Income Tax 17
State and Local Taxes 17
Performance Information 17
Other Classes of Shares 18
Financial Highlights -- Institutional Shares 19
Financial Statements 20
Report of Independent Public Accountants 44
Appendix 45
SUMMARY OF FUND EXPENSES
SELECT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.25%
12b-1 Fee (after waiver)(2) 0.50%
Total Other Expenses 0.75%
Shareholder Services Fee 0.25%
Total Operating Expenses(3) 1.50%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver of a portion
of the 12b-1 fee. The distributor can terminate this voluntary waiver at any
time at its sole discretion. The maximum 12b-1 fee is 0.75%.
(3) The total operating expenses would have been 2.25% absent the voluntary
waivers of portions of the management fee and the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Select Shares of the Fund will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see Investing in Select Shares and "Trust Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
EXAMPLE
- -----------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 15
3 Years $ 47
5 Years $ 82
10 Years $179
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 44.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.56 $10.54 $ 9.77 $10.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.51 0.53 0.48 0.28
- ------------------------------------------------
Net realized and unrealized gain (loss) on
investments, foreign currency transactions, and
futures contracts 0.31 0.10 0.83 (0.25)
- ------------------------------------------------ ------ ------ ------ ------
Total from
investment operations 0.82 0.63 1.31 0.03
- ------------------------------------------------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from
net investment income (0.54) (0.54) (0.54) (0.26)
- ------------------------------------------------
Distributions from net realized gain on
investments, foreign currency transactions, and
futures contracts (0.07) (0.07) -- --
- ------------------------------------------------ ------ ------ ------ ------
Total distributions (0.61) (0.61) (0.54) (0.26)
- ------------------------------------------------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.77 $10.56 $10.54 $ 9.77
- ------------------------------------------------ ------ ------ ------ ------
TOTAL RETURN(B) 8.14% 6.23% 13.76% 0.26%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 1.50% 1.50% 1.50% 1.42%*
- ------------------------------------------------
Net investment income 4.93% 5.02% 5.56% 5.24%*
- ------------------------------------------------
Expense waiver/reimbursement(c) 0.75% 0.85% 1.06% 1.26%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $36,608 $25,459 $13,927 $3,198
- ------------------------------------------------
Average commission rate paid(d) $0.0053 $0.0003 -- --
- ------------------------------------------------
Portfolio turnover 99% 164% 165% 153%
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from the start of business,
January 27, 1994 to May 24, 1994, the net investment income was distributed
to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
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 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 Portfolio 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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested.
The Fund will invest only in CMOs which are rated AAA or Aaa by an NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed-income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's Investors Service, Inc. ("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);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
EQUITY SECURITIES
Common stocks represent ownership interest in a corporation. Unlike bonds, which
are debt securities, common stocks have neither fixed maturity dates nor fixed
schedules of promised payments.
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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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 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.
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.
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 been a portfolio
manager of the Fund 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.
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.
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 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
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
FEE ASSETS OF THE FEDERATED FUNDS
-------- -------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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.
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 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
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
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 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
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 $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
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 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.
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants on page 44.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.56 $10.54 $ 9.76 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.60 0.59 0.62 0.31
- ---------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency, and futures contracts 0.30 0.12 0.78 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 0.90 0.71 1.40 0.06
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from
net investment income (0.62) (0.62) (0.62) (0.30)
- ---------------------------------------------
Distributions from net realized gain on
investments and foreign currency transactions,
and futures contracts (0.07) (0.07) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.69) (0.69) (0.62) (0.30)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $10.77 $10.56 $10.54 $ 9.76
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 8.88% 6.98% 14.74% 0.55%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.80% 0.80% 0.75% 0.67%*
- ---------------------------------------------
Net investment income 5.63% 5.72% 6.26% 6.02%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.70% 0.80% 1.06% 1.01%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $71,058 $67,122 $50,852 $34,692
- ---------------------------------------------
Average commission rate paid(d) $0.0053 $0.0003 -- --
- ---------------------------------------------
Portfolio turnover 99% 164% 165% 153%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from the start of business,
January 18, 1994 to May 24, 1994, the net investment income was distributed
to the Fund's adviser.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED INCOME FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- ---------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
STOCKS -- 14.6%
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- 10.0%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
7,100 Archer-Daniels-Midland Co. $151,763
--------------------------------------------------------------------------------------------------
1,300 Dow Chemical Co. 128,375
--------------------------------------------------------------------------------------------------
7,600 LTV Corporation 84,550
--------------------------------------------------------------------------------------------------
4,400 Louisiana-Pacific Corp. 88,825
-------------------------------------------------------------------------------------------------- ------------
Total 453,513
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,400 Eastman Kodak Co. 84,875
--------------------------------------------------------------------------------------------------
1,800 General Motors Corp., Class H 120,600
--------------------------------------------------------------------------------------------------
1,200 General Motors Corp. 73,200
--------------------------------------------------------------------------------------------------
4,100 Rubbermaid, Inc. 99,425
-------------------------------------------------------------------------------------------------- ------------
Total 378,100
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
1,000 CPC International, Inc. 103,375
--------------------------------------------------------------------------------------------------
25 (a)Hosiery Corp. of America 175
--------------------------------------------------------------------------------------------------
5,600 PepsiCo, Inc. 206,500
--------------------------------------------------------------------------------------------------
1,800 Philip Morris Cos., Inc. 78,300
--------------------------------------------------------------------------------------------------
2,100 RJR Nabisco Holdings Corp. 76,519
--------------------------------------------------------------------------------------------------
5,400 Russell Corp. 165,038
--------------------------------------------------------------------------------------------------
2,600 Sara Lee Corp. 137,475
--------------------------------------------------------------------------------------------------
3,600 Unilever N.V. 209,025
-------------------------------------------------------------------------------------------------- ------------
Total 976,407
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
1,200 Atlantic Richfield Co. 97,800
--------------------------------------------------------------------------------------------------
2,000 Chevron Corp. 160,375
--------------------------------------------------------------------------------------------------
2,500 Exxon Corp. 152,500
--------------------------------------------------------------------------------------------------
4,300 Occidental Petroleum Corp. 127,656
--------------------------------------------------------------------------------------------------
1,600 Royal Dutch Petroleum Co., ADR 84,300
--------------------------------------------------------------------------------------------------
4,900 Sun Co., Inc. 198,144
--------------------------------------------------------------------------------------------------
2,800 Texaco, Inc. 158,200
--------------------------------------------------------------------------------------------------
5,000 USX-Marathon Group 171,250
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- ---------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,600 YPF Sociedad Anonima, ADR $120,825
-------------------------------------------------------------------------------------------------- ------------
Total 1,271,050
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
2,300 Allmerica Financial Corp. 111,550
--------------------------------------------------------------------------------------------------
1,348 Allstate Corp. 115,760
--------------------------------------------------------------------------------------------------
3,000 Bear Stearns Cos., Inc. 124,500
--------------------------------------------------------------------------------------------------
2,800 Block (H&R), Inc. 114,800
--------------------------------------------------------------------------------------------------
2,900 Boston Properties, Inc. 94,613
--------------------------------------------------------------------------------------------------
1,200 CIGNA Corp. 200,700
--------------------------------------------------------------------------------------------------
500 General RE Corp. 99,250
--------------------------------------------------------------------------------------------------
2,200 Marsh & McLennan Cos., Inc. 163,763
--------------------------------------------------------------------------------------------------
2,200 Morgan Stanley, Dean Witter, Discover & Co. 119,488
--------------------------------------------------------------------------------------------------
2,400 Travelers Group, Inc. 121,200
-------------------------------------------------------------------------------------------------- ------------
Total 1,265,624
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
2,200 Abbott Laboratories 143,000
--------------------------------------------------------------------------------------------------
6,800 (a)Beverly Enterprises, Inc. 115,600
--------------------------------------------------------------------------------------------------
2,600 Bristol-Myers Squibb Co. 243,425
--------------------------------------------------------------------------------------------------
1,200 Merck & Co., Inc. 113,475
--------------------------------------------------------------------------------------------------
3,400 (a)Perrigo Co. 48,450
--------------------------------------------------------------------------------------------------
5,800 Pharmacia & Upjohn, Inc. 195,750
--------------------------------------------------------------------------------------------------
2,000 Smithkline Beecham, ADR 99,250
--------------------------------------------------------------------------------------------------
4,000 U.S. Surgical Corp. 105,500
--------------------------------------------------------------------------------------------------
1,900 United Healthcare Corp. 98,919
-------------------------------------------------------------------------------------------------- ------------
Total 1,163,369
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
6,600 ITT Industries, Inc. 209,550
--------------------------------------------------------------------------------------------------
4,200 Ingersoll-Rand Co. 171,675
--------------------------------------------------------------------------------------------------
2,900 Johnson Controls, Inc. 132,856
--------------------------------------------------------------------------------------------------
4,100 (a)Lexmark Intl. Group, Class A 130,688
--------------------------------------------------------------------------------------------------
800 Loews Corp. 84,900
--------------------------------------------------------------------------------------------------
2,000 PACCAR, Inc. 110,000
-------------------------------------------------------------------------------------------------- ------------
Total 839,669
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED INCOME FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- ---------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
2,400 Dayton-Hudson Corp. $159,450
--------------------------------------------------------------------------------------------------
15,300 (a)K Mart Corp. 192,206
--------------------------------------------------------------------------------------------------
6,300 Wal-Mart Stores, Inc. 251,606
-------------------------------------------------------------------------------------------------- ------------
Total 603,262
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
900 ABB AB, ADR 111,600
--------------------------------------------------------------------------------------------------
2,800 Browning-Ferris Industries, Inc. 99,925
--------------------------------------------------------------------------------------------------
800 News Corp., Ltd., ADR 17,350
--------------------------------------------------------------------------------------------------
10,900 News Corp., Ltd., ADR 215,275
--------------------------------------------------------------------------------------------------
5,300 Readers Digest Association, Inc., Class A 126,869
--------------------------------------------------------------------------------------------------
2,348 (a)TCI Ventures Group, Class A 53,124
--------------------------------------------------------------------------------------------------
560 (a)Tricon Global Restaurants, Inc. 18,935
--------------------------------------------------------------------------------------------------
2,800 (a)Viacom, Inc., Class A 97,300
--------------------------------------------------------------------------------------------------
1,800 (a)Viacom, Inc., Class B 63,000
--------------------------------------------------------------------------------------------------
7,700 Waste Management, Inc. 189,613
-------------------------------------------------------------------------------------------------- ------------
Total 992,991
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
3,200 AMP, Inc. 139,000
--------------------------------------------------------------------------------------------------
2,800 (a)Cabletron Systems, Inc. 64,400
--------------------------------------------------------------------------------------------------
5,600 First Data Corp. 158,550
--------------------------------------------------------------------------------------------------
1,200 International Business Machines Corp. 131,475
--------------------------------------------------------------------------------------------------
900 Matsushita Electric Industrial Co., ADR 139,556
--------------------------------------------------------------------------------------------------
12,400 (a)Novell, Inc. 114,700
--------------------------------------------------------------------------------------------------
1,300 Raytheon Co. 72,719
--------------------------------------------------------------------------------------------------
4,300 (a)Seagate Technology, Inc. 97,556
--------------------------------------------------------------------------------------------------
2,600 (a)Storage Technology Corp. 167,863
-------------------------------------------------------------------------------------------------- ------------
Total 1,085,819
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
38 (a)NEXTEL Communications, Inc., Class A 960
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
3,000 CNF Transporation, Inc. 130,500
--------------------------------------------------------------------------------------------------
2,935 KLM Royal Dutch Airlines 105,660
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- ------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,700 Ryder Systems, Inc. $ 98,044
-------------------------------------------------------------------------------------------------- ------------
Total 334,204
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
2,300 CMS Energy Corp. 90,563
--------------------------------------------------------------------------------------------------
1,700 Coastal Corp. 99,556
--------------------------------------------------------------------------------------------------
1,600 Columbia Gas System, Inc. 116,400
--------------------------------------------------------------------------------------------------
4,300 Entergy Corp. 111,800
--------------------------------------------------------------------------------------------------
1,700 GTE Corp. 85,956
--------------------------------------------------------------------------------------------------
4,300 Houston Industries, Inc. 101,856
--------------------------------------------------------------------------------------------------
5,700 MCI Communications Corp. 250,444
----------------------------------------------------------------------------------------------------
4,900 P G & E Corp. 138,425
----------------------------------------------------------------------------------------------------
2,900 Public Service Enterprises Group, Inc. 84,644
----------------------------------------------------------------------------------------------------
6,852 (a)Tele-Communications, Inc., Class A 156,954
----------------------------------------------------------------------------------------------------
2,700 U.S. West, Inc. 122,006
-------------------------------------------------------------------------------------------------- ------------
Total 1,358,604
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE COMPANY 10,723,572
-------------------------------------------------------------------------------------------------- ------------
UTILITY STOCKS -- 4.6%
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: CENTRAL -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
4,300 American Electric Power Co., Inc. 213,119
--------------------------------------------------------------------------------------------------
5,200 CMS Energy Corp. 204,750
--------------------------------------------------------------------------------------------------
5,200 Cinergy Corp. 185,250
--------------------------------------------------------------------------------------------------
7,500 DPL, Inc. 196,875
--------------------------------------------------------------------------------------------------
4,400 NIPSCO Industries, Inc. 205,975
--------------------------------------------------------------------------------------------------
1,700 Northern States Power Co. 93,288
-------------------------------------------------------------------------------------------------- ------------
Total 1,099,257
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: EAST -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
3,400 Baltimore Gas & Electric Co. 104,338
--------------------------------------------------------------------------------------------------
6,600 DQE, Inc. 219,038
-------------------------------------------------------------------------------------------------- ------------
Total 323,376
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: SOUTH -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
2,500 Carolina Power & Light Co. 93,438
--------------------------------------------------------------------------------------------------
2,500 Dominion Resources, Inc. 97,188
--------------------------------------------------------------------------------------------------
5,800 Duke Energy Corp. 301,600
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
SHARES OR UNITS
OR PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: SOUTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
4,900 FPL Group, Inc. $274,094
--------------------------------------------------------------------------------------------------
6,300 Houston Industries, Inc. 149,231
--------------------------------------------------------------------------------------------------
12,500 Southern Co. 300,000
--------------------------------------------------------------------------------------------------
7,200 TECO Energy, Inc. 184,500
--------------------------------------------------------------------------------------------------
4,000 Texas Utilities Co. 160,000
-------------------------------------------------------------------------------------------------- ------------
Total 1,560,051
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: WEST -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
5,600 Edison International 150,150
--------------------------------------------------------------------------------------------------
7,500 P G & E Corp. 211,875
--------------------------------------------------------------------------------------------------
6,200 Pacificorp 144,538
--------------------------------------------------------------------------------------------------
6,100 Pinnacle West Capital Corp. 235,231
-------------------------------------------------------------------------------------------------- ------------
Total 741,794
-------------------------------------------------------------------------------------------------- ------------
NATURAL GAS DISTRIBUTION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
2,500 Consolidated Natural Gas Co. 150,938
--------------------------------------------------------------------------------------------------
5,900 MCN Corp. 225,306
--------------------------------------------------------------------------------------------------
4,100 Pacific Enterprises 145,038
-------------------------------------------------------------------------------------------------- ------------
Total 521,282
-------------------------------------------------------------------------------------------------- ------------
OIL/GAS TRANSMISSION -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
1,700 Coastal Corp. 99,556
--------------------------------------------------------------------------------------------------
2,000 Columbia Gas System, Inc. 145,500
--------------------------------------------------------------------------------------------------
5,400 Enron Corp. 209,250
--------------------------------------------------------------------------------------------------
2,600 Sonat, Inc. 113,263
--------------------------------------------------------------------------------------------------
4,300 Williams Companies, Inc. 229,781
-------------------------------------------------------------------------------------------------- ------------
Total 797,350
-------------------------------------------------------------------------------------------------- ------------
TOTAL UTILITY STOCKS 5,043,110
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $13,545,781) 15,766,682
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 87.7%
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 44.7%
- --------------------------------------------------------------------------------------------------------------------
U.S. TREASURY -- 36.0%
- --------------------------------------------------------------------------------------------------------------------
$6,060,000 United States Treasury Bond, 7.25%, 5/15/2004 6,503,350
--------------------------------------------------------------------------------------------------
4,200,000 United States Treasury Bond, 8.125%, 5/15/2021 5,226,522
--------------------------------------------------------------------------------------------------
11,698,000 United States Treasury Note, 5.75%, 8/15/2003 11,635,065
--------------------------------------------------------------------------------------------------
1,000,000 United States Treasury Note, 5.875%, 2/15/2004 1,001,490
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
U.S. TREASURY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$6,840,000 United States Treasury Note, 6.125%, 8/15/2007 $6,975,637
--------------------------------------------------------------------------------------------------
7,125,000 United States Treasury Note, 6.50%, 10/15/2006 7,410,998
-------------------------------------------------------------------------------------------------- ------------
Total 38,753,062
-------------------------------------------------------------------------------------------------- ------------
(D)REPURCHASE AGREEMENTS -- 8.7%
- --------------------------------------------------------------------------------------------------------------------
7,380,000 BT Securities Corp., 5.730%, dated 11/28/1997, due 12/1/1997 7,380,000
--------------------------------------------------------------------------------------------------
2,000,000 (e)UBS Securities, Inc., 5.700%, dated 11/24/1997, due 1/14/1998 2,000,000
-------------------------------------------------------------------------------------------------- ------------
Total (at amortized cost) 9,380,000
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 48,133,062
-------------------------------------------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES -- 26.9%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 26.9%
- --------------------------------------------------------------------------------------------------------------------
45,554 Federal Home Loan Mortgage Corp., 9.50%, 6/1/2021 49,497
--------------------------------------------------------------------------------------------------
105,103 Federal Home Loan Mortgage Corp., 9.50%, 4/1/2021 113,347
--------------------------------------------------------------------------------------------------
405,055 Federal Home Loan Mortgage Corp., 7.50%, 5/1/2024 415,307
--------------------------------------------------------------------------------------------------
214,598 Federal Home Loan Mortgage Corp., 7.00%, 7/1/2024 216,542
--------------------------------------------------------------------------------------------------
927,004 Federal Home Loan Mortgage Corp., 6.50%, 9/1/2025 915,130
--------------------------------------------------------------------------------------------------
942,107 Federal Home Loan Mortgage Corp., 7.00%, 2/1/2026 947,703
--------------------------------------------------------------------------------------------------
3,050,000 Federal Home Loan Mortgage Corp., 6.00%, 11/1/2027 2,986,133
--------------------------------------------------------------------------------------------------
810,908 Federal Home Loan Mortgage Corp., 6.50%, 4/1/2026 802,297
--------------------------------------------------------------------------------------------------
811,484 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 829,491
--------------------------------------------------------------------------------------------------
1,100,169 Federal Home Loan Mortgage Corp., 6.50%, 3/1/2011 1,097,419
--------------------------------------------------------------------------------------------------
294,334 Federal Home Loan Mortgage Corp., 8.00%, 9/1/2010 304,635
--------------------------------------------------------------------------------------------------
640,090 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 648,488
--------------------------------------------------------------------------------------------------
217,045 Federal Home Loan Mortgage Corp., 6.50%, 5/1/2011 216,502
--------------------------------------------------------------------------------------------------
888,649 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2011 910,314
--------------------------------------------------------------------------------------------------
583,363 Federal Home Loan Mortgage Corp., 6.00%, 5/1/2003 577,529
--------------------------------------------------------------------------------------------------
396,177 Federal National Mortgage Association, 7.00%, 5/1/2001 400,138
--------------------------------------------------------------------------------------------------
441,526 Federal National Mortgage Association, 7.00%, 7/1/2024 444,701
--------------------------------------------------------------------------------------------------
688,082 Federal National Mortgage Association, 8.50%, 7/1/2024 721,413
--------------------------------------------------------------------------------------------------
531,956 Federal National Mortgage Association, 7.50%, 10/1/2011 544,425
--------------------------------------------------------------------------------------------------
986,519 Federal National Mortgage Association, 7.00%, 8/1/2027 988,058
--------------------------------------------------------------------------------------------------
359,388 Federal National Mortgage Association, 8.00%, 11/1/2024 372,617
--------------------------------------------------------------------------------------------------
332,222 Federal National Mortgage Association, 9.00%, 2/1/2025 353,610
--------------------------------------------------------------------------------------------------
122,572 Federal National Mortgage Association, 8.50%, 2/1/2025 128,394
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$772,417 Federal National Mortgage Association, 7.50%, 7/1/2025 $790,523
--------------------------------------------------------------------------------------------------
875,656 Federal National Mortgage Association, 7.00%, 7/1/2025 880,857
--------------------------------------------------------------------------------------------------
906,614 Federal National Mortgage Association, 6.00%, 3/1/2011 891,455
--------------------------------------------------------------------------------------------------
887,172 Federal National Mortgage Association, 6.50%, 2/1/2026 871,833
--------------------------------------------------------------------------------------------------
954,143 Federal National Mortgage Association, 7.50%, 10/1/2026 974,419
--------------------------------------------------------------------------------------------------
409,875 Federal National Mortgage Association, 7.00%, 8/1/2011 414,486
--------------------------------------------------------------------------------------------------
1,155,724 Federal National Mortgage Association, 8.00%, 5/1/2027 1,196,394
--------------------------------------------------------------------------------------------------
282,026 Federal National Mortgage Association, 10.50%, 1/1/2021 315,429
--------------------------------------------------------------------------------------------------
2,000,000 (c)Federal National Mortgage Association TBA, 8.00% 2,068,740
--------------------------------------------------------------------------------------------------
891,834 Government National Mortgage Association, 8.00%, 6/15/2022 927,507
--------------------------------------------------------------------------------------------------
823,193 Government National Mortgage Association, 7.00%, 10/15/2023 828,083
--------------------------------------------------------------------------------------------------
405,694 Government National Mortgage Association, 8.50%, 10/15/2024 426,741
--------------------------------------------------------------------------------------------------
1,437,992 Government National Mortgage Association, 7.50%, 3/15/2026 1,468,103
--------------------------------------------------------------------------------------------------
579,234 Government National Mortgage Association, 7.00%, 7/15/2024 582,675
--------------------------------------------------------------------------------------------------
1,229,833 Government National Mortgage Association, 9.00%, 11/15/2017 1,334,369
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES 28,955,304
-------------------------------------------------------------------------------------------------- ------------
HIGH YIELD BONDS -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
38,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 42,370
--------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 56,750
-------------------------------------------------------------------------------------------------- ------------
Total 99,120
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 First Nationwide Escrow , Sr. Sub. Note, 10.625%, 10/1/2003 55,875
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 262 PIK Pfd., 11.375% 30,916
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 500 PIK Pfd., Series A, 12.25% 70,250
--------------------------------------------------------------------------------------------------
50,000 (b)Fox/Liberty Networks, LLC, Sr. Disc. Note, 8/15/2007 31,375
--------------------------------------------------------------------------------------------------
(b)Sinclair Broadcast Group, Inc., 500 Pfd., $11.625 55,250
--------------------------------------------------------------------------------------------------
25,000 Sullivan Broadcasting, Sr. Sub. Note, 10.25%, 12/15/2005 26,750
-------------------------------------------------------------------------------------------------- ------------
Total 214,541
-------------------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)Dialog Corporation PLC, Sr. Sub. Note, 11.00%, 11/15/2007 51,125
--------------------------------------------------------------------------------------------------
32,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 35,840
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$17,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 $ 19,423
-------------------------------------------------------------------------------------------------- ------------
Total 106,388
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 54,375
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
50,000 (b)Diamond Cable Comm. PLC, Sr. Disc. Note, 2/15/2007 33,250
--------------------------------------------------------------------------------------------------
25,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 20,875
--------------------------------------------------------------------------------------------------
50,000 International Cabletel, Sr. Defd. Cpn. Note, 2/1/2006 38,375
--------------------------------------------------------------------------------------------------
25,000 Pegasus Media , Note, 12.50%, 7/1/2005 28,625
--------------------------------------------------------------------------------------------------
25,000 Rogers Cablesystems Inc., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 27,375
--------------------------------------------------------------------------------------------------
50,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 38,375
--------------------------------------------------------------------------------------------------
50,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 32,750
-------------------------------------------------------------------------------------------------- ------------
Total 329,750
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 52,625
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Hosiery Corp. Of America, Sr. Sub. Note, 13.75%, 8/1/2002 27,125
--------------------------------------------------------------------------------------------------
25,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 25,188
--------------------------------------------------------------------------------------------------
25,000 Revlon Consumer Products, Sr. Sub. Note, 10.50%, 2/15/2003 26,531
--------------------------------------------------------------------------------------------------
25,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 26,250
-------------------------------------------------------------------------------------------------- ------------
Total 105,094
-------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 54,750
-------------------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 27,875
--------------------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 56,375
-------------------------------------------------------------------------------------------------- ------------
Total 84,250
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 27,875
-------------------------------------------------------------------------------------------------- ------------
FOOD SERVICES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)AmeriServe Food Dist. Inc, Sr. Sub. Note, 10.125%, 7/15/2007 52,000
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 26,750
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREST PRODUCTS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$25,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 $27,375
-------------------------------------------------------------------------------------------------- ------------
Total 54,125
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 55,875
--------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 8.625%, 1/15/2007 51,375
-------------------------------------------------------------------------------------------------- ------------
Total 107,250
-------------------------------------------------------------------------------------------------- ------------
HOTELS, MOTELS, INNS & CASINOS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 Courtyard By Marriott, Sr. Note, 10.75%, 2/1/2008 27,188
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 28,125
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 39,000
--------------------------------------------------------------------------------------------------
25,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 27,125
--------------------------------------------------------------------------------------------------
50,000 Premier Parks, Sr. Note, 12.00%, 8/15/2003 55,750
-------------------------------------------------------------------------------------------------- ------------
Total 121,875
-------------------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 53,250
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Forcenergy, Inc., Sr. Sub. Note, 8.50%, 2/15/2007 50,500
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 56,250
-------------------------------------------------------------------------------------------------- ------------
REAL ESTATE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
17,000 Trizec Finance, Sr. Note, 10.875%, 10/15/2005 19,210
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 27,625
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 26,375
--------------------------------------------------------------------------------------------------
25,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 27,531
--------------------------------------------------------------------------------------------------
50,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 54,688
-------------------------------------------------------------------------------------------------- ------------
Total 108,594
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
50,000 American Communications, Sr. Disc. Note, 0/12.75%, 4/1/2006 35,750
--------------------------------------------------------------------------------------------------
50,000 (b)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$50,000 Intermedia Communications, Sr. Disc. Note, 0/12.50%, 5/15/2006 $39,000
--------------------------------------------------------------------------------------------------
50,000 (b)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
25,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 21,688
--------------------------------------------------------------------------------------------------
25,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 25,938
--------------------------------------------------------------------------------------------------
50,000 (b)Qwest Communications, Inc., Sr. Disc. Note, 10/15/2007 32,500
--------------------------------------------------------------------------------------------------
50,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 39,813
--------------------------------------------------------------------------------------------------
50,000 (b)Telesystem International, Sr. Disc. Note, 11/1/2007 27,500
--------------------------------------------------------------------------------------------------
50,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 52,375
-------------------------------------------------------------------------------------------------- ------------
Total 386,314
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 27,125
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 604 PIK Pfd., Series A, 11.40% 66,138
-------------------------------------------------------------------------------------------------- ------------
Total 93,263
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 2,315,837
-------------------------------------------------------------------------------------------------- ------------
INVESTMENT GRADE BONDS -- 9.4%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 McDonnell Douglas Finance, Note, 9.40%, 10/15/2001 265,000
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 Chase Manhattan, Sub. Note, 8.00%, 5/1/2005 252,175
--------------------------------------------------------------------------------------------------
200,000 National Bank of Canada, Sub. Note, 8.125%, 8/15/2004 216,458
--------------------------------------------------------------------------------------------------
285,000 PNC Funding Corp, Sub. Note, 6.875%, 7/15/2007 290,273
--------------------------------------------------------------------------------------------------
350,000 Santander Finance Issuances, Bank Guarantee, 7.875%, 4/15/2005 372,761
-------------------------------------------------------------------------------------------------- ------------
Total 1,131,667
-------------------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
100,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 97,881
--------------------------------------------------------------------------------------------------
100,000 Philip Morris, Deb., 8.625%, 3/1/1999 102,933
-------------------------------------------------------------------------------------------------- ------------
Total 200,814
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
175,000 SCI Television, Sr. Secd. Note, 11.00%, 6/30/2005 182,313
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
515,000 TKR Cable Inc., 10.50%, 10/30/2007 573,092
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
350,000 (b)Bayer Corp., Deb., 6.50%, 10/1/2002 353,056
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
EDUCATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
$300,000 Boston University, 7.625%, 7/15/2097 $323,741
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
200,000 Harris Corp, Deb., 10.375%, 12/1/2018 217,546
-------------------------------------------------------------------------------------------------- ------------
FINANCE - RETAIL -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 Household Finance, Deb., 6.45%, 2/1/2009 244,650
-------------------------------------------------------------------------------------------------- ------------
FINANCIAL INTERMEDIARIES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
250,000 Green Tree Financial Corp, Sr. Sub. Note, 10.25%, 6/1/2002 287,138
--------------------------------------------------------------------------------------------------
325,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.375%, 1/15/2007 334,633
--------------------------------------------------------------------------------------------------
100,000 Salomon, Inc., Note, 7.20%, 2/1/2004 102,674
-------------------------------------------------------------------------------------------------- ------------
Total 724,445
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
400,000 Quno Corp., Sr. Note, 9.125%, 5/15/2005 431,000
--------------------------------------------------------------------------------------------------
250,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 272,975
-------------------------------------------------------------------------------------------------- ------------
Total 703,975
-------------------------------------------------------------------------------------------------- ------------
GOVERNMENT AGENCY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 Federal National Mortgage Association, 8.59%, 2/3/2005 251,228
-------------------------------------------------------------------------------------------------- ------------
INSURANCE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
250,000 AFC Capital Trust I, Bond, 8.207%, 2/3/2027 270,660
--------------------------------------------------------------------------------------------------
85,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 89,476
--------------------------------------------------------------------------------------------------
350,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 420,273
--------------------------------------------------------------------------------------------------
265,000 Continental Corp, Note, 8.25%, 4/15/1999 272,637
--------------------------------------------------------------------------------------------------
250,000 Delphi Funding, LLC, 9.31% Capital Securities, Series A 271,665
--------------------------------------------------------------------------------------------------
250,000 Sunamerica Inc, Medium Term Note, 7.34%, 8/30/2005 260,775
--------------------------------------------------------------------------------------------------
250,000 USF&G Corp., Company Guarantee, 8.47%, 1/10/2027 264,578
-------------------------------------------------------------------------------------------------- ------------
Total 1,850,064
-------------------------------------------------------------------------------------------------- ------------
METALS & MINING -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
225,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 237,227
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 USX Corp., Note, 6.375%, 7/15/1998 251,118
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
400,000 News America Holdings, Sr. Note, 7.50%, 3/1/2000 408,924
-------------------------------------------------------------------------------------------------- ------------
RETAILERS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
200,000 Harcourt General, Sr. Deb., 7.20%, 8/1/2027 201,128
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED INCOME FUND
PRINCIPAL
AMOUNT
OR FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SERVICES -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
$250,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 $259,523
-------------------------------------------------------------------------------------------------- ------------
SOVEREIGN GOVERNMENT -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2009 314,919
--------------------------------------------------------------------------------------------------
100,000 Republic of South Africa, Global Bond Deb., 9.625%, 12/15/1999 105,750
--------------------------------------------------------------------------------------------------
250,000 Republic of Colombia, Note, 7.25%, 2/15/2003 238,625
-------------------------------------------------------------------------------------------------- ------------
Total 659,294
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
300,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 345,825
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
300,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 305,085
--------------------------------------------------------------------------------------------------
250,000 Enersis S.A., Note, 7.40%, 12/1/2016 251,295
--------------------------------------------------------------------------------------------------
300,000 Gulf States Util, FMB, 6.75%, 10/1/1998 300,582
-------------------------------------------------------------------------------------------------- ------------
Total 856,962
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENT GRADE BONDS 10,241,592
-------------------------------------------------------------------------------------------------- ------------
FOREIGN BONDS -- 4.5%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
165,000 Federal National Mortgage Association, 6.50%, 7/10/2002 114,994
--------------------------------------------------------------------------------------------------
74,000 Queensland TreasGlobal Notes, Deb., 10.50%, 5/15/2003 60,571
--------------------------------------------------------------------------------------------------
25,000 West Australia Treas Corp, Local Gov't. Guarantee, 8.00%, 7/15/2003 18,541
-------------------------------------------------------------------------------------------------- ------------
Total 194,106
-------------------------------------------------------------------------------------------------- ------------
BELGIUM FRANC -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
514,000 Belgian Govt., Bond, 6.50%, 3/31/2005 15,024
--------------------------------------------------------------------------------------------------
2,000,000 Belgium Kingdom, 7.75%, 10/15/2004 62,356
-------------------------------------------------------------------------------------------------- ------------
Total 77,380
-------------------------------------------------------------------------------------------------- ------------
CANADIAN DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
167,000 Canada Government, Deb., 6.50%, 6/1/2004 124,050
--------------------------------------------------------------------------------------------------
200,000 Ontario Hydro, 9.00%, 6/24/2002 161,126
--------------------------------------------------------------------------------------------------
34,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 26,919
-------------------------------------------------------------------------------------------------- ------------
Total 312,095
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED INCOME FUND
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DANISH KRONE -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
898,000 Denmark -- Bullet, Bond, 8.00%, 3/15/2006 $152,806
--------------------------------------------------------------------------------------------------
600,000 Denmark, 8.00%, 5/15/2003 100,149
-------------------------------------------------------------------------------------------------- ------------
Total 252,955
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
28,000 France O.A.T., Deb., 8.25%, 4/25/2022 39,628
--------------------------------------------------------------------------------------------------
270,000 France O.A.T., Bond, 7.25%, 4/25/2006 51,637
--------------------------------------------------------------------------------------------------
73,000 France O.A.T., Bond, 7.50%, 4/25/2005 91,939
-------------------------------------------------------------------------------------------------- ------------
Total 183,204
-------------------------------------------------------------------------------------------------- ------------
DEUTSCHE MARK -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
45,000 DG-HYPBK 5.75%, 1/22/2007 25,798
--------------------------------------------------------------------------------------------------
79,000 Deutschland Republic, Deb., 6.25%, 1/4/2024 46,083
--------------------------------------------------------------------------------------------------
38,000,000 KFW International Finance, 6.00%, 11/29/1999 329,457
--------------------------------------------------------------------------------------------------
100,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 60,675
--------------------------------------------------------------------------------------------------
600,000 KFW International Finance, 7.00%, 5/12/2000 107,304
--------------------------------------------------------------------------------------------------
700,000 Treuhandanstalt, 7.75%, 10/1/2002 442,149
--------------------------------------------------------------------------------------------------
408,000 Treuhandanstalt, Foreign Gov't. Guarantee, 6.875%, 6/11/2003 250,121
-------------------------------------------------------------------------------------------------- ------------
Total 1,261,587
-------------------------------------------------------------------------------------------------- ------------
GREEK DRACHMA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
11,400,000 Hellenic Republic, FRN 10/23/2003 39,188
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
80,000,000 Btps, Bond, 10.50%, 11/1/2000 52,647
--------------------------------------------------------------------------------------------------
95,000,000 Btps, Deb., 12.00%, 5/18/1999 59,829
--------------------------------------------------------------------------------------------------
480,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 337,027
-------------------------------------------------------------------------------------------------- ------------
Total 449,503
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
24,000,000 Export-Import Bank Japan, 4.375%, 10/1/2003 218,327
--------------------------------------------------------------------------------------------------
10,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 90,842
-------------------------------------------------------------------------------------------------- ------------
Total 309,169
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS GUILDER -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
40,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 21,205
--------------------------------------------------------------------------------------------------
30,000 Bk Ned Gemeenten, Bond, 7.75%, 12/20/2004 17,058
--------------------------------------------------------------------------------------------------
60,000 LKB-global Bd, Bank Guarantee, 6.00%, 1/25/2006 34,857
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS GUILDER -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
350,000 Netherlands Government, 5.75%, 1/15/2004 $181,314
--------------------------------------------------------------------------------------------------
60,000 Netherlands Government, 6.00%, 1/15/2006 31,430
-------------------------------------------------------------------------------------------------- ------------
Total 285,864
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
41,000 New Zealand Government, 8.00%, 2/15/2001 26,092
--------------------------------------------------------------------------------------------------
70,000 New Zealand Government, Bond, 8.00%, 7/15/1998 43,381
-------------------------------------------------------------------------------------------------- ------------
Total 69,473
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE--0.1%
- --------------------------------------------------------------------------------------------------------------------
330,000 NGB, Bond, 9.00%, 1/31/1999 48,219
--------------------------------------------------------------------------------------------------
420,000 Norwegian Government, Bond, 7.00%, 5/31/2001 62,112
--------------------------------------------------------------------------------------------------
315,000 Norwegian Govt., Foreign Gov't. Guarantee, 5.75%, 11/30/2004 44,608
-------------------------------------------------------------------------------------------------- ------------
Total 154,939
-------------------------------------------------------------------------------------------------- ------------
PORTUGUESE ESCUDO -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
6,500,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 41,186
-------------------------------------------------------------------------------------------------- ------------
SPANISH PESETA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
20,000,000 Spanish Government, 10.00%, 2/28/2005 168,902
--------------------------------------------------------------------------------------------------
12,000,000 Spanish Govt, Bond, 8.80%, 4/30/2006 96,907
--------------------------------------------------------------------------------------------------
4,340,000 Spanish Govt, Bond, 9.40%, 4/30/1999 30,914
--------------------------------------------------------------------------------------------------
4,950,000 Spanish Govt., Deb., 10.10%, 2/28/2001 38,165
-------------------------------------------------------------------------------------------------- ------------
Total 334,888
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
1,000,000 Stadshypotekskas, Foreign Gov't. Guarantee, Series 1551, 7.50%, 3/17/1999 132,257
--------------------------------------------------------------------------------------------------
900,000 Sweden, 6.00%, 2/9/2005 115,272
-------------------------------------------------------------------------------------------------- ------------
Total 247,529
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
80,000 British Gas PLC, 8.875%, 7/8/2008 150,059
--------------------------------------------------------------------------------------------------
29,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 54,748
--------------------------------------------------------------------------------------------------
175,000 U.K. Conversion, 9.00%, 3/3/2000 306,898
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED INCOME FUND
FOREIGN
CURRENCY VALUE IN
PAR AMOUNT U.S. DOLLARS
- ------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM POUND -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
20,000 United Kingdom Treasury, Bond, 7.5%, 12/7/2006 $35,942
--------------------------------------------------------------------------------------------------
30,000 United Kingdom Treasury, Bond, 8%, 12/7/2015 58,805
-------------------------------------------------------------------------------------------------- ------------
Total 606,452
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 4,819,518
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $92,921,428) 94,465,313
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $106,467,209)(F) $110,231,995
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $1,062,725 which represents 1.0% of net assets.
(c) These securities are subject to dollar roll transactions.
(d) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(e) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(f) The cost of investments for federal tax purposes amounts to $106,471,306.
The net unrealized appreciation of investments on a federal tax basis
amounts to $3,760,689 which is comprised of $4,528,456 appreciation and
$767,767 depreciation at November 30, 1997.
Certain securities may be classified in multiple categorizations, based on
purpose of individual purchases.
Note: The categories of investments are shown as a percentage of
net assets ($107,665,821) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt FRN -- Floating Rate Note LLC -- Limited
Liability Corporation PIK -- Payment in Kind PLC -- Public Limited Company TBA
- -- To Be Announced
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED INCOME FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
- ---------------------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $106,467,209 and tax cost $106,471,306) $110,231,995
- ---------------------------------------------------------------------------------------------------------
Cash 3,586
- ---------------------------------------------------------------------------------------------------------
Income receivable 1,084,235
- ---------------------------------------------------------------------------------------------------------
Receivable for investments sold 36,127
- ---------------------------------------------------------------------------------------------------------
Receivable for shares sold 378,134
- ---------------------------------------------------------------------------------------------------------
Deferred organizational costs 54,744
- ---------------------------------------------------------------------------------------------------------
Other assets 13,489
- --------------------------------------------------------------------------------------------------------- ------------
Total assets 111,802,310
- ---------------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------------
Payable for investments purchased $2,000,000
- -----------------------------------------------------------------------------------------
Payable for shares redeemed 9,725
- -----------------------------------------------------------------------------------------
Payable for dollar roll transactions 2,070,000
- -----------------------------------------------------------------------------------------
Payable for taxes withheld 620
- -----------------------------------------------------------------------------------------
Accrued expenses 56,144
- ----------------------------------------------------------------------------------------- -----------
Total liabilities 4,136,489
- --------------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 9,992,430 shares outstanding $107,665,821
- --------------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ---------------------------------------------------------------------------------------------------------
Paid in capital $102,572,001
- ---------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in foreign currency 3,762,617
- ---------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments,foreign currency transactions, and futures contracts 1,304,978
- ---------------------------------------------------------------------------------------------------------
Undistributed net investment income 26,225
- --------------------------------------------------------------------------------------------------------- ------------
Total Net Assets $107,665,821
- --------------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ---------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ---------------------------------------------------------------------------------------------------------
$71,057,985 [DIVIDED BY] 6,594,928 shares outstanding $10.77
- --------------------------------------------------------------------------------------------------------- ------------
SELECT SHARES:
- ---------------------------------------------------------------------------------------------------------
$36,607,836 [DIVIDED BY] 3,397,502 shares outstanding $10.77
- --------------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MANAGED INCOME FUND
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $937) $350,921
- --------------------------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $1,468) (net of foreign taxes withheld of $1,431) 5,652,834
- -------------------------------------------------------------------------------------------------------- ---------
Total income 6,003,755
- --------------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------
Investment advisory fee $696,806
- -----------------------------------------------------------------------------------------
Administrative personnel and services fee 154,890
- -----------------------------------------------------------------------------------------
Custodian fees 16,234
- -----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 97,638
- -----------------------------------------------------------------------------------------
Directors'/Trustees' fees 4,188
- -----------------------------------------------------------------------------------------
Auditing fees 16,794
- -----------------------------------------------------------------------------------------
Legal fees 3,504
- -----------------------------------------------------------------------------------------
Portfolio accounting fees 72,311
- -----------------------------------------------------------------------------------------
Distribution services fee -- Select Shares 198,031
- -----------------------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 166,258
- -----------------------------------------------------------------------------------------
Shareholder services fee -- Select Shares 66,010
- -----------------------------------------------------------------------------------------
Share registration costs 37,303
- -----------------------------------------------------------------------------------------
Printing and postage 39,258
- -----------------------------------------------------------------------------------------
Insurance premiums 1,474
- -----------------------------------------------------------------------------------------
Taxes 1,470
- -----------------------------------------------------------------------------------------
Miscellaneous 20,182
- ----------------------------------------------------------------------------------------- ---------
Total expenses 1,592,351
- -------------------------------------------------------------------------
Waivers --
- -------------------------------------------------------------------------
Waiver of investment advisory fee $(461,157)
- -------------------------------------------------------------------------
Waiver of distribution services fee -- Select Shares (66,010)
- -------------------------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (133,007)
- ------------------------------------------------------------------------- --------
Total waivers (660,174)
- ----------------------------------------------------------------------------------------- --------
Net expenses 932,177
- -------------------------------------------------------------------------------------------------------- ---------
Net investment income 5,071,578
- -------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- --------------------------------------------------------------------------------------------------------
Net realized gain on investments, foreign currency transactions, and futures contracts
- --------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency, and futures contracts 1,480,118
- -------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain on investments, foreign currency, and futures contracts 2,781,392
- -------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $7,852,970
- -------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-------------------------------
1997 1996
- --------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------
OPERATIONS --
- ---------------------------------------------------------------------------------------
Net investment income $5,071,578 $4,425,589
- ---------------------------------------------------------------------------------------
Net realized gain on investments, foreign currency transactions and futures contracts
($1,326,866 and $629,064, net gains respectively, as computed for federal tax purposes) 1,301,274 649,318
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments and translation of
assets and liabilities in foreign currency and futures contracts 1,480,118 410,861
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 7,852,970 5,485,768
- --------------------------------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
- ---------------------------------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------------------------------
Institutional Shares (3,897,404) (3,457,532)
- ---------------------------------------------------------------------------------------
Select Shares (1,379,778) (1,037,906)
- ---------------------------------------------------------------------------------------
Distributions from net realized gains on investments, foreign currency transactions
and futures contracts
- ---------------------------------------------------------------------------------------
Institutional Shares (457,124) (332,234)
- ---------------------------------------------------------------------------------------
Select Shares (172,678) (91,563)
- --------------------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from distributions to shareholders (5,906,984) (4,919,235)
- --------------------------------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS --
- ---------------------------------------------------------------------------------------
Proceeds from sale of shares 42,602,074 48,463,331
- ---------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared 2,996,006 2,121,547
- ---------------------------------------------------------------------------------------
Cost of shares redeemed (32,459,813) (23,349,415)
- --------------------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 13,138,267 27,235,463
- --------------------------------------------------------------------------------------- ------------- -------------
Change in net assets 15,084,253 27,801,996
- ---------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------
Beginning of period 92,581,568 64,779,572
- --------------------------------------------------------------------------------------- ------------- -------------
End of period (including undistributed net investment income of
$26,225 and $246,961, respectively) $107,665,821 $92,581,568
- --------------------------------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED INCOME FUND
NOVEMBER 30,1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Income Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to seek current income.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are valued at prices furnished by an
independent pricing service. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
With respect to the valuation of foreign securities, trading in foreign
countries may be completed at times which vary from the closing of the New York
Stock Exchange. Therefore, foreign securities are valued at the latest closing
price on the exchange on which they are traded prior to the closing of the New
York Stock Exchange. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at the foreign exchange rate in effect at noon,
eastern time, on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
- ------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET
NET REALIZED GAIN INVESTMENT INCOME
- ---------------------- ----------------------
$15,132 $(15,132)
Net Investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transactions costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in value
of the contract may not correlate with the changes in value of the underlying
securities. As of November 30,1997, the Fund had no outstanding futures
contracts.
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund enters into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date. At November 30,1997, the Fund had no
outstanding foreign currency commitments.
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30,1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- ------------------------------------ --------------------- --------------------
<S> <C> <C>
AmeriServe Food Dist., Inc. 10/16/1997 $52,750
Bayer Corp. 3/21/1996 - 4/17/1996 345,302
Dialog Corporation, PLC 11/10/97 50,000
Diamond Cable Comm. PLC 2/21/97 32,316
Fox/Liberty Networks, LLC 8/15/1997 32,077
Freeport Terminal (Malta) 7/19/1994 284,196
Hermes Europe Railtel B.V. 8/14/1997 51,094
Metronet Communications 7/18/1997 50,000
Sinclair Broadcast Group, Inc., Pfd. 3/5/97 50,000
Telesystem International 10/22/1997 30,363
Qwest Communications, Inc. 10/22/1997 33,353
</TABLE>
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by Government National Mortgage Association, Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation, in which the
Fund sells mortgage securities to financial institutions and simultaneously
agrees to accept substantially similar (same type, coupon and maturity)
securities at a later date at an agreed upon price. Dollar roll transactions
involve "to be announced" securities and are treated as short-term financing
arrangements which will not exceed twelve months. The Fund will use the proceeds
generated from the transactions to invest in short-term investments, which may
enhance the Fund's current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ---------- ------------ ---------- ------------
<S>
<C> <C> <C> <C>
Shares sold 2,242,410 $23,562,794 2,995,976 $31,129,010
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 185,324 1,941,234 135,176 1,403,094
- ------------------------------------------------
Shares redeemed (2,190,519) (22,927,532) (1,600,230) (16,630,503)
- ------------------------------------------------ ----------- ------------ ------------ ------------
Net change resulting from
Institutional Shares transactions 237,215 $2576496 1,530,922 $15,901,601
- ------------------------------------------------ ----------- ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 1,793,074 $19,039,280 1,668,304 $17,334,321
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 100,754 1,054,772 69,234 718,453
- ------------------------------------------------
Shares redeemed (907,794) (9,532,281) (648,056) (6,718,912)
- ------------------------------------------------ ----------- ------------ ------------ ------------
Net change resulting from
Select Share transactions 986,034 $10,561,771 1,089,482 $11,333,862
- ------------------------------------------------ ----------- ------------ ------------ ------------
Net change resulting from
share transactions 1,223,249 $13,138,267 2,620,404 $27,235,463
- ------------------------------------------------ ----------- ------------ ------------ ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses of up to
0.75% of average net assets, annually, to compensate FSC. The distributor may
voluntarily choose to waive any portion of its fee. The distributor can modify
or terminate this voluntary waiver at any time at its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $91,334 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five year period following the Fund's effective
date. For the year ended November 30,1997, the Fund expensed $23,608 of
organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30,1997, were as follows:
PURCHASES $98,358,513
- -------------------------------------------- -----------
SALES $88,081,235
- -------------------------------------------- -----------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30,1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- ------------------------------------------ -------------- -------------------------------- -------------
<S> <C> <C> <C>
Aerospace & Defense 0.3 Healthcare 1.2
Automobile 0.1 Hotels, Motels, Inns & Casinos 0.1
Banking 1.1 Industrial Products & Equipment 0.1
Basic Industry 0.4 Insurance 2.7
Beverage & Tobacco 0.2 Leisure & Entertainment 0.1
Broadcast Radio & T.V. 0.4 Machinery & Equipment 0.1
Business Equipment & Services 0.1 Metals & Mining 0.2
Cable Television 1.9 Natural Gas Distribution 1.5
Chemicals & Plastics 0.3 Oil & Gas 0.3
Clothing & Textiles 0.1 Oil & Gas Transmission 1.7
Consumer Durables 0.4 Printing & Publishing 0.4
Consumer Non-Durables 1.9 Producer Manufacturing 1.8
Consumer Products 0.1 Real Estate 0.1
Ecological Services & Equipment 0.1 Retail Trade 1.8
Education 0.3 Services 1.2
Electrical Utilities 4.5 Sovereign 5.5
Electronics 0.2 Sovereign Government 1.6
Energy Minerals 1.2 Steel 0.1
Finance 1.2 Surface Transportation 0.4
Finance -- Retail 0.2 Technology 1.0
Financial Intermediaries 1.7 Telecommunications & Cellular 0.4
Food Services 0.1 Transportation 0.3
Forest Products & Paper 1.0 Treasury Securities 36.0
Government Agency 24.4 Utilities 2.1
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Income Fund (an investment portfolio of Managed Series Trust,
a Massachusetts business trust), including the schedule of portfolio
investments, as of November 30,1997, and the related statement of operations for
the year then ended, and the statement of changes in net assets, and the
financial highlights (see pages 2 and 19 of the prospectus) for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30,1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Income Fund, an investment portfolio of Managed Series Trust,
as of November 30,1997, the results of its operations for the year then ended,
and the changes in its net assets and its financial highlights for the periods
presented in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] FEDERATED INVESTORS
Federated Managed
Income Fund
Select Shares
PROSPECTUS
JANUARY 31,z1998
A Diversified Portfolio of Managed Series Trust,
an Open-End Management Investment Company
FEDERATED MANAGED
INCOME FUND
SELECT SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT
PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K206
3122012A-SEL (1/98)
[RECYCLE LOGO]
RECYCLED PAPER
3161P Final.edg Page 77 To Federated Investors
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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Institutional Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 6
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Institutional Shares 15
Administration of the Fund 15
Brokerage Transactions 15
Net Asset Value 15
Investing in Institutional Shares 16
Share Purchases 16
Minimum Investment Required 16
What Shares Cost 16
Systematic Investment Program 16
Confirmations and Account Statements 17
Dividends 17
Capital Gains 17
Redeeming Institutional Shares 17
Through a Financial Institution 17
Telephone Redemption 17
Written Requests 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
Shareholder Information 18
Voting Rights 18
Tax Information 18
Federal Income Tax 18
State and Local Taxes 18
Performance Information 18
Other Classes of Shares 19
Financial Highlights -- Select Shares 20
Financial Statements 21
Report of Independent Public Accountants 65
Appendix 66
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.70%
12b-1 Fee None
Total Other Expenses 0.35%
Shareholder Services Fee (after waiver)(2) 0.05%
Total Operating Expenses(3) 1.05%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholders services fee. The shareholder
service provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.30% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see Investing in Institutional Shares and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
1 Year $ 11
3 Years $ 33
5 Years $ 58
10 Years $128
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 65.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.37 $11.14 $ 9.85 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.49 0.50 0.50 0.25
- ---------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 0.74 0.41 1.28 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.23 0.91 1.78 0.00
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from
net investment income (0.50) (0.52) (0.49) (0.15)
- ---------------------------------------------
Distributions from net realized gain
on investments and
foreign currency transactions (0.12) (0.16) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.62) (0.68) (0.49) (0.15)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.98 $11.37 $11.14 $ 9.85
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 11.25% 8.54% 18.51% 0.02%
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.05% 1.05% 1.00% 0.88%*
- ---------------------------------------------
Net investment income 4.27% 4.72% 5.10% 5.07%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.25% 0.31% 0.55% 0.59%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $164,728 $156,635 $103,715 $43,793
- ---------------------------------------------
Average commission rate paid(d) $0.0078 $0.0043 -- --
- ---------------------------------------------
Portfolio turnover 130% 154% 157% 132%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
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 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.
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 Portfolio 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 37.5% 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.
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.
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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested. The Fund will invest only in CMOs which are rated AAA or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")NNN
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's Investors Service, Inc. ("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);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
EQUITY SECURITIES
Common stocks represent ownership interest in a corporation. Unlike bonds, which
are debt securities, common stocks have neither fixed maturity dates nor fixed
schedules of promised payments. Utility stocks are common stocks of utility
companies, including water companies, companies that produce, transmit, or
distribute gas and electric energy and those companies that provide
communications facilities, such as telephone and telegraph companies. Foreign
stocks are equity securities of foreign issuers.
FOREIGN SECURITIES
The foreign bonds in which the Fund invests are rated within the four highest
ratings for bonds by Moody's (Aaa, Aa, A or Baa) or by Standard & Poor's (AAA,
AA, A or BBB) or are unrated if determined to be of equivalent quality by the
Fund's adviser.
INVESTMENT RISKS
Investments in foreign securities involve special risks that differ from those
associated with investments in domestic securities. The risks associated with
investments in foreign securities apply to securities issued by foreign
corporations and sovereign governments. These risks relate to political and
economic developments abroad, as well as those that result from the differences
between the regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to, expropriation,
confiscatory taxation, currency fluctuations, withholding taxes on interest,
limitations on the use or transfer of Fund assets, political or social
instability and adverse diplomatic developments. It may also be more difficult
to enforce contractual obligations or obtain court judgments abroad than would
be the case in the United States because of differences in the legal systems. If
the issuer of the debt or the governmental authorities that control the
repayment of the debt 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, 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 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 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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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 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:
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.I.A. concentrating
in Finance 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 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 have 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 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 been a portfolio
manager of the Fund 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 Masters 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 a Portfolio 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
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
FEE ASSETS OF THE FEDERATED FUNDS
---------- ----------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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 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 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 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
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 quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL 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 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.
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 65.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.36 $11.12 $ 9.83 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.40 0.43 0.37 0.21
- ---------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 0.74 0.41 1.34 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.14 0.84 1.71 (0.04)
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.42) (0.44) (0.42) (0.13)
- ---------------------------------------------
Distributions from net realized gain
on investments and
foreign currency transactions (0.12) (0.16) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.54) (0.60) (0.42) (0.13)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.96 $11.36 $11.12 $ 9.83
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 10.41% 7.92% 17.76% (0.40%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.75% 1.75% 1.75% 1.64%*
- ---------------------------------------------
Net investment income 3.51% 4.02% 4.37% 4.33%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.30% 0.36% 0.55% 0.84%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $47,499 $44,248 $24,787 $3,697
- ---------------------------------------------
Average commission rate paid(d) $0.0078 $0.0043 -- --
- ---------------------------------------------
Portfolio turnover 130% 154% 157% 132%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions
were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED GROWTH AND INCOME FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
*STOCKS -- 34.9%
- --------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- 12.6%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.5%
--------------------------------------------------------------------------------------------------
18,000 Archer-Daniels-Midland Co. $384,322
--------------------------------------------------------------------------------------------------
3,200 Dow Chemical Co. 316,000
--------------------------------------------------------------------------------------------------
19,000 LTV Corporation 211,375
--------------------------------------------------------------------------------------------------
10,900 Louisiana-Pacific Corp. 220,044
-------------------------------------------------------------------------------------------------- ------------
Total 1,131,741
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,700 Eastman Kodak Co. 224,313
--------------------------------------------------------------------------------------------------
4,300 General Motors Corp., Class H 288,100
--------------------------------------------------------------------------------------------------
2,900 General Motors Corp. 176,900
--------------------------------------------------------------------------------------------------
10,400 Rubbermaid, Inc. 252,200
-------------------------------------------------------------------------------------------------- ------------
Total 941,513
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
2,400 CPC International, Inc. 248,100
--------------------------------------------------------------------------------------------------
14,000 PepsiCo, Inc. 516,250
--------------------------------------------------------------------------------------------------
4,400 Philip Morris Cos., Inc. 191,400
--------------------------------------------------------------------------------------------------
5,200 RJR Nabisco Holdings Corp. 189,475
--------------------------------------------------------------------------------------------------
13,300 Russell Corp. 406,481
--------------------------------------------------------------------------------------------------
6,500 Sara Lee Corp. 343,688
--------------------------------------------------------------------------------------------------
9,200 Unilever N.V. 534,175
-------------------------------------------------------------------------------------------------- ------------
Total 2,429,569
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.5%
- --------------------------------------------------------------------------------------------------------------------
3,100 Atlantic Richfield Co. 252,650
--------------------------------------------------------------------------------------------------
4,900 Chevron Corp. 392,919
--------------------------------------------------------------------------------------------------
6,200 Exxon Corp. 378,200
--------------------------------------------------------------------------------------------------
10,500 Occidental Petroleum Corp. 311,719
--------------------------------------------------------------------------------------------------
4,400 Royal Dutch Petroleum Co., ADR 231,825
--------------------------------------------------------------------------------------------------
12,100 Sun Co., Inc. 489,294
--------------------------------------------------------------------------------------------------
6,800 Texaco, Inc. 384,200
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
12,200 USX-Marathon Group $417,850
--------------------------------------------------------------------------------------------------
9,100 YPF Sociedad Anonima, ADR 305,419
-------------------------------------------------------------------------------------------------- ------------
Total 3,164,076
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 1.5%
- --------------------------------------------------------------------------------------------------------------------
6,000 Allmerica Financial Corp. 291,000
--------------------------------------------------------------------------------------------------
3,352 Allstate Corp. 287,853
--------------------------------------------------------------------------------------------------
7,300 Bear Stearns Cos., Inc. 302,950
--------------------------------------------------------------------------------------------------
7,100 Block (H&R), Inc. 291,100
--------------------------------------------------------------------------------------------------
7,700 Boston Properties, Inc. 251,213
--------------------------------------------------------------------------------------------------
3,000 CIGNA Corp. 501,750
--------------------------------------------------------------------------------------------------
1,300 General RE Corp. 258,050
--------------------------------------------------------------------------------------------------
5,600 Marsh & McLennan Cos., Inc. 416,850
--------------------------------------------------------------------------------------------------
5,700 Morgan Stanley, Dean Witter, Discover & Co. 309,581
--------------------------------------------------------------------------------------------------
6,000 Travelers Group, Inc. 303,000
-------------------------------------------------------------------------------------------------- ------------
Total 3,213,347
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
5,300 Abbott Laboratories 344,500
--------------------------------------------------------------------------------------------------
16,700 (b)Beverly Enterprises, Inc. 283,900
--------------------------------------------------------------------------------------------------
6,500 Bristol-Myers Squibb Co. 608,563
--------------------------------------------------------------------------------------------------
3,000 Merck & Co., Inc. 283,688
--------------------------------------------------------------------------------------------------
8,800 (b)Perrigo Co. 125,400
--------------------------------------------------------------------------------------------------
14,500 Pharmacia & Upjohn, Inc. 489,375
--------------------------------------------------------------------------------------------------
5,000 Smithkline Beecham, ADR 248,125
--------------------------------------------------------------------------------------------------
10,100 U.S. Surgical Corp. 266,388
--------------------------------------------------------------------------------------------------
4,800 United Healthcare Corp. 249,900
-------------------------------------------------------------------------------------------------- ------------
Total 2,899,839
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
16,500 ITT Industries, Inc. 523,875
--------------------------------------------------------------------------------------------------
10,500 Ingersoll-Rand Co. 429,188
--------------------------------------------------------------------------------------------------
7,400 Johnson Controls, Inc. 339,013
--------------------------------------------------------------------------------------------------
10,100 (b)Lexmark Intl. Group, Class A 321,938
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,100 Loews Corp. $222,863
--------------------------------------------------------------------------------------------------
5,100 PACCAR, Inc. 280,500
-------------------------------------------------------------------------------------------------- ------------
Total 2,117,377
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
6,000 Dayton-Hudson Corp. 398,625
--------------------------------------------------------------------------------------------------
38,400 (b)K Mart Corp. 482,400
--------------------------------------------------------------------------------------------------
15,500 Wal-Mart Stores, Inc. 619,031
-------------------------------------------------------------------------------------------------- ------------
Total 1,500,056
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
2,100 ABB AB, ADR 260,400
--------------------------------------------------------------------------------------------------
7,000 Browning-Ferris Industries, Inc. 249,813
--------------------------------------------------------------------------------------------------
2,000 News Corp., Ltd., ADR 43,375
--------------------------------------------------------------------------------------------------
27,300 News Corp., Ltd., ADR 539,175
--------------------------------------------------------------------------------------------------
12,900 Readers Digest Association, Inc., Class A 308,794
--------------------------------------------------------------------------------------------------
5,751 (b)TCI Ventures Group, Class A 130,116
--------------------------------------------------------------------------------------------------
1,400 (b)Tricon Global Restaurants, Inc. 47,338
--------------------------------------------------------------------------------------------------
7,100 (b)Viacom, Inc., Class A 246,725
--------------------------------------------------------------------------------------------------
4,400 (b)Viacom, Inc., Class B 154,000
--------------------------------------------------------------------------------------------------
19,600 Waste Management, Inc. 482,650
-------------------------------------------------------------------------------------------------- ------------
Total 2,462,386
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
7,900 AMP, Inc. 343,156
--------------------------------------------------------------------------------------------------
6,800 (b)Cabletron Systems, Inc. 156,400
--------------------------------------------------------------------------------------------------
14,100 First Data Corp. 399,206
--------------------------------------------------------------------------------------------------
2,900 International Business Machines Corp. 317,731
--------------------------------------------------------------------------------------------------
2,300 Matsushita Electric Industrial Co., ADR 356,644
--------------------------------------------------------------------------------------------------
31,700 (b)Novell, Inc. 293,225
--------------------------------------------------------------------------------------------------
3,400 Raytheon Co. 190,188
--------------------------------------------------------------------------------------------------
10,600 (b)Seagate Technology, Inc. 240,488
--------------------------------------------------------------------------------------------------
6,500 (b)Storage Technology Corp. 419,656
-------------------------------------------------------------------------------------------------- ------------
Total 2,716,694
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
7,700 CNF Transporation, Inc. $334,950
--------------------------------------------------------------------------------------------------
7,397 KLM Royal Dutch Airlines 266,292
--------------------------------------------------------------------------------------------------
7,200 Ryder Systems, Inc. 261,450
-------------------------------------------------------------------------------------------------- ------------
Total 862,692
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
5,800 CMS Energy Corp. 228,375
--------------------------------------------------------------------------------------------------
4,100 Coastal Corp. 240,106
--------------------------------------------------------------------------------------------------
3,900 (b)Columbia Gas System, Inc. 283,725
--------------------------------------------------------------------------------------------------
11,000 Entergy Corp. 286,000
--------------------------------------------------------------------------------------------------
4,100 GTE Corp. 207,306
--------------------------------------------------------------------------------------------------
11,800 Houston Industries, Inc. 279,513
--------------------------------------------------------------------------------------------------
14,100 MCI Communications Corp. 619,519
--------------------------------------------------------------------------------------------------
13,200 P G & E Corp. 372,900
--------------------------------------------------------------------------------------------------
7,800 Public Service Enterprises Group, Inc. 227,663
--------------------------------------------------------------------------------------------------
17,049 (b)Tele-Communications, Inc., Class A 390,529
--------------------------------------------------------------------------------------------------
7,000 U.S. West, Inc. 316,313
-------------------------------------------------------------------------------------------------- ------------
Total 3,451,949
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE-COMPANY 26,891,239
-------------------------------------------------------------------------------------------------- ------------
SMALL-COMPANY -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
2,000 BMC Industries, Inc. 37,125
--------------------------------------------------------------------------------------------------
1,300 Cambrex Corp. 58,988
--------------------------------------------------------------------------------------------------
1,800 (b)Carbide/Graphite Group, Inc. 69,525
--------------------------------------------------------------------------------------------------
2,800 (b)Chirex, Inc. 68,250
--------------------------------------------------------------------------------------------------
1,600 Furon Co. 63,200
--------------------------------------------------------------------------------------------------
1,100 Lone Star Industries, Inc. 57,338
--------------------------------------------------------------------------------------------------
1,500 (b)Lone Star Technologies, Inc. 43,500
--------------------------------------------------------------------------------------------------
4,000 Spartech Corp. 66,000
--------------------------------------------------------------------------------------------------
1,000 Valspar Corp. 30,375
-------------------------------------------------------------------------------------------------- ------------
Total 494,301
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
2,400 (b)Action Performance Companies, Inc. $ 69,600
--------------------------------------------------------------------------------------------------
1,700 (b)American Homestar Corporation 23,800
--------------------------------------------------------------------------------------------------
3,100 Brilliance China Automotive Holdings Ltd. 29,256
--------------------------------------------------------------------------------------------------
1,000 Carlisle Cos., Inc. 42,500
--------------------------------------------------------------------------------------------------
2,100 (b)Dura Automotive Systems, Inc. 55,388
--------------------------------------------------------------------------------------------------
1,400 (b)Equity Marketing, Inc. 41,300
--------------------------------------------------------------------------------------------------
1,300 (b)Gentex Corp. 32,175
--------------------------------------------------------------------------------------------------
3,700 (b)Helen of Troy Ltd. 52,725
--------------------------------------------------------------------------------------------------
800 Oakwood Homes Corp. 24,000
--------------------------------------------------------------------------------------------------
1,600 (b)Stanley Furniture Co. Inc. 44,000
--------------------------------------------------------------------------------------------------
700 Wynns International, Inc. 22,706
-------------------------------------------------------------------------------------------------- ------------
Total 437,450
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,000 (b)Blyth Industries, Inc. 25,688
--------------------------------------------------------------------------------------------------
1,700 (b)North Face, Inc. 36,975
--------------------------------------------------------------------------------------------------
1,700 (b)Rayovac Corp. 28,475
--------------------------------------------------------------------------------------------------
1,100 (b)Tommy Hilfiger Corp. 43,175
-------------------------------------------------------------------------------------------------- ------------
Total 134,313
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
500 Camco International, Inc. 31,375
--------------------------------------------------------------------------------------------------
2,100 (b)Key Energy Group, Inc. 51,056
--------------------------------------------------------------------------------------------------
300 (b)Patterson Energy Inc. 11,025
--------------------------------------------------------------------------------------------------
1,000 (b)TransCoastal Marine Services, Inc. 19,500
--------------------------------------------------------------------------------------------------
1,500 (b)Tuboscope Inc. 36,938
--------------------------------------------------------------------------------------------------
2,500 Vintage Petroleum, Inc. 48,438
-------------------------------------------------------------------------------------------------- ------------
Total 198,332
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
1,700 (b)Amresco, Inc. 47,600
--------------------------------------------------------------------------------------------------
1,100 CMAC Investment Corp. 57,131
--------------------------------------------------------------------------------------------------
2,100 City National Corp. 68,250
--------------------------------------------------------------------------------------------------
1,100 (b)Delphi Financial Group, Inc., Class A 44,138
--------------------------------------------------------------------------------------------------
2,500 (b)Delta Financial Corp. 41,406
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
700 Executive Risk, Inc. $ 45,500
--------------------------------------------------------------------------------------------------
1,300 (b)FIRSTPLUS Financial Group, Inc. 49,563
--------------------------------------------------------------------------------------------------
1,800 (b)FirstFed Financial Corp. 65,700
--------------------------------------------------------------------------------------------------
1,800 Frontier Insurance Group, Inc. 43,313
--------------------------------------------------------------------------------------------------
1,200 GBC Bancorp 65,550
--------------------------------------------------------------------------------------------------
1,700 (b)Imperial Bancorp 79,369
--------------------------------------------------------------------------------------------------
2,200 North Fork Bancorp, Inc. 66,825
--------------------------------------------------------------------------------------------------
2,400 (b)Philadelphia Consolidated Holding Corp. 39,300
--------------------------------------------------------------------------------------------------
1,100 Sirrom Capital Corp. 48,400
--------------------------------------------------------------------------------------------------
2,700 Sovereign Bancorp, Inc. 51,131
--------------------------------------------------------------------------------------------------
1,900 Trans Financial, Inc. 65,313
--------------------------------------------------------------------------------------------------
2,100 (b)Triad Guaranty, Inc. 61,950
--------------------------------------------------------------------------------------------------
1,100 Vesta Insurance Group, Inc. 60,363
-------------------------------------------------------------------------------------------------- ------------
Total 1,000,802
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
2,100 Ballard Medical Products 48,431
--------------------------------------------------------------------------------------------------
1,600 (b)Complete Management, Inc. 26,600
--------------------------------------------------------------------------------------------------
900 (b)Curative Technologies, Inc. 25,650
--------------------------------------------------------------------------------------------------
2,800 (b)FPA Medical Management, Inc. 72,275
--------------------------------------------------------------------------------------------------
2,500 (b)Genesis Health Ventures, Inc. 60,625
--------------------------------------------------------------------------------------------------
3,200 (b)Healthdyne Technologies, Inc. 61,400
--------------------------------------------------------------------------------------------------
1,000 (b)Medicis Pharmaceutical Corp., Class A 42,750
--------------------------------------------------------------------------------------------------
2,100 Phycor, Inc. 51,713
--------------------------------------------------------------------------------------------------
3,400 (b)Prime Medical Services 45,050
--------------------------------------------------------------------------------------------------
1,200 (b)Somnus Medical Technologies, Inc. 13,800
--------------------------------------------------------------------------------------------------
1,100 (b)Universal Health Services, Inc., Class B 48,056
-------------------------------------------------------------------------------------------------- ------------
Total 496,350
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
2,500 (b)AFC Cable Systems, Inc. 66,875
--------------------------------------------------------------------------------------------------
2,500 (b)Ballantyne of Omaha, Inc. 45,938
--------------------------------------------------------------------------------------------------
1,600 (b)Cable Design Technologies, Class A 64,800
--------------------------------------------------------------------------------------------------
1,800 (b)Chicago Miniature Lamp, Inc. 60,975
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
1,000 (b)EVI, Inc. $ 51,438
--------------------------------------------------------------------------------------------------
1,900 (b)Royal Group Technologies Ltd. 45,719
--------------------------------------------------------------------------------------------------
2,500 (b)US Office Products Co. 49,688
-------------------------------------------------------------------------------------------------- ------------
Total 385,433
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,000 (b)CDW Computer Centers, Inc. 59,000
--------------------------------------------------------------------------------------------------
2,900 Claire's Stores, Inc. 65,613
--------------------------------------------------------------------------------------------------
1,000 (b)Express Scripts, Inc., Class A 59,000
--------------------------------------------------------------------------------------------------
2,800 (b)Funco, Inc. 51,800
--------------------------------------------------------------------------------------------------
2,200 (b)Microage, Inc. 44,275
--------------------------------------------------------------------------------------------------
1,100 (b)O'Reilly Automotive, Inc. 25,988
--------------------------------------------------------------------------------------------------
3,300 (b)Paul Harris Stores, Inc. 69,713
--------------------------------------------------------------------------------------------------
2,300 (b)Pomeroy Computer Resources 57,500
--------------------------------------------------------------------------------------------------
1,300 (b)Proffitts, Inc. 39,731
--------------------------------------------------------------------------------------------------
1,300 (b)Renters Choice, Inc. 29,250
--------------------------------------------------------------------------------------------------
2,200 (b)Zale Corp. 48,950
-------------------------------------------------------------------------------------------------- ------------
Total 550,820
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
900 (b)ASE Test Limited 50,400
--------------------------------------------------------------------------------------------------
1,500 (b)Allied Waste Industries, Inc. 32,813
--------------------------------------------------------------------------------------------------
2,700 (b)American Business Information, Class A 31,725
--------------------------------------------------------------------------------------------------
2,700 (b)American Business Information, Class B 29,700
--------------------------------------------------------------------------------------------------
2,300 (b)BARRA, Inc. 64,113
--------------------------------------------------------------------------------------------------
1,100 (b)Caribiner International, Inc. 46,681
--------------------------------------------------------------------------------------------------
1,400 (b)FactSet Research Systems 35,350
--------------------------------------------------------------------------------------------------
3,200 (b)Newpark Resources, Inc. 63,800
--------------------------------------------------------------------------------------------------
1,700 (b)Personnel Group of America, Inc. 62,156
--------------------------------------------------------------------------------------------------
2,500 (b)Prime Hospitality Corp. 47,813
--------------------------------------------------------------------------------------------------
3,400 (b)ProBusiness Services, Inc. 71,825
--------------------------------------------------------------------------------------------------
4,800 (b)Seattle Filmworks, Inc. 47,400
--------------------------------------------------------------------------------------------------
2,100 (b)Snyder Communications, Inc. 71,269
-------------------------------------------------------------------------------------------------- ------------
Total 655,045
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,700 ATMI, Inc. $ 54,613
--------------------------------------------------------------------------------------------------
2,900 (b)Alphanet Solutions, Inc. 37,338
--------------------------------------------------------------------------------------------------
2,200 (b)Apex mPC Solutions, Inc. 48,400
--------------------------------------------------------------------------------------------------
1,500 (b)Applied Science & Technology, Inc. 31,500
--------------------------------------------------------------------------------------------------
2,300 (b)Applied Voice Technology, Inc. 64,400
--------------------------------------------------------------------------------------------------
1,800 (b)Benchmark Electronics, Inc. 50,625
--------------------------------------------------------------------------------------------------
2,000 (b)Benchmarq Microelectronics, Inc. 36,500
--------------------------------------------------------------------------------------------------
2,700 (b)Cybex Computer Products Corp. 70,200
--------------------------------------------------------------------------------------------------
2,200 (b)Cymer, Inc. 42,213
--------------------------------------------------------------------------------------------------
1,700 (b)DSP Group, Inc. 55,675
--------------------------------------------------------------------------------------------------
1,400 (b)Ducommun, Inc. 45,413
--------------------------------------------------------------------------------------------------
1,700 (b)Eltron International, Inc. 53,125
--------------------------------------------------------------------------------------------------
1,200 (b)HADCO Corp. 74,400
--------------------------------------------------------------------------------------------------
1,800 (b)II-VI, Inc. 43,425
--------------------------------------------------------------------------------------------------
1,800 (b)MRV Communications, Inc. 50,850
--------------------------------------------------------------------------------------------------
1,600 (b)Mastech Corp. 46,800
--------------------------------------------------------------------------------------------------
800 (b)Qlogic Corp. 26,500
--------------------------------------------------------------------------------------------------
1,500 (b)Three-Five Systems, Inc. 29,906
--------------------------------------------------------------------------------------------------
1,300 (b)Tollgrade Communications, Inc. 30,713
-------------------------------------------------------------------------------------------------- ------------
Total 892,596
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
700 Airlines Express International Corp. 20,081
--------------------------------------------------------------------------------------------------
1,850 Comair Holdings, Inc. 40,931
--------------------------------------------------------------------------------------------------
500 Expeditors International Washington, Inc. 19,469
-------------------------------------------------------------------------------------------------- ------------
Total 80,481
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
900 Cincinnati Bell, Inc. 26,550
--------------------------------------------------------------------------------------------------
1,400 IXC Communications, Inc. 48,563
--------------------------------------------------------------------------------------------------
700 MCN Corp. 26,731
--------------------------------------------------------------------------------------------------
800 Sonat, Inc. 34,850
-------------------------------------------------------------------------------------------------- ------------
Total 136,694
-------------------------------------------------------------------------------------------------- ------------
TOTAL SMALL-COMPANY 5,462,617
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- 11.8%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.3%
- -------------------------------------------------------------------------------------------------------------------
4,600 (b)Lone Star Technologies, Inc. $133,400
--------------------------------------------------------------------------------------------------
3,800 Martin Marietta Materials 131,575
--------------------------------------------------------------------------------------------------
2,600 Southdown, Inc. 149,988
--------------------------------------------------------------------------------------------------
6,800 (b)Steel Dynamics, Inc. 125,800
-------------------------------------------------------------------------------------------------- ------------
Total 540,763
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
4,500 Carlisle Cos., Inc. 191,250
--------------------------------------------------------------------------------------------------
10,000 (b)Furniture Brands International, Inc. 195,625
--------------------------------------------------------------------------------------------------
1,400 Sony Corp ADR 116,900
-------------------------------------------------------------------------------------------------- ------------
Total 503,775
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
3,300 (b)Consolidated Cigar Holdings, Inc. 90,956
--------------------------------------------------------------------------------------------------
1,500 Gillette Co. 138,469
--------------------------------------------------------------------------------------------------
5,300 (b)Jones Apparel Group, Inc. 258,375
--------------------------------------------------------------------------------------------------
5,700 Philip Morris Cos., Inc. 247,950
--------------------------------------------------------------------------------------------------
4,400 Procter & Gamble Co. 335,775
--------------------------------------------------------------------------------------------------
5,200 (b)Smithfield Foods, Inc. 183,950
--------------------------------------------------------------------------------------------------
4,200 St. John Knits, Inc. 160,388
--------------------------------------------------------------------------------------------------
4,400 (b)Tommy Hilfiger Corp. 172,700
--------------------------------------------------------------------------------------------------
4,800 Universal Corp. 189,900
--------------------------------------------------------------------------------------------------
5,600 Wolverine World Wide, Inc. 127,750
--------------------------------------------------------------------------------------------------
3,300 Wrigley (Wm.), Jr. Co. 261,113
-------------------------------------------------------------------------------------------------- ------------
Total 2,167,326
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
2,300 (b)BJ Services Co. 165,169
--------------------------------------------------------------------------------------------------
4,200 Baker Hughes, Inc. 175,875
--------------------------------------------------------------------------------------------------
2,200 British Petroleum Co., PLC - ADR 182,600
--------------------------------------------------------------------------------------------------
3,000 (b)Cooper Cameron Corp. 182,813
--------------------------------------------------------------------------------------------------
3,200 Diamond Offshore Drilling, Inc. 159,600
--------------------------------------------------------------------------------------------------
5,000 ENSCO International, Inc. 178,750
--------------------------------------------------------------------------------------------------
5,500 (b)Falcon Drilling Co., Inc. 177,375
--------------------------------------------------------------------------------------------------
4,600 (b)Friede Goldman International, Inc. 136,850
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,800 (b)Key Energy Group, Inc. $141,013
--------------------------------------------------------------------------------------------------
4,600 (b)Nabors Industries, Inc. 161,288
--------------------------------------------------------------------------------------------------
1,700 (b)Petroleum Geo-Services, ADR 109,331
--------------------------------------------------------------------------------------------------
4,900 (b)Rowan Companies, Inc. 166,600
--------------------------------------------------------------------------------------------------
3,100 (b)Smith International, Inc. 198,400
--------------------------------------------------------------------------------------------------
4,000 Tosco Corp. 130,250
--------------------------------------------------------------------------------------------------
4,600 (b)TransCoastal Marine Services, Inc. 89,700
-------------------------------------------------------------------------------------------------- ------------
Total 2,355,614
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 2.3%
- --------------------------------------------------------------------------------------------------------------------
5,700 Ahmanson (H.F.) & Co. 339,150
--------------------------------------------------------------------------------------------------
2,900 Allstate Corp. 249,038
--------------------------------------------------------------------------------------------------
1,800 American International Group, Inc. 181,463
--------------------------------------------------------------------------------------------------
4,500 Bank of New York Co., Inc. 241,875
--------------------------------------------------------------------------------------------------
3,300 BankAmerica Corp. 240,900
--------------------------------------------------------------------------------------------------
8,500 (b)Catellus Development Corp. 157,250
--------------------------------------------------------------------------------------------------
1,600 Citicorp 191,900
--------------------------------------------------------------------------------------------------
5,600 Conseco, Inc. 260,750
--------------------------------------------------------------------------------------------------
4,800 (b)ETrade Group, Inc. 120,300
--------------------------------------------------------------------------------------------------
2,800 Equitable Companies Inc. 133,525
--------------------------------------------------------------------------------------------------
8,300 Frontier Insurance Group, Inc. 199,719
--------------------------------------------------------------------------------------------------
5,700 (b)Golden State Bancorp, Inc. 189,881
--------------------------------------------------------------------------------------------------
14,850 MBNA Corp. 394,453
--------------------------------------------------------------------------------------------------
1,900 MGIC Investment Corp. 111,031
--------------------------------------------------------------------------------------------------
4,100 Mellon Bank Corp. 232,419
--------------------------------------------------------------------------------------------------
3,700 Merrill Lynch & Co., Inc. 259,694
--------------------------------------------------------------------------------------------------
4,900 Morgan Stanley, Dean Witter, Discover & Co. 266,131
--------------------------------------------------------------------------------------------------
3,100 NationsBank Corp. 186,194
--------------------------------------------------------------------------------------------------
5,100 Old Republic International Corp. 183,919
--------------------------------------------------------------------------------------------------
3,900 T. Rowe Price Associates 253,500
--------------------------------------------------------------------------------------------------
4,700 Torchmark Corp. 191,819
--------------------------------------------------------------------------------------------------
8,250 Travelers Group, Inc. 416,625
-------------------------------------------------------------------------------------------------- ------------
Total 5,001,536
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
7,000 (b)BioChem Pharma, Inc. $178,500
--------------------------------------------------------------------------------------------------
4,700 (b)Centocor, Inc. 204,450
--------------------------------------------------------------------------------------------------
3,600 (b)Dura Pharmaceuticals, Inc. 157,950
--------------------------------------------------------------------------------------------------
3,400 Guidant Corp. 218,450
--------------------------------------------------------------------------------------------------
6,800 HBO & Co. 305,150
--------------------------------------------------------------------------------------------------
7,500 (b)HEALTHSOUTH Corp. 196,875
--------------------------------------------------------------------------------------------------
6,300 Jones Medical Industries, Inc. 207,900
--------------------------------------------------------------------------------------------------
4,000 Lilly (Eli) & Co. 252,250
--------------------------------------------------------------------------------------------------
4,200 (b)MedPartners, Inc. 103,950
--------------------------------------------------------------------------------------------------
1,800 Merck & Co., Inc. 170,213
--------------------------------------------------------------------------------------------------
8,700 Omnicare, Inc. 251,213
--------------------------------------------------------------------------------------------------
2,000 Pfizer, Inc. 145,500
--------------------------------------------------------------------------------------------------
4,700 (b)Phycor, Inc. 115,738
--------------------------------------------------------------------------------------------------
2,600 (b)Quintiles Transnational Corp. 203,125
--------------------------------------------------------------------------------------------------
5,900 (b)Safeskin Corp. 280,988
--------------------------------------------------------------------------------------------------
3,600 Smithkline Beecham, ADR 178,650
--------------------------------------------------------------------------------------------------
4,400 (b)Universal Health Services, Inc., Class B 192,225
--------------------------------------------------------------------------------------------------
1,700 Warner-Lambert Co. 237,788
-------------------------------------------------------------------------------------------------- ------------
Total 3,600,915
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
4,000 (b)EVI, Inc. 205,750
--------------------------------------------------------------------------------------------------
5,600 General Electric Co. 413,000
--------------------------------------------------------------------------------------------------
5,550 (b)Halter Marine Group, Inc. 154,706
--------------------------------------------------------------------------------------------------
6,100 (b)Maverick Tube Corp. 174,231
--------------------------------------------------------------------------------------------------
3,200 Precision Castparts Corp. 190,000
--------------------------------------------------------------------------------------------------
10,100 (b)Royal Group Technologies Ltd. 243,031
--------------------------------------------------------------------------------------------------
6,000 Tyco International, Ltd. 235,500
--------------------------------------------------------------------------------------------------
11,250 (b)US Office Products Co. 223,594
-------------------------------------------------------------------------------------------------- ------------
Total 1,839,812
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
6,000 (b)CompUSA, Inc. $219,375
--------------------------------------------------------------------------------------------------
9,600 (b)General Nutrition Cos., Inc. 327,600
--------------------------------------------------------------------------------------------------
4,750 Home Depot, Inc. 265,703
--------------------------------------------------------------------------------------------------
10,550 Pier 1 Imports, Inc. 236,056
--------------------------------------------------------------------------------------------------
3,300 (b)Safeway, Inc. 200,475
--------------------------------------------------------------------------------------------------
7,300 TJX Cos., Inc. 251,850
-------------------------------------------------------------------------------------------------- ------------
Total 1,501,059
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
2,600 (b)ASE Test Limited 145,600
--------------------------------------------------------------------------------------------------
6,700 (b)Corrections Corp. America 231,988
--------------------------------------------------------------------------------------------------
2,700 (b)HFS, Inc. 185,288
--------------------------------------------------------------------------------------------------
2,100 (b)Heftel Broadcasting Corp., Class A 155,138
--------------------------------------------------------------------------------------------------
7,400 (b)Newpark Resources, Inc. 147,538
--------------------------------------------------------------------------------------------------
10,000 (b)Philip Services Corp. 158,125
--------------------------------------------------------------------------------------------------
7,000 (b)Snyder Communications, Inc. 237,563
-------------------------------------------------------------------------------------------------- ------------
Total 1,261,240
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
1,200 (b)ASM Lithography Holding NV, ADR 75,000
--------------------------------------------------------------------------------------------------
4,500 (b)Advanced Fibre Communications 116,438
--------------------------------------------------------------------------------------------------
2,600 (b)America Online, Inc. 196,300
--------------------------------------------------------------------------------------------------
4,300 (b)Applied Materials, Inc. 141,900
--------------------------------------------------------------------------------------------------
5,000 (b)Cadence Design Systems, Inc. 126,250
--------------------------------------------------------------------------------------------------
3,200 (b)Cisco Systems, Inc. 276,000
--------------------------------------------------------------------------------------------------
4,000 (b)Compaq Computer Corp. 249,750
--------------------------------------------------------------------------------------------------
8,600 (b)Creative Technology Ltd. 228,975
--------------------------------------------------------------------------------------------------
2,700 Dallas Semiconductor Corp. 131,963
--------------------------------------------------------------------------------------------------
1,900 (b)Dell Computer Corp. 159,956
--------------------------------------------------------------------------------------------------
4,600 (b)EMC Corp. Mass 139,438
--------------------------------------------------------------------------------------------------
4,000 (b)HNC Software 126,000
--------------------------------------------------------------------------------------------------
7,600 (b)Hyperion Software Corp. 327,513
--------------------------------------------------------------------------------------------------
2,500 Intel Corp. 194,063
--------------------------------------------------------------------------------------------------
2,600 Lucent Technologies, Inc. 208,325
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
6,300 (b)Mastech Corp. $184,275
--------------------------------------------------------------------------------------------------
1,500 (b)Metromedia Fibre Network, Inc. 25,313
--------------------------------------------------------------------------------------------------
2,100 (b)Microsoft Corp. 297,150
--------------------------------------------------------------------------------------------------
7,200 (b)Ortel Corp. 128,700
--------------------------------------------------------------------------------------------------
1,900 (b)PRI Automation, Inc. 64,838
--------------------------------------------------------------------------------------------------
1,800 (b)Peoplesoft, Inc. 117,788
--------------------------------------------------------------------------------------------------
3,600 (b)Rambus, Inc. 200,925
--------------------------------------------------------------------------------------------------
5,200 (b)SCI Systems, Inc. 238,225
--------------------------------------------------------------------------------------------------
6,500 (b)Sandisk Corp. 159,250
--------------------------------------------------------------------------------------------------
1,800 (b)Speedfam International, Inc. 46,125
--------------------------------------------------------------------------------------------------
3,700 (b)Tellabs, Inc. 192,400
--------------------------------------------------------------------------------------------------
2,600 Texas Instruments, Inc. 128,050
--------------------------------------------------------------------------------------------------
4,200 (b)World Access, Inc. 102,900
-------------------------------------------------------------------------------------------------- ------------
Total 4,583,810
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
3,000 (b)Continental Airlines, Inc., Class B 136,688
--------------------------------------------------------------------------------------------------
6,500 Expeditors International Washington, Inc. 253,094
-------------------------------------------------------------------------------------------------- ------------
Total 389,782
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
5,700 Cincinnati Bell, Inc. 168,150
--------------------------------------------------------------------------------------------------
3,800 Coastal Corp. 222,538
--------------------------------------------------------------------------------------------------
8,800 (b)ICG Communications, Inc. 204,600
--------------------------------------------------------------------------------------------------
9,400 (b)IXC Communications, Inc. 326,063
--------------------------------------------------------------------------------------------------
3,600 Sonat, Inc. 156,825
--------------------------------------------------------------------------------------------------
3,900 (b)Teleport Communications Group, Inc., Class A 191,100
-------------------------------------------------------------------------------------------------- ------------
Total 1,269,276
-------------------------------------------------------------------------------------------------- ------------
TOTAL GROWTH STOCKS 25,014,908
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITY STOCKS -- 5.5%
- --------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: CENTRAL -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
10,000 American Electric Power Co., Inc. $495,625
--------------------------------------------------------------------------------------------------
12,000 CMS Energy Corp. 472,500
--------------------------------------------------------------------------------------------------
12,000 Cinergy Corp. 427,500
--------------------------------------------------------------------------------------------------
17,100 DPL, Inc. 448,875
--------------------------------------------------------------------------------------------------
10,000 NIPSCO Industries, Inc. 468,125
--------------------------------------------------------------------------------------------------
4,000 Northern States Power Co. 219,500
-------------------------------------------------------------------------------------------------- ------------
Total 2,532,125
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: EAST -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
7,800 Baltimore Gas & Electric Co. 239,363
--------------------------------------------------------------------------------------------------
15,100 DQE, Inc. 501,131
-------------------------------------------------------------------------------------------------- ------------
Total 740,494
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: SOUTH -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
5,800 Carolina Power & Light Co. 216,775
--------------------------------------------------------------------------------------------------
5,800 Dominion Resources, Inc. 225,475
--------------------------------------------------------------------------------------------------
13,400 Duke Energy Corp. 696,800
--------------------------------------------------------------------------------------------------
11,200 FPL Group, Inc. 626,500
--------------------------------------------------------------------------------------------------
14,500 Houston Industries, Inc. 343,469
--------------------------------------------------------------------------------------------------
28,800 Southern Co. 691,200
--------------------------------------------------------------------------------------------------
16,400 TECO Energy, Inc. 420,250
--------------------------------------------------------------------------------------------------
9,100 Texas Utilities Co. 364,000
-------------------------------------------------------------------------------------------------- ------------
Total 3,584,469
-------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: WEST -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
12,900 Edison International 345,881
--------------------------------------------------------------------------------------------------
17,300 P G & E Corp. 488,725
--------------------------------------------------------------------------------------------------
14,200 Pacificorp 331,038
--------------------------------------------------------------------------------------------------
13,900 Pinnacle West Capital Corp. 536,019
-------------------------------------------------------------------------------------------------- ------------
Total 1,701,663
-------------------------------------------------------------------------------------------------- ------------
NATURAL GAS DISTRIBUTION -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
5,800 Consolidated Natural Gas Co. 350,175
--------------------------------------------------------------------------------------------------
13,500 MCN Corp. 515,531
--------------------------------------------------------------------------------------------------
9,500 Pacific Enterprises 336,063
-------------------------------------------------------------------------------------------------- ------------
Total 1,201,769
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
OIL/GAS TRANSMISSION -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
3,900 Coastal Corp. $228,394
--------------------------------------------------------------------------------------------------
4,700 Columbia Gas System, Inc. 341,925
--------------------------------------------------------------------------------------------------
12,900 Enron Corp. 499,875
--------------------------------------------------------------------------------------------------
6,000 Sonat, Inc. 261,375
--------------------------------------------------------------------------------------------------
10,000 Williams Companies, Inc. 534,375
-------------------------------------------------------------------------------------------------- ------------
Total 1,865,944
-------------------------------------------------------------------------------------------------- ------------
TOTAL UTILITY STOCKS 11,626,464
-------------------------------------------------------------------------------------------------- ------------
FOREIGN EQUITY -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
ARGENTINA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,900 (b)Banco Rio de la Plata SA, ADR 23,869
--------------------------------------------------------------------------------------------------
2,121 Compania Naviera Perez Companc SA, Class B 15,149
--------------------------------------------------------------------------------------------------
800 Telecom Argentina S.A., ADR 24,550
--------------------------------------------------------------------------------------------------
700 Telefonica De Argentina ADR 23,144
-------------------------------------------------------------------------------------------------- ------------
Total 86,712
-------------------------------------------------------------------------------------------------- ------------
AUSTRALIA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
3,000 Australia & New Zealand Banking Group, Melbourne 20,567
--------------------------------------------------------------------------------------------------
12,200 Austrim Ltd 27,158
--------------------------------------------------------------------------------------------------
6,400 Coles Myer Limited 31,466
--------------------------------------------------------------------------------------------------
246,000 (b)Cue Energy Resources NL 22,677
--------------------------------------------------------------------------------------------------
4,800 (b)News Corp., Ltd. 25,631
--------------------------------------------------------------------------------------------------
10,600 Oil Search Ltd. 20,918
--------------------------------------------------------------------------------------------------
4,200 Woodside Petroleum Ltd. 30,111
-------------------------------------------------------------------------------------------------- ------------
Total 178,528
-------------------------------------------------------------------------------------------------- ------------
AUSTRIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
400 (b)Bank Austria AG, Pfd. 16,342
-------------------------------------------------------------------------------------------------- ------------
BELGIUM -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
10 UCB (groupe) 33,036
-------------------------------------------------------------------------------------------------- ------------
BRAZIL -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
64,000 Centrais Eletricas Brasileiras SA, Preference, Series B 31,155
--------------------------------------------------------------------------------------------------
387,000 Companhia Energetica de Minas Gerais, Preference 18,664
--------------------------------------------------------------------------------------------------
103,000 Petroleo Brasileiro SA, Preference 22,563
--------------------------------------------------------------------------------------------------
183,000 Telecomunicacoes Brasileiras SA 16,992
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
BRAZIL -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,479 Telecomunicacoes de Sao Paulo SA $ 47
--------------------------------------------------------------------------------------------------
74,233 Telecomunicacoes de Sao Paulo SA, Preference 19,541
-------------------------------------------------------------------------------------------------- ------------
Total 108,962
-------------------------------------------------------------------------------------------------- ------------
CHILE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
250 (a)Chilectra SA, ADR 6,240
--------------------------------------------------------------------------------------------------
425 Compania Telecomunicacion Chile, ADR 11,502
-------------------------------------------------------------------------------------------------- ------------
Total 17,742
-------------------------------------------------------------------------------------------------- ------------
CHINA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
8,000 (b)China Telecommunications 13,350
-------------------------------------------------------------------------------------------------- ------------
COLOMBIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
700 Banco Ganadero SA, ADR 26,688
--------------------------------------------------------------------------------------------------
800 Banco Industrial Colombiano, ADR 11,600
-------------------------------------------------------------------------------------------------- ------------
Total 38,288
-------------------------------------------------------------------------------------------------- ------------
DENMARK -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
500 BG Bank AS 32,477
--------------------------------------------------------------------------------------------------
300 Novo-Nordisk, Class B 36,738
--------------------------------------------------------------------------------------------------
1,080 (b)Sydbank AS 57,923
-------------------------------------------------------------------------------------------------- ------------
Total 127,138
-------------------------------------------------------------------------------------------------- ------------
FINLAND -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,600 Enso Oy, Class R 14,045
--------------------------------------------------------------------------------------------------
800 Partek Corp. 14,841
--------------------------------------------------------------------------------------------------
1,500 Rauma 25,885
-------------------------------------------------------------------------------------------------- ------------
Total 54,771
-------------------------------------------------------------------------------------------------- ------------
FRANCE -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
821 AXA 59,580
--------------------------------------------------------------------------------------------------
200 Accor SA 37,809
--------------------------------------------------------------------------------------------------
250 Bertrand Faure 17,024
--------------------------------------------------------------------------------------------------
150 (b)CLF-Dexia France 15,576
--------------------------------------------------------------------------------------------------
75 Canal Plus 13,048
--------------------------------------------------------------------------------------------------
800 Compagnie Financiere de Paribas, Class A 57,798
--------------------------------------------------------------------------------------------------
320 Compagnie de Saint Gobain 43,474
--------------------------------------------------------------------------------------------------
210 Elf Aquitaine SA 24,368
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FRANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
204 (b)France Telecommunications $ 7,492
--------------------------------------------------------------------------------------------------
330 Groupe Danon BSN SA 52,659
--------------------------------------------------------------------------------------------------
45 L'Oreal 17,228
--------------------------------------------------------------------------------------------------
300 Pechiney Ord A 11,780
--------------------------------------------------------------------------------------------------
420 (b)SGS-Thomson Microelectronics N.V. 29,618
--------------------------------------------------------------------------------------------------
817 Schneider SA 43,734
--------------------------------------------------------------------------------------------------
200 Synthelabo 25,410
--------------------------------------------------------------------------------------------------
1,000 Thomson-csf 28,933
--------------------------------------------------------------------------------------------------
560 Total SA-B 58,815
-------------------------------------------------------------------------------------------------- ------------
Total 544,346
-------------------------------------------------------------------------------------------------- ------------
GERMANY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
1,155 Bayer AG 42,748
--------------------------------------------------------------------------------------------------
50 Bayerische Motoren Werke AG 37,341
--------------------------------------------------------------------------------------------------
1,900 Commerzbank AG, Frankfurt 66,045
--------------------------------------------------------------------------------------------------
2,225 Dresdner Bank AG, Frankfurt 86,300
--------------------------------------------------------------------------------------------------
160 Mannesmann AG 74,488
--------------------------------------------------------------------------------------------------
600 Siemens AG 35,231
--------------------------------------------------------------------------------------------------
200 Singulus Technologies AG 8,846
--------------------------------------------------------------------------------------------------
2,400 Skw Trostberg 82,949
-------------------------------------------------------------------------------------------------- ------------
Total 433,948
-------------------------------------------------------------------------------------------------- ------------
HONG KONG -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
4,000 (b)Cheung Kong 28,201
--------------------------------------------------------------------------------------------------
8,000 China Resources Enterprises Ltd. 17,231
--------------------------------------------------------------------------------------------------
839 HSBC Holdings PLC 20,242
--------------------------------------------------------------------------------------------------
4,000 Hutchison Whampoa 26,648
--------------------------------------------------------------------------------------------------
6,000 (b)New World Development Co. Ltd. 22,237
--------------------------------------------------------------------------------------------------
19,000 Peregrine Investments 18,680
-------------------------------------------------------------------------------------------------- ------------
Total 133,239
-------------------------------------------------------------------------------------------------- ------------
INDONESIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
6,000 PT Indosat 13,612
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ITALY -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
6,400 Eni $ 37,361
--------------------------------------------------------------------------------------------------
3,000 Istituto Bancario San Paolo di Torino 24,850
--------------------------------------------------------------------------------------------------
4,000 La Rinascente S.P.A. 30,332
--------------------------------------------------------------------------------------------------
9,600 Telecom Italia SPA 59,849
-------------------------------------------------------------------------------------------------- ------------
Total 152,392
-------------------------------------------------------------------------------------------------- ------------
JAPAN -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
1,200 Circle K Japan Co. Ltd. 60,270
--------------------------------------------------------------------------------------------------
7,000 Fujitsu Ltd. 78,433
--------------------------------------------------------------------------------------------------
2,000 Hitachi Maxell 44,819
--------------------------------------------------------------------------------------------------
1,000 Ito-Yokado Co., Ltd. 45,132
--------------------------------------------------------------------------------------------------
1,300 Mabuchi Motor Co. 68,145
--------------------------------------------------------------------------------------------------
28,000 (b)Mazda Motor Corp. 78,323
--------------------------------------------------------------------------------------------------
9,000 Minolta Co 51,832
--------------------------------------------------------------------------------------------------
6,000 Mitsubishi Estate Co. Ltd. 69,579
--------------------------------------------------------------------------------------------------
500 Nintendo Corp. Ltd. 51,714
--------------------------------------------------------------------------------------------------
8 Nippon Telegraph & Telephone Corp. 65,818
--------------------------------------------------------------------------------------------------
2,000 Sankyo Co. Ltd. 63,781
--------------------------------------------------------------------------------------------------
300 Shokoh Fund & Co. 85,328
--------------------------------------------------------------------------------------------------
1,000 Sony Corp. 85,406
--------------------------------------------------------------------------------------------------
6,000 Sumitomo Bank Ltd., Osaka 76,161
--------------------------------------------------------------------------------------------------
17,000 Tokyu Land Corp 33,833
-------------------------------------------------------------------------------------------------- ------------
Total 958,574
-------------------------------------------------------------------------------------------------- ------------
MEXICO -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
1,200 Empresas ICA Sociedad Controladora S.A., ADR 18,600
--------------------------------------------------------------------------------------------------
3,200 Fomento Economico Mexicano, SA de C.V., Class B 26,376
--------------------------------------------------------------------------------------------------
35,000 (a)(b)Grupo Financiero Bancomer, S.A. de C.V., Class B 20,241
--------------------------------------------------------------------------------------------------
400 Telefonos de Mexico, Class L, ADR 19,800
--------------------------------------------------------------------------------------------------
1,400 (b)Tubos de Acero de Mexico SA, ADR 30,975
-------------------------------------------------------------------------------------------------- ------------
Total 115,992
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
1,317 ABN-Amro Holdings NV $ 25,117
--------------------------------------------------------------------------------------------------
200 (b)ASM Lithography Holding NV, ADR 12,500
--------------------------------------------------------------------------------------------------
1,233 ING Groep, N.V. 50,132
--------------------------------------------------------------------------------------------------
700 Koninklijke PTT Nederland NV 28,108
--------------------------------------------------------------------------------------------------
300 Philips Electronics N.V. 19,821
--------------------------------------------------------------------------------------------------
2,400 VNU - Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 57,485
--------------------------------------------------------------------------------------------------
343 Wolters Kluwer NV 45,410
-------------------------------------------------------------------------------------------------- ------------
Total 238,573
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
16,000 Air New Zealand Ltd., Class B 32,575
-------------------------------------------------------------------------------------------------- ------------
NORWAY -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
750 Saga Petroleum A.S., Class A 13,454
--------------------------------------------------------------------------------------------------
900 Schibsted 15,268
--------------------------------------------------------------------------------------------------
500 Smedvig ASA, Class B 12,724
-------------------------------------------------------------------------------------------------- ------------
Total 41,446
-------------------------------------------------------------------------------------------------- ------------
SINGAPORE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
700 (b)Creative Technology Ltd. 18,638
--------------------------------------------------------------------------------------------------
10,000 Natsteel Broadway Ltd. 14,650
--------------------------------------------------------------------------------------------------
1,000 Singapore Press Holdings Ltd. 13,674
--------------------------------------------------------------------------------------------------
6,000 Wing Tai Holdings, Ltd. 7,715
-------------------------------------------------------------------------------------------------- ------------
Total 54,677
-------------------------------------------------------------------------------------------------- ------------
SPAIN -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
2,250 (b)Banco Bilbao Vizcaya SA 67,978
--------------------------------------------------------------------------------------------------
440 Banco Popular Espanol 28,033
--------------------------------------------------------------------------------------------------
2,760 Endesa S.A. 51,920
--------------------------------------------------------------------------------------------------
1,200 Iberdrola SA 15,331
--------------------------------------------------------------------------------------------------
1,200 Repsol SA 51,908
--------------------------------------------------------------------------------------------------
2,180 Telefonica de Espana 62,866
-------------------------------------------------------------------------------------------------- ------------
Total 278,036
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SWEDEN -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
240 Electrolux B $ 18,898
--------------------------------------------------------------------------------------------------
5,120 Munksjo AB 48,405
--------------------------------------------------------------------------------------------------
3,000 Skand Enskilda BKN, Class A 35,356
--------------------------------------------------------------------------------------------------
750 Trygg-hansa B 23,360
--------------------------------------------------------------------------------------------------
1,100 Volvo AB, Class B 29,347
-------------------------------------------------------------------------------------------------- ------------
Total 155,366
-------------------------------------------------------------------------------------------------- ------------
SWITZERLAND -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
10 (b)Baloise Holdings-REG 17,815
--------------------------------------------------------------------------------------------------
58 Holderbank Financiere Glaris AG, Class B 50,564
--------------------------------------------------------------------------------------------------
35 Nestle SA 51,501
--------------------------------------------------------------------------------------------------
58 Novartis AG-REG 92,667
--------------------------------------------------------------------------------------------------
6 (b)Roche Holding AG 53,696
--------------------------------------------------------------------------------------------------
40 UBS-Union Bank of Switzerland 50,919
--------------------------------------------------------------------------------------------------
119 Zurich Versicherungsgesellschaft 50,077
-------------------------------------------------------------------------------------------------- ------------
Total 367,239
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
3,500 BBA Group PLC 22,255
--------------------------------------------------------------------------------------------------
2,752 Barclays PLC 66,371
--------------------------------------------------------------------------------------------------
26 Boc Group PLC 415
--------------------------------------------------------------------------------------------------
4,690 Boots Co. PLC 68,912
--------------------------------------------------------------------------------------------------
2,728 British Aerospace PLC 74,454
--------------------------------------------------------------------------------------------------
3,122 British Petroleum Co. PLC 42,709
--------------------------------------------------------------------------------------------------
2,000 British Sky Broadcasting Group PLC 14,862
--------------------------------------------------------------------------------------------------
3,800 Cadbury Schweppes PLC 39,470
--------------------------------------------------------------------------------------------------
3,290 Compass Group 39,284
--------------------------------------------------------------------------------------------------
3,879 EMI Group PLC 29,219
--------------------------------------------------------------------------------------------------
3,431 GKN PLC 74,577
--------------------------------------------------------------------------------------------------
3,000 (b)Gallaher Group PLC 16,213
--------------------------------------------------------------------------------------------------
6,560 General Electric Co. PLC 42,710
--------------------------------------------------------------------------------------------------
1,819 Glaxo Wellcome PLC 39,937
--------------------------------------------------------------------------------------------------
19 Granada Group PLC 272
--------------------------------------------------------------------------------------------------
4,257 Grand Metropolitan PLC 38,752
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
SHARES OR
UNITS OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,200 Marks & Spencer PLC $ 32,913
--------------------------------------------------------------------------------------------------
2,000 National Westminster Bank, PLC, London 30,333
--------------------------------------------------------------------------------------------------
1,200 Next 14,997
--------------------------------------------------------------------------------------------------
1,960 Pearson 27,310
--------------------------------------------------------------------------------------------------
2,000 PowerGen PLC 25,823
--------------------------------------------------------------------------------------------------
2,268 Reckitt & Colman PLC 33,057
--------------------------------------------------------------------------------------------------
3,700 Reed International PLC 39,400
--------------------------------------------------------------------------------------------------
1,600 Royal & Sun Alliance Insurance Group PLC 14,403
--------------------------------------------------------------------------------------------------
4,000 Shell Transport & Trading Co. 27,225
--------------------------------------------------------------------------------------------------
3,326 Siebe PLC 60,498
--------------------------------------------------------------------------------------------------
20 Smithkline Beecham PLC 186
--------------------------------------------------------------------------------------------------
6,000 Vodafone Group PLC 40,128
--------------------------------------------------------------------------------------------------
1,640 Zeneca Group 52,349
-------------------------------------------------------------------------------------------------- ------------
Total 1,009,034
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN EQUITY 5,203,918
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $47,813,784) 74,199,146
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 65.5%
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 32.3%
- --------------------------------------------------------------------------------------------------------------------
(C)REPURCHASE AGREEMENTS -- 6.6%
- --------------------------------------------------------------------------------------------------------------------
$10,600,000 BT Securities Corporation, 5.730%, dated 11/28/1997, due 12/1/1997 10,600,000
--------------------------------------------------------------------------------------------------
1,800,000 Credit Suisse First Boston, Inc., 5.550%, dated 11/10/1997, due 12/17/1997 1,800,000
--------------------------------------------------------------------------------------------------
1,500,000 Swiss Bank Capital Markets, 5.550%, dated 11/12/1997, due 12/15/1997 1,500,000
-------------------------------------------------------------------------------------------------- ------------
Total 13,900,000
-------------------------------------------------------------------------------------------------- ------------
U.S. TREASURY SECURITIES -- 25.7%
- --------------------------------------------------------------------------------------------------------------------
1,100,000 United States Treasury Bill, 12/18/1997 1,098,458
--------------------------------------------------------------------------------------------------
6,500,000 United States Treasury Bond, 7.25%, 5/15/2004 6,975,540
--------------------------------------------------------------------------------------------------
6,500,000 United States Treasury Bond, 8.125%, 5/15/2021 8,088,665
--------------------------------------------------------------------------------------------------
13,398,000 United States Treasury Note, 5.75%, 8/15/2003 13,325,919
--------------------------------------------------------------------------------------------------
19,525,000 United States Treasury Note, 6.125%, 8/15/2007 19,912,181
--------------------------------------------------------------------------------------------------
5,000,000 United States Treasury Note, 6.50%, 10/15/2006 5,200,700
-------------------------------------------------------------------------------------------------- ------------
Total 54,601,463
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 68,501,463
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 18.6%
- --------------------------------------------------------------------------------------------------------------------
$2,050,000 Federal Home Loan Mortgage Corp., 6.00%, 11/1/2027 $2,007,073
--------------------------------------------------------------------------------------------------
431,756 Federal Home Loan Mortgage Corp., 9.00%, 5/1/2017 462,247
--------------------------------------------------------------------------------------------------
308,781 Federal Home Loan Mortgage Corp., 9.50%, 6/1/2021 335,509
--------------------------------------------------------------------------------------------------
321,661 Federal Home Loan Mortgage Corp., 7.50%, 5/1/2024 329,803
--------------------------------------------------------------------------------------------------
873,031 Federal Home Loan Mortgage Corp., 7.00%, 8/1/2025 879,850
--------------------------------------------------------------------------------------------------
913,540 Federal Home Loan Mortgage Corp., 7.50%, 12/1/2022 938,663
--------------------------------------------------------------------------------------------------
214,598 Federal Home Loan Mortgage Corp., 7.00%, 7/1/2024 216,542
--------------------------------------------------------------------------------------------------
848,855 Federal Home Loan Mortgage Corp., 6.50%, 9/1/2025 837,981
--------------------------------------------------------------------------------------------------
957,403 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2026 963,090
--------------------------------------------------------------------------------------------------
835,275 Federal Home Loan Mortgage Corp., 7.00%, 2/1/2026 842,843
--------------------------------------------------------------------------------------------------
1,680,409 Federal Home Loan Mortgage Corp., 7.50%, 6/1/2026 1,721,377
--------------------------------------------------------------------------------------------------
779,871 Federal Home Loan Mortgage Corp., 9.00%, 11/1/2006 817,890
--------------------------------------------------------------------------------------------------
292,489 Federal Home Loan Mortgage Corp., 8.00%, 11/1/2009 302,726
--------------------------------------------------------------------------------------------------
1,682,612 Federal Home Loan Mortgage Corp., 6.50%, 3/1/2011 1,678,405
--------------------------------------------------------------------------------------------------
261,078 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 264,503
--------------------------------------------------------------------------------------------------
509,486 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 516,170
--------------------------------------------------------------------------------------------------
473,158 Federal Home Loan Mortgage Corp., 6.50%, 5/1/2011 471,975
--------------------------------------------------------------------------------------------------
848,395 Federal Home Loan Mortgage Corp., 7.50%, 8/1/2003 855,284
--------------------------------------------------------------------------------------------------
655,377 Federal National Mortgage Association, 7.50%, 9/1/2009 670,942
--------------------------------------------------------------------------------------------------
440,706 Federal National Mortgage Association, 7.00%, 7/1/2024 443,875
--------------------------------------------------------------------------------------------------
909,603 Federal National Mortgage Association, 7.50%, 5/1/2026 928,932
--------------------------------------------------------------------------------------------------
136,063 Federal National Mortgage Association, 7.50%, 6/1/2009 139,295
--------------------------------------------------------------------------------------------------
122,572 Federal National Mortgage Association, 8.50%, 2/1/2025 128,394
--------------------------------------------------------------------------------------------------
456,601 Federal National Mortgage Association, 7.50%, 7/1/2025 467,304
--------------------------------------------------------------------------------------------------
446,413 Federal National Mortgage Association, 7.00%, 7/1/2025 449,064
--------------------------------------------------------------------------------------------------
865,634 Federal National Mortgage Association, 6.50%, 9/1/2025 852,468
--------------------------------------------------------------------------------------------------
793,838 Federal National Mortgage Association, 6.50%, 1/1/2003 794,584
--------------------------------------------------------------------------------------------------
1,010,160 Federal National Mortgage Association 7.00%, 7/1/2026 1,012,554
--------------------------------------------------------------------------------------------------
2,705,459 Federal National Mortgage Association, 8.00%, 5/1/2027 2,800,664
--------------------------------------------------------------------------------------------------
423,571 Federal National Mortgage Association, 10.50%, 1/1/2021 473,738
--------------------------------------------------------------------------------------------------
1,500,000 (e)Federal National Mortgage Association, 6.00%, 1/1/2099 TBA 1,468,594
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$2,574,000 Government National Mortgage Association, 7.00%, 11/20/2027 $2,566,767
--------------------------------------------------------------------------------------------------
587,527 Government National Mortgage Association, 10.00%, 10/15/2018 650,504
--------------------------------------------------------------------------------------------------
771,677 Government National Mortgage Association, 8.50%, 10/15/2022 815,084
--------------------------------------------------------------------------------------------------
827,449 Government National Mortgage Association, 6.50%, 1/15/2024 818,918
--------------------------------------------------------------------------------------------------
853,755 Government National Mortgage Association, 8.00%, 11/15/2024 886,838
--------------------------------------------------------------------------------------------------
99,450 Government National Mortgage Association, 9.50%, 12/15/2025 108,462
--------------------------------------------------------------------------------------------------
214,435 Government National Mortgage Association, 7.00%, 8/15/2024 215,574
--------------------------------------------------------------------------------------------------
1,742,459 Government National Mortgage Association, 7.50%, 4/15/2024 1,785,480
--------------------------------------------------------------------------------------------------
1,057,047 Government National Mortgage Association, 7.00%, 11/15/2024 1,063,326
--------------------------------------------------------------------------------------------------
1,633,230 Government National Mortgage Association, 9.00%, 11/15/2017 1,772,055
--------------------------------------------------------------------------------------------------
1,750,898 Government National Mortgage Association, 8.00%, 9/15/2017 1,838,986
--------------------------------------------------------------------------------------------------
1,800,000 Government National Mortgage Association, 7.50%, 12/15/2099 1,837,692
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES 39,432,025
-------------------------------------------------------------------------------------------------- ------------
INVESTMENT GRADE BONDS -- 7.4%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 McDonnell Douglas Finance, Note, 9.40%, 10/15/2001 265,000
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
330,000 Chase Manhattan, Sub. Note, 8.00%, 5/1/2005 332,871
--------------------------------------------------------------------------------------------------
250,000 Crestar Financial Corp, Sub. Note, 8.75%, 11/15/2004 280,708
--------------------------------------------------------------------------------------------------
400,000 Exp-Imp BK Korea, Note, 6.50%, 5/15/2000 381,937
--------------------------------------------------------------------------------------------------
300,000 National Bank of Canada, Sub. Note, 8.125%, 8/15/2004 324,687
--------------------------------------------------------------------------------------------------
285,000 PNC Funding Corp, Sub. Note, 6.875%, 7/15/2007 290,273
--------------------------------------------------------------------------------------------------
400,000 Santander Finance Issuances, Bank Guarantee, 7.875%, 4/15/2005 426,012
-------------------------------------------------------------------------------------------------- ------------
Total 2,036,488
-------------------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
150,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 146,822
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 SCI Television, Sr. Secd. Note, 11.00%, 6/30/2005 260,448
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
350,000 Continental Cablevision, Sr. Note, 8.50%, 9/15/2001 372,313
--------------------------------------------------------------------------------------------------
515,000 TKR Cable Inc., 10.50%, 10/30/2007 573,092
-------------------------------------------------------------------------------------------------- ------------
Total 945,405
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
$450,000 (a)Bayer Corp., Deb., 6.50%, 10/1/2002 $453,929
-------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
275,000 Waste Management, Deb., 8.75%, 5/1/2018 309,625
-------------------------------------------------------------------------------------------------- ------------
EDUCATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
375,000 Boston University, 7.625%, 7/15/2097 404,677
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
300,000 Harris Corp, Deb., 10.375%, 12/1/2018 326,319
-------------------------------------------------------------------------------------------------- ------------
FINANCE-RETAIL -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
150,000 Household Finance, Deb., 6.45%, 2/1/2009 146,790
-------------------------------------------------------------------------------------------------- ------------
FINANCIAL INTERMEDIARIES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
400,000 DLJ, Note, 6.875%, 11/1/2005 402,964
--------------------------------------------------------------------------------------------------
400,000 Green Tree Financial Corp, Sr. Sub. Note, 10.25%, 6/1/2002 459,420
--------------------------------------------------------------------------------------------------
300,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.375%, 1/15/2007 308,892
--------------------------------------------------------------------------------------------------
225,000 Salomon, Inc., Note, 7.20%, 2/1/2004 231,017
--------------------------------------------------------------------------------------------------
247,665 (a)World Financial, Pass Thru Cert., Series 96 WFP-B, 6.91%, 9/1/2013 255,323
-------------------------------------------------------------------------------------------------- ------------
Total 1,657,616
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
350,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 382,165
-------------------------------------------------------------------------------------------------- ------------
GOVERNMENT AGENCY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 Federal National Mortgage Association, 7.43%, 8/4/2005 252,170
--------------------------------------------------------------------------------------------------
250,000 Federal National Mortgage Association, 8.59%, 2/3/2005 251,228
-------------------------------------------------------------------------------------------------- ------------
Total 503,398
-------------------------------------------------------------------------------------------------- ------------
INSURANCE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
250,000 AFC Capital Trust I, Bond, 8.207%, 2/3/2027 270,660
--------------------------------------------------------------------------------------------------
450,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 473,697
--------------------------------------------------------------------------------------------------
350,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 420,273
--------------------------------------------------------------------------------------------------
515,000 Continental Corp, Note, 8.25%, 4/15/1999 529,842
--------------------------------------------------------------------------------------------------
250,000 Sunamerica Inc, Medium Term Note, 7.34%, 8/30/2005 260,775
--------------------------------------------------------------------------------------------------
425,000 Sunamerica, Inc., Sr. Note, 9.00%, 1/15/1999 439,021
--------------------------------------------------------------------------------------------------
250,000 USF&G Corp., Company Guarantee, 8.47%, 1/10/2027 264,578
-------------------------------------------------------------------------------------------------- ------------
Total 2,658,846
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
$350,000 Viacom, Inc., Sr. Note, 7.75%, 6/1/2005 $353,962
-------------------------------------------------------------------------------------------------- ------------
METALS & MINING -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
150,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 158,151
--------------------------------------------------------------------------------------------------
450,000 Santa Fe Pacific Gold Co, Note, 8.375%, 7/1/2005 492,894
-------------------------------------------------------------------------------------------------- ------------
Total 651,045
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
350,000 USX Corp., Note, 6.375%, 7/15/1998 351,565
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
400,000 News Amer Hldgs, Sr. Note, 7.50%, 3/1/2000 408,924
-------------------------------------------------------------------------------------------------- ------------
RETAILERS -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
250,000 Harcourt General, Sr. Deb., 7.20%, 8/1/2027 251,410
--------------------------------------------------------------------------------------------------
400,000 May Department Stores, Deb., 8.125%, 8/15/2035 441,708
-------------------------------------------------------------------------------------------------- ------------
Total 693,118
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 259,523
-------------------------------------------------------------------------------------------------- ------------
SOVEREIGN GOVERNMENT -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2009 314,919
--------------------------------------------------------------------------------------------------
450,000 Republic of South Africa, Global Bond Deb., 9.625%, 12/15/1999 475,875
--------------------------------------------------------------------------------------------------
400,000 Republic of Colombia, Note, 7.25%, 2/15/2003 381,800
--------------------------------------------------------------------------------------------------
375,000 Swedish Export Credit, 9.875%, 3/15/2038 397,658
-------------------------------------------------------------------------------------------------- ------------
Total 1,570,252
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
225,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 259,369
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
200,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 203,390
--------------------------------------------------------------------------------------------------
250,000 Enersis S.A., Note, 7.40%, 12/1/2016 251,295
--------------------------------------------------------------------------------------------------
200,000 Gulf States Util, FMB, 6.75%, 10/1/1998 200,388
-------------------------------------------------------------------------------------------------- ------------
Total 655,073
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENT GRADE BONDS 15,700,359
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
$50,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 $ 50,250
-------------------------------------------------------------------------------------------------- ------------
AUTOMOBILE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
38,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 42,370
--------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 56,750
--------------------------------------------------------------------------------------------------
50,000 Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 6/15/2007 52,375
-------------------------------------------------------------------------------------------------- ------------
Total 151,495
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
75,000 First Nationwide Escrow , Sr. Sub. Note, 10.625%, 10/1/2003 83,813
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)ACME Television, LLC, Sr. Disc. Note, 9/30/2004 36,750
--------------------------------------------------------------------------------------------------
American Radio Systems Corp., 525 Exchangeable Pfd. Shares Stock, 11.375% 61,950
--------------------------------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc., 500 Shares Stock Sr. Pfd., $12.00 56,375
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 529 Exchangeable Pfd. Shares Stock, $12.00 62,687
--------------------------------------------------------------------------------------------------
50,000 (a)Fox/Liberty Networks, LLC, Sr. Disc. Note, 8/15/2007 31,375
--------------------------------------------------------------------------------------------------
50,000 Jacor Communications, Inc, Sr. Sub. Note, 9.75%, 12/15/2006 53,375
--------------------------------------------------------------------------------------------------
50,000 Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, 6/15/2007 52,000
--------------------------------------------------------------------------------------------------
(a)Sinclair Broadcast Group, Inc., Pfd., 500 Shares Series A $11.625 55,250
--------------------------------------------------------------------------------------------------
50,000 Sinclair Broadcast Group, Sr. Sub. Note, 9.00%, 7/15/2007 50,625
-------------------------------------------------------------------------------------------------- ------------
Total 460,387
-------------------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)Dialog Corporation plc, Sr. Sub. Note, 11.00%, 11/15/2007 51,125
--------------------------------------------------------------------------------------------------
32,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 35,840
--------------------------------------------------------------------------------------------------
50,000 Outsourcing Solutions Inc, Sr. Sub. Note, 11.00%, 11/1/2006 56,000
--------------------------------------------------------------------------------------------------
17,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 19,423
-------------------------------------------------------------------------------------------------- ------------
Total 162,388
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
13 (a)(b)CS Wireless Systems, Inc. unit, 0/11.75%, 3/1/2006 0
--------------------------------------------------------------------------------------------------
50,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 54,375
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
125,000 (a)Diamond Cable, Sr. Disc. Note, 0/10.75%, 2/15/2007 83,125
--------------------------------------------------------------------------------------------------
50,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 41,750
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$50,000 FrontierVision Holdings, 9/15/2007 $ 34,875
--------------------------------------------------------------------------------------------------
100,000 International Cabletel, Sr. Disc. Note, 0/12.75%, 4/15/2005 82,500
--------------------------------------------------------------------------------------------------
50,000 Lenfest Communication, Sr. Note, 8.375%, 11/1/2005 50,438
--------------------------------------------------------------------------------------------------
50,000 Pegasus Communications , Sr. Note, 9.625%, 10/15/2005 50,250
--------------------------------------------------------------------------------------------------
25,000 Pegasus Media , Note, 12.50%, 7/1/2005 28,625
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 54,750
--------------------------------------------------------------------------------------------------
100,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 76,750
--------------------------------------------------------------------------------------------------
50,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 32,750
-------------------------------------------------------------------------------------------------- ------------
Total 645,938
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 21,500
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)Glenoit Corporation, Sr. Sub. Note, 11.00%, 4/15/2007 54,250
--------------------------------------------------------------------------------------------------
50,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006 53,250
--------------------------------------------------------------------------------------------------
75,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 78,938
-------------------------------------------------------------------------------------------------- ------------
Total 186,438
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 54,500
--------------------------------------------------------------------------------------------------
50,000 ICON Fitness Corp., Sr. Disc. Note, 11/15/2006 29,250
--------------------------------------------------------------------------------------------------
50,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 50,375
--------------------------------------------------------------------------------------------------
50,000 Renaissance Cosmetics, Inc.,Sr. Note, 11.75%, 2/15/2004 47,250
--------------------------------------------------------------------------------------------------
50,000 Revlon Consumer Products, Sr. Sub. Note, 10.50%, 2/15/2003 53,063
--------------------------------------------------------------------------------------------------
50,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 52,500
-------------------------------------------------------------------------------------------------- ------------
Total 286,938
-------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 54,750
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)Fairchild Semiconductor, Sr. Sub., 10.125%, 3/15/2007 53,000
--------------------------------------------------------------------------------------------------
50,000 (a)Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 51,875
-------------------------------------------------------------------------------------------------- ------------
Total 104,875
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$25,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 $ 27,875
--------------------------------------------------------------------------------------------------
50,000 Digiorgio Corp., Sr. Note, 10.00%, 6/15/2007 49,250
--------------------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 56,375
-------------------------------------------------------------------------------------------------- ------------
Total 133,500
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 International Home Foods, Sr. Sub. Note, 10.375%, 11/1/2006 54,750
--------------------------------------------------------------------------------------------------
25,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 27,875
-------------------------------------------------------------------------------------------------- ------------
Total 82,625
-------------------------------------------------------------------------------------------------- ------------
FOOD SERVICES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)AmeriServe Food Dist. Inc, Sr. Sub. Note, 10.125%, 7/15/2007 52,000
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 26,750
--------------------------------------------------------------------------------------------------
50,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 54,750
-------------------------------------------------------------------------------------------------- ------------
Total 81,500
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 55,875
--------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 10.125%, 3/1/2005 54,313
--------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 8.625%, 1/15/2007 51,375
-------------------------------------------------------------------------------------------------- ------------
Total 161,563
-------------------------------------------------------------------------------------------------- ------------
HOME PRODUCTS & FURNISHINGS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (a)Werner Holding Co. Inc., Sr. Sub. Note, 10.00%, 11/15/2007 51,250
-------------------------------------------------------------------------------------------------- ------------
HOTELS, MOTELS, INNS & CASINOS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Courtyard By Marriott, Sr. Note, 10.75%, 2/1/2008 54,375
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 28,125
--------------------------------------------------------------------------------------------------
50,000 (a)Continental Global, Inc., Sr. Note, 11.00%, 4/1/2007 53,750
--------------------------------------------------------------------------------------------------
50,000 Euramax International Plc, Sr. Sub. Note, 11.25%, 10/1/2006 54,375
--------------------------------------------------------------------------------------------------
50,000 (a)Roller Bearing Co. of America, Inc., Sr. Sub. Note, 9.625%, 6/15/2007 50,625
--------------------------------------------------------------------------------------------------
50,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 51,750
-------------------------------------------------------------------------------------------------- ------------
Total 238,625
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
$100,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 $ 78,000
--------------------------------------------------------------------------------------------------
25,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 27,125
--------------------------------------------------------------------------------------------------
50,000 (a)Livent Inc., Sr. Note, 9.375%, 10/15/2004 50,000
--------------------------------------------------------------------------------------------------
50,000 Premier Parks, Sr. Note, 9.75%, 1/15/2007 53,500
--------------------------------------------------------------------------------------------------
50,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 53,000
--------------------------------------------------------------------------------------------------
50,000 Viacom Inc, Sub. Deb., 8.00%, 7/7/2006 50,000
-------------------------------------------------------------------------------------------------- ------------
Total 311,625
-------------------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 53,250
--------------------------------------------------------------------------------------------------
50,000 Clark Material Handling , Sr. Note, 10.75%, 11/15/2006 53,000
--------------------------------------------------------------------------------------------------
50,000 (a)National Equipment Serv., Sr. Sub. Note, 10.00%, 11/30/2004 49,250
--------------------------------------------------------------------------------------------------
50,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 56,750
-------------------------------------------------------------------------------------------------- ------------
Total 212,250
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 54,438
--------------------------------------------------------------------------------------------------
50,000 Falcon Drilling Company, Sr. Note, 9.75%, 1/15/2001 52,500
--------------------------------------------------------------------------------------------------
50,000 Forcenergy Inc., Sr. Sub. Note, 9.50%, 11/1/2006 52,875
--------------------------------------------------------------------------------------------------
50,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 54,250
-------------------------------------------------------------------------------------------------- ------------
Total 214,063
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 56,250
--------------------------------------------------------------------------------------------------
50,000 Hollinger International, Sr. Sub. Note, 9.25%, 3/15/2007 52,000
--------------------------------------------------------------------------------------------------
Primedia, Inc., Pfd., 500 Series D, $10.00 51,875
-------------------------------------------------------------------------------------------------- ------------
Total 160,125
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 55,250
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$25,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 $ 26,375
--------------------------------------------------------------------------------------------------
50,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 55,063
--------------------------------------------------------------------------------------------------
50,000 Statia Terminals, 1st Mtg. Note, 11.75%, 11/15/2003 53,000
--------------------------------------------------------------------------------------------------
50,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 54,688
-------------------------------------------------------------------------------------------------- ------------
Total 189,126
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
100,000 Brooks Fiber Properties, Inc. Sr. Disc. Note, 0/10.875%, 3/1/2006 82,750
--------------------------------------------------------------------------------------------------
75,000 Call-Net Enterprises, Inc, Sr. Disc. Note, 8/15/2007 50,625
--------------------------------------------------------------------------------------------------
50,000 Comcast Cellular Holdings, Sr. Note, 9.50%, 5/1/2007 52,250
--------------------------------------------------------------------------------------------------
50,000 (a)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
100,000 Intermedia Communications, Sr. Disc. Note, 0/12.50%, 5/15/2006 78,000
--------------------------------------------------------------------------------------------------
50,000 (a)Mcleod USA Incorporated, Sr. Note, 9.250%, 7/15/2007 51,000
--------------------------------------------------------------------------------------------------
50,000 (a)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
50,000 Millicom International, Sr. Disc. Note, 0/13.50%, 6/1/2006 36,500
--------------------------------------------------------------------------------------------------
116 (b)NEXTEL Communications, Inc., Class A 2,929
--------------------------------------------------------------------------------------------------
75,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 65,063
--------------------------------------------------------------------------------------------------
50,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 51,875
--------------------------------------------------------------------------------------------------
50,000 (a)Qwest Communications, Sr. Note, 10.875%, 4/1/2007 55,750
--------------------------------------------------------------------------------------------------
50,000 (a)RCN Corporation, Sr. Disc. Note, 0/11.125%, 10/15/2007 29,250
--------------------------------------------------------------------------------------------------
50,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 54,250
--------------------------------------------------------------------------------------------------
100,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 79,625
--------------------------------------------------------------------------------------------------
50,000 (a)Telesystem International, Sr. Disc. Note, 6/30/2007 30,875
--------------------------------------------------------------------------------------------------
50,000 (a)Teligent, Inc., Sr. Note, 11.50%, 12/1/2007 50,250
--------------------------------------------------------------------------------------------------
50,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 52,375
-------------------------------------------------------------------------------------------------- ------------
Total 935,117
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 54,250
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 604 PIK Pfd., Shares Series A, 11.40% 66,138
-------------------------------------------------------------------------------------------------- ------------
Total 120,388
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 5,262,154
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- 4.7%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
315,000 Federal National Mortgage Association, 6.50%, 7/10/2002 $219,534
--------------------------------------------------------------------------------------------------
128,000 Queensland Treas-Global , Local Government Guarantee, Deb., 10.50%, 5/15/2003 104,772
--------------------------------------------------------------------------------------------------
25,000 West Aust T Corp, Local Government Guarantee, 8.00%, 7/15/2003 18,541
-------------------------------------------------------------------------------------------------- ------------
Total 342,847
-------------------------------------------------------------------------------------------------- ------------
BELGIAN FRANC -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
2,112,000 Belgian Govt., Bond, 6.50%, 3/31/2005 61,733
--------------------------------------------------------------------------------------------------
6,000,000 Belgium Kingdom, 7.75%, 10/15/2004 187,069
-------------------------------------------------------------------------------------------------- ------------
Total 248,802
-------------------------------------------------------------------------------------------------- ------------
CANADIAN DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
290,000 Canada Government, Deb., 6.50%, 6/1/2004 215,416
--------------------------------------------------------------------------------------------------
375,000 Ontario Hydro, 9.00%, 6/24/2002 302,111
--------------------------------------------------------------------------------------------------
102,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 80,758
-------------------------------------------------------------------------------------------------- ------------
Total 598,285
-------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
1,844,000 Denmark - Bullet, Bond, 8.00%, 3/15/2006 313,780
--------------------------------------------------------------------------------------------------
1,200,000 Denmark, 8.00%, 5/15/2003 200,298
-------------------------------------------------------------------------------------------------- ------------
Total 514,078
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
28,000 France O.A.T., Deb., 8.25%, 4/25/2022 39,628
--------------------------------------------------------------------------------------------------
1,044,000 France O.A.T., Bond, 7.25%, 4/25/2006 199,664
--------------------------------------------------------------------------------------------------
150,500 France O.A.T., Bond, 7.50%, 4/25/2005 189,546
-------------------------------------------------------------------------------------------------- ------------
Total 428,838
-------------------------------------------------------------------------------------------------- ------------
DEUTSCHE MARK-- 1.1%
- --------------------------------------------------------------------------------------------------------------------
137,000 DG-HYPBK 5.75%, 1/22/2007 78,541
--------------------------------------------------------------------------------------------------
188,000 Deutschland Republic, Deb., 6.25%, 1/4/2024 109,666
--------------------------------------------------------------------------------------------------
33,000,000 KFW International Finance, 6.00%, 11/29/1999 286,108
--------------------------------------------------------------------------------------------------
350,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 212,362
--------------------------------------------------------------------------------------------------
1,400,000 KFW International Finance, 7.00%, 5/12/2000 250,377
--------------------------------------------------------------------------------------------------
280,000 Tennessee Valley Authority - Global Bond, 6.375%, 9/18/2006 166,476
--------------------------------------------------------------------------------------------------
1,100,000 Treuhandanstalt, 7.75%, 10/1/2002 694,806
--------------------------------------------------------------------------------------------------
744,000 Treuhandanstalt, Foreign Gov't. Guarantee, 6.875%, 6/11/2003 456,103
-------------------------------------------------------------------------------------------------- ------------
Total 2,254,439
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GREEK DRACHMA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
34,000,000 Hellenic Republic, FRN 14.00%, 10/23/2003 $116,877
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
110,000,000 BTPS, Bond, 10.50%, 11/1/2000 72,390
--------------------------------------------------------------------------------------------------
520,000,000 BTPS, Deb., 12.00%, 5/18/1999 327,486
--------------------------------------------------------------------------------------------------
1,040,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 730,226
-------------------------------------------------------------------------------------------------- ------------
Total 1,130,102
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
65,000,000 Export-Import Bank Japan, 4.375%, 10/1/2003 591,302
--------------------------------------------------------------------------------------------------
42,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 381,538
-------------------------------------------------------------------------------------------------- ------------
Total 972,840
-------------------------------------------------------------------------------------------------- ------------
NETHERLAND GUILDER -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
70,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 37,108
--------------------------------------------------------------------------------------------------
30,000 Bank Ned Gemeenten, Bond, 7.75%, 12/20/2004 17,058
--------------------------------------------------------------------------------------------------
90,000 Lkb-global Bd, Bank Guarantee, 6.00%, 1/25/2006 52,285
--------------------------------------------------------------------------------------------------
700,000 Netherlands Government, 5.75%, 1/15/2004 362,628
--------------------------------------------------------------------------------------------------
210,000 Netherlands Government, 6.00%, 1/15/2006 110,004
-------------------------------------------------------------------------------------------------- ------------
Total 579,083
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
143,000 New Zealand Government, 8.00%, 2/15/2001 91,003
--------------------------------------------------------------------------------------------------
105,000 New Zealand Government, Bond, 8.00%, 7/15/1998 65,071
-------------------------------------------------------------------------------------------------- ------------
Total 156,074
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
800,000 NGB Bond, 9.00%, 1/31/1999 116,895
--------------------------------------------------------------------------------------------------
630,000 Norwegian Government, Bond, 7.00%, 5/31/2001 93,168
--------------------------------------------------------------------------------------------------
473,000 Norwegian Government, Foreign Government Guarantee, 5.75%, 11/30/2004 66,983
-------------------------------------------------------------------------------------------------- ------------
Total 277,046
-------------------------------------------------------------------------------------------------- ------------
PORTUGUESE ESCUDO -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
10,250,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 64,947
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SPANISH PESETA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
40,000,000 Spanish Government, Bond,10.00%, 2/28/2005 $337,804
--------------------------------------------------------------------------------------------------
29,000,000 Spanish Government, Bond, 8.80%, 4/30/2006 234,192
--------------------------------------------------------------------------------------------------
6,510,000 Spanish Government, Bond, 9.40%, 4/30/1999 46,370
--------------------------------------------------------------------------------------------------
6,480,000 Spanish Government, Deb., 10.10%, 2/28/2001 49,961
-------------------------------------------------------------------------------------------------- ------------
Total 668,327
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
1,000,000 Stadshypotekskas, Foreign Government Guarantee, Series 1551, 7.50%, 3/17/1999 132,257
--------------------------------------------------------------------------------------------------
2,300,000 Sweden, 6.00%, 2/9/2005 294,584
-------------------------------------------------------------------------------------------------- ------------
Total 426,841
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
127,000 British Gas PLC, 8.875%, 7/8/2008 238,218
--------------------------------------------------------------------------------------------------
108,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 203,890
--------------------------------------------------------------------------------------------------
365,000 UK Conversion, 9.00%, 3/3/2000 639,951
--------------------------------------------------------------------------------------------------
108,000 United Kingdom Treasury, Bond, 7.50%, 12/7/2006 194,086
--------------------------------------------------------------------------------------------------
30,000 United Kingdom Treasury, Bond, 8.00%, 12/7/2015 58,805
-------------------------------------------------------------------------------------------------- ------------
Total 1,334,950
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 10,114,376
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $152,788,627) 139,010,377
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $200,602,411)(D) $213,209,523
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
* The Fund purchases index futures contracts to efficiently manage
cash flows resulting from shareholder purchases and redemptions,
dividends and capital gain payments to shareholders and corporate
actions while maintaining exposure to the index and minimize trading
costs. The underlying face amount, at value of open index futures
contracts is $1,079,625 at November 30, 1997, which represents 0.5%
of net assets. Taking into consideration these open index futures
contracts, the Fund's effective total exposure to stocks is 31.5%,
and increasing the total exposure to small company stocks is 3.0%.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $2,221,893 which represents 1.04% of net assets.
(b) Non-income producing security.
(c) The repurchase agreements are full collateralized by U.S. government and/or
agency obligations. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $200,685,920.
The net unrealized appreciation of investments on a federal tax basis
amounts to $12,523,603 which is comprised of $15,678,887 appreciation and
$3,155,284 depreciation at November 30, 1997.
(e) This security is subject to dollar roll transactions.
CERTAIN SECURITIES MAY BE CLASSIFIED IN MULTIPLE CATEGORIZATIONS BASED ON
PURPOSE OF INDIVIDUAL PURCHASES.
FEDERATED MANAGED GROWTH AND INCOME FUND
Note: The categories of investments are shown as a percentage of
net assets ($212,226,797) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt FRN -- Floating Rate Note GTD -- Guaranty LLC
- -- Limited Liability Corporation PIK -- Payment in Kind PLC -- Public Limited
Company PP -- Principal Payment SA -- Support Agreement SPA -- Standby Purchase
Agreement TBA -- To Be Announced TRANs -- Tax and Revenue Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED GROWTH AND INCOME FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $200,602,411, and tax cost $200,685,920) $213,209,523
- -----------------------------------------------------------------------------------------
Cash 3,580
- -----------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $640) 626
- -----------------------------------------------------------------------------------------
Income receivable 1,863,155
- -----------------------------------------------------------------------------------------
Receivable for investments sold 2,158,518
- -----------------------------------------------------------------------------------------
Receivable for shares sold 310,199
- -----------------------------------------------------------------------------------------
Deferred organizational costs 52,013
- -----------------------------------------------------------------------------------------
Other assets 14,303
- -----------------------------------------------------------------------------------------
Total assets 217,611,917
- ----------------------------------------------------------------------------------------- ------------
LIABILITIES:
- --------------------------------------------------------------------------
Payable for investments purchased $ 3,732,386
- --------------------------------------------------------------------------
Payable for shares redeemed 82,360
- --------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 522
- --------------------------------------------------------------------------
Payable for dollar roll transactions 1,494,948
- --------------------------------------------------------------------------
Payable for taxes withheld 1,775
- --------------------------------------------------------------------------
Payable for daily variation margin 625
- --------------------------------------------------------------------------
Accrued expenses 72,504
- ------------------------------------------------------------------------- ------------
Total liabilities 5,385,120
- ----------------------------------------------------------------------------------------- ------------
NET ASSETS for 17,721,265 shares outstanding $212,226,797
- ----------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------
Paid in capital $187,336,495
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities
in future currency 12,609,822
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investments, foreign currency transactions and
futures contracts 10,956,599
- -----------------------------------------------------------------------------------------
Undistributed net investment income 1,323,881
- ----------------------------------------------------------------------------------------- ------------
Total Net Assets $212,226,797
- ----------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -----------------------------------------------------------------------------------------
$164,727,526 [DIVIDED BY] 13,751,196 shares outstanding $11.98
- ----------------------------------------------------------------------------------------- ------------
SELECT SHARES:
- -----------------------------------------------------------------------------------------
$47,499,271 [DIVIDED BY] 3,970,069 shares outstanding $11.96
- ----------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MANAGED GROWTH AND INCOME FUND
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $28,415) $ 1,346,997
- -----------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $39,319) (net of foreign taxes withheld of $1,275) 9,532,769
- ----------------------------------------------------------------------------------------- ------------
Total income 10,879,766
- -----------------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------
Investment advisory fee $ 1,535,953
- --------------------------------------------------------------------------
Administrative personnel and services fee 155,085
- --------------------------------------------------------------------------
Custodian fees 104,479
- --------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 124,840
- --------------------------------------------------------------------------
Directors'/Trustees' fees 5,042
- --------------------------------------------------------------------------
Auditing fees 16,953
- --------------------------------------------------------------------------
Legal fees 4,034
- --------------------------------------------------------------------------
Portfolio accounting fees 90,078
- --------------------------------------------------------------------------
Distribution services fee -- Select Shares 344,598
- --------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 397,118
- --------------------------------------------------------------------------
Shareholder services fee -- Select Shares 114,866
- --------------------------------------------------------------------------
Share registration costs 41,496
- --------------------------------------------------------------------------
Printing and postage 51,550
- --------------------------------------------------------------------------
Insurance premiums 4,444
- --------------------------------------------------------------------------
Taxes 3,012
- --------------------------------------------------------------------------
Miscellaneous 21,955
- -------------------------------------------------------------------------- ------------
Total expenses 3,015,503
- --------------------------------------------------------------------------
Waivers --
- -------------------------------------------------------------
Waiver of investment advisory fee $ (101,972)
- -------------------------------------------------------------
Waiver of distribution services fee -- Select Shares (114,866)
- -------------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (317,695)
- ------------------------------------------------------------- -----------
Total waivers (534,533)
- -------------------------------------------------------------------------- ------------
Net expenses 2,480,970
- ----------------------------------------------------------------------------------------- ------------
Net investment income 8,398,796
- ----------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- -----------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 10,949,153
- -----------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities in foreign currency 2,187,689
- ----------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and foreign currency 13,136,842
- ----------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 21,535,638
- ----------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------
<S> <C> <C>
1997 1996
- -------------------------------------------------------------------------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS --
- --------------------------------------------------------------------------
Net investment income $8,398,796 $7,708,963
- -------------------------------------------------------------------------- ------------ ------------
Net realized gain on investments and foreign currency
transactions ($11,034,226 and $2,127,966, respectively,
as computed for federal tax purposes) 10,949,153 2,283,641
- --------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation
of assets and liabilities in foreign currency 2,187,689 4,291,960
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 21,535,638 14,284,564
- -------------------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
- --------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------
Institutional Shares (6,945,797) (5,990,819)
- --------------------------------------------------------------------------
Select Shares (1,683,717) (1,327,197)
- --------------------------------------------------------------------------
Distributions from net realized gains on investments and foreign
currency transactions
- --------------------------------------------------------------------------
Institutional Shares (1,660,283) (1,517,396)
- --------------------------------------------------------------------------
Select Shares (461,933) (372,550)
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to shareholders (10,751,730) (9,207,962)
- -------------------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS --
- --------------------------------------------------------------------------
Proceeds from sale of shares 70,870,478 103,412,568
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 6,401,094 5,072,213
- --------------------------------------------------------------------------
Cost of shares redeemed (76,711,981) (41,180,003)
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 559,591 67,304,778
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets 11,343,499 72,381,380
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period 200,883,298 128,501,918
- -------------------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$1,323,881 and $1,646,433, respectively) $ 212,226,797 $ 200,883,298
- -------------------------------------------------------------------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED GROWTH AND INCOME FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Growth And Income Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is to seek current income and capital appreciation.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are valued at the prices furnished by an
independent pricing service. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
With respect to valuation of foreign securities, trading in foreign countries
may be completed at times which vary from the closing of the New York Stock
Exchange. Therefore, foreign securities are valued at the latest closing price
on the exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. Dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities, market discount, foreign currency transactions, non-taxable
dividends, wash sales, and futures. The following reclassifications have been
made to the financial statements.
INCREASE (DECREASE)
- -------------------------------------------------------------------
ACCUMULATED
PAID-IN NET REALIZED UNDISTRIBUTED NET
CAPITAL GAIN/LOSS INVESTMENT INCOME
- --------- -------------- --------------------
$1,059 $90,775 $(91,834)
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. For the period ended November 30, 1997, the Fund had
realized gains of $3,039 on future contracts.
At November 30, 1997, the Fund had outstanding futures contracts as set forth
below:
CONTRACTS TO UNREALIZED
EXPIRATION DATE RECEIVE POSITION APPRECIATION
- ---------------- --------------- ---------- ----------------
December 1997 Russell 2000 Long 5,119
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The fund may enter into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date.At November 30, 1997, the Fund had
outstanding foreign currency commitments as set forth below:
<TABLE>
<CAPTION>
FOREIGN CURRENCY
CONTRACTS SETTLEMENT UNITS TO CONTRACTS UNREALIZED
PURCHASED DATE RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ------------- ---------- ---------------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Belgian Franc 12/01/97 1,183,540 $33,051 $32,529 $(522)
</TABLE>
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
- ----------------------------------------------- ------------------------ ----------------
<S> <C> <C>
Bayer Corp.,Deb. 03/26/1996 - 04/17/1996 $444,985
World Financial, Pass Thru Cert. 11/18/1996 247,463
ACME Television, LLC 09/24/1997 37,183
FOX/Liberty Networks,LLC 08/15/1997 32,052
Sinclair Broadcast Group, Inc. 03/05/1997 50,000
Dialog Corporation plc 11/10/1997 50,000
Chilectra S.A.,ADR 02/28/1996 5,428
CS Wireless Systems, Inc. 02/16/1996 --
Diamond Cable 03/12/1997 80,550
Glenoit Corporation 03/26/1997 49,905
Allied waste N.A., Inc. 06/02/1997 50,000
Fairchild Semiconductor 03/06/1997 50,000
Viasystems, Inc. 06/02/1997 50,000
Ameriserve Food Dist. Inc. 10/16/1997 52,750
Werner Holding Co. Inc. 11/14/1997 50,000
Continental Global, Inc. 03/26/1997 50,000
Rollar Bearing Co. of America, Inc. 06/18/1997 50,000
Livent Inc. 10/10/1997 50,250
National Equipment Serv. 11/20/1997 49,384
Hermes Europe Railtel B.V. 08/14/1997 51,094
Mcleod USA Incorporated 07/15/1997 50,000
Metronet Communications Corp. 07/18/1997 50,000
Qwest Communications Intl, Inc. 03/25/1997 50,000
RCN Corporation 10/10/1997 29,613
Telesystem International 06/24/1997 27,900
Teligent Inc. 11/21/1997 50,000
Grupo Financiero Bancomer, S.A. de C.V., Class B 11/06/1995 - 01/17/1996 16,067
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------
1997 1996
-------------------------- --------------------------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ --------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Shares sold 4,487,267 $ 51,304,428 7,128,986 $ 78,333,565
- ------------------------------------------------
Shares issued to shareholders in payment
of distributions declared 400,790 4,522,191 334,449 3,648,682
- ------------------------------------------------ --------- ------------ --------- ------------
Shares redeemed (4,916,395) (56,006,233) (2,992,691) (32,944,715)
- ------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from Institutional
Share transactions (28,338) $ (17,9614) 4,470,744 $ 49,037,532
- ------------------------------------------------ --------- ------------ --------- ------------
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------
1997 1996
-------------------------- --------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ --------- ------------ --------- ------------
Shares sold 1,716,458 $ 19,566,050 2,283,902 $ 25,079,003
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 166,372 1,878,903 130,571 1,423,531
- ------------------------------------------------
Shares redeemed $(1,808,151) (20,705,748) (747,832) (8,235,288)
- ------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from
Select Share transactions 74,679 $ 739,205 1,666,641 $ 18,267,246
- ------------------------------------------------ --------- ------------ --------- ------------
Net change resulting from
share transactions 46,341 $ 559,591 6,137,385 $ 67,304,778
- ------------------------------------------------ --------- ------------ --------- ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets.The Adviser may voluntarily choose to waive any portion
of its fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp., 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp.("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses up to
0.75% of average daily net assets of Select Shares annually, to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. Federated
Shareholder Services may voluntarily choose to waive any portion of its fee. FSS
can modify or terminate this voluntary waiver at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of 86,568 were borne intitally by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over five year period following the Fund's effective
date. For the year ended November 30, 997, the Fund expensed $22,395 of
organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $249,713,498
- ------------------------------------------------ ------------
SALES $252,545,497
- ------------------------------------------------ ------------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- ------------------------------------------ ----------- ------------------------------------------ -----------
<S> <C> <C> <C>
Aerospace & Military Technology 0.2 Healthcare 3.5
Agency 1.0 Industrial Components 0.0
Automotive 0.1 Industrial Products & Equipment 0.1
Banking 1.4 Insurance 1.3
Basic Industry 1.0 Leisure & Entertainment 0.3
Beverage & Tobacco 1.0 Machinery & Engineering 0.1
Broadcast Radio & T.V. 0.5 Machinery & Equipment 0.1
Building Materials & Components 0.1 Manufacturing 0.0
Business & Public Services 0.1 Metals & Mining 0.3
Business Equipment & Services 0.1 Metals -- Steel 0.0
Cable Television 0.7 Miscellaneous Materials & Commodities 7.1
Chemicals & Plastics 0.3 Multi-Industry 0.1
Clothing & Textiles 0.1 Natural Gas Distribution 0.6
Construction & Housing 0.1 Oil & Gas 1.2
Consumer Durables 0.9 Printing & Publishing 0.3
Consumer Non-Durables 2.2 Producer Manufacturing 2.0
Consumer Products 0.1 Real Estate 0.1
Ecological Services & Equipment 0.2 Recreation, Other Consumer Goods 0.1
Electric Utilities 4.0 Retail Trade 2.0
Electrical & Electronics 0.1 Services 2.0
Electronics 0.2 Soverign 3.0
Energy Minerals 2.8 Soverign Government 1.0
Energy Sources 0.1 State & Provincial 0.1
Finance 4.4 Surface Transportation 0.2
Financial Intermediaries 0.9 Technology 4.0
Financial Services 0.1 Telecommunications & Cellular 0.2
Food & Drug Retailers 0.1 Transportation 0.6
Food & Household Products 0.2 Treasury Securities 25.7
Forest Products & Paper 0.2 Utilities 3.0
Government Agency 17.9
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Growth and Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Growth and Income Fund (an investment portfolio of Managed
Series Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of November 30, 1997, and the related statement of
operations for the year then ended, and the statement of changes in net assets,
and the financial highlights (see pages 2 and 20 of the prospectus) for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Growth and Income Fund, an investment portfolio of Managed
Series Trust, as of November 30, 1997, the results of its operations for the
year then ended, and the changes in its net assets and its financial highlights
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] FEDERATED INVESTORS
FEDERATED MANAGED GROWTH AND INCOME FUND
Institutional Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust,
an Open-End Management Investment Company
FEDERATED MANAGED GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT
PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K305
3122007A-IS (1/98)
[RECYCLED LOGO]
RECYCLED PAPER
3155P Final.edg PAGE 73 TO FEDERATED INVESTORS
FEDERATED MANAGED GROWTH AND INCOME FUND
(A Portfolio of Managed Series Trust)
Select Shares
PROSPECTUS
The Select Shares of Federated Managed Growth and Income Fund (the Fund) offered
by this prospectus represent interests in the Fund, which is a diversified
investment portfolio of Managed Series Trust (the "Trust"). The Trust is an
open-end management investment company (a mutual fund).
The investment objective of the Fund is to seek current income and capital
appreciation. The Fund invests in both bonds and stocks.
Select Shares are sold at net asset value.
THE SELECT SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SELECT SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Select Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a 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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Select Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 6
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Select Shares 15
Administration of the Fund 15
Brokerage Transactions 16
Net Asset Value 16
Investing in Select Shares 16
Share Purchases 16
Minimum Investment Required 17
What Shares Cost 17
Systematic Investment Program 17
Confirmations and Account Statements 17
Dividends 17
Capital Gains 17
Redeeming Select Shares 17
Through a Financial Institution 17
Telephone Redemption 18
Written Requests 18
Systematic Withdrawal Program 18
Accounts with Low Balances 18
Shareholder Information 19
Voting Rights 19
Tax Information 19
Federal Income Tax 19
State and Local Taxes 19
Performance Information 19
Other Classes of Shares 19
Financial Highlights -- Institutional Shares 20
Financial Statements 21
Report of Independant Public Accountants 65
Appendix 66
SUMMARY OF FUND EXPENSES
SELECT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.70%
12b-1 Fee (after waiver)(2) 0.50%
Total Other Expenses 0.55%
Shareholder Services Fee 0.25%
Total Operating Expenses(3) 1.75%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion.
The maximum management fee is 0.75%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver of a portion
of the 12b-1 fee. The distributor can terminate the voluntary waiver at any
time at its sole discretion. The maximum 12b-1 fee is 0.75%.
(3) The total operating expenses would have been 2.05% absent the voluntary
waivers of portions of the management fee and the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Select Shares of the Fund will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see Investing in Select Shares and "Trust Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
EXAMPLE
- -----------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 18
3 Years $ 55
5 Years $ 95
10 Years $206
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 65.
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.36 $11.12 $ 9.83 $10.00
- --------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------
Net investment income 0.40 0.43 0.37 0.21
- --------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.74 0.41 1.34 (0.25)
- -------------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.14 0.84 1.71 (0.04)
- -------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- --------------------------------------------------
Distributions from
net investment income (0.42) (0.44) (0.42) (0.13)
- --------------------------------------------------
Distributions from net realized gain on
investments and foreign currency transactions (0.12) (0.16) -- --
- -------------------------------------------------- ------ ------ ------ ------
Total distributions (0.54) (0.60) (0.42) (0.13)
- -------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.96 $11.36 $11.12 $ 9.83
- -------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 10.41% 7.92% 17.76% (0.40%)
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------
Expenses 1.75% 1.75% 1.75% 1.64%*
- --------------------------------------------------
Net investment income 3.51% 4.02% 4.37% 4.33%*
- --------------------------------------------------
Expense waiver/reimbursement(c) 0.30% 0.36% 0.55% 0.84%*
- --------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets, end of period (000 omitted) $47,499 $44,248 $24,787 $3,697
- --------------------------------------------------
Average commission rate paid(d) $0.0078 $0.0043 -- --
- --------------------------------------------------
Portfolio turnover 130% 154% 157% 132%
- --------------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
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 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.
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 Portfolio 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 37.5% 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.
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.
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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested. The Fund will invest only in CMOs which are rated AAA or Aaa by an
NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's Investors Service, Inc. ("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);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
EQUITY SECURITIES
Common stocks represent ownership interest in a corporation. Unlike bonds, which
are debt securities, common stocks have neither fixed maturity dates nor fixed
schedules of promised payments. Utility stocks are common stocks of utility
companies, including water companies, companies that produce, transmit, or
distribute gas and electric energy and those companies that provide
communications facilities, such as telephone and telegraph companies. Foreign
stocks are equity securities of foreign issuers.
FOREIGN SECURITIES
The foreign bonds in which the Fund invests are rated within the four highest
ratings for bonds by Moody's (Aaa, Aa, A or Baa) or by Standard & Poor's (AAA,
AA, A or BBB) or are unrated if determined to be of equivalent quality by the
Fund's adviser.
INVESTMENT RISKS
Investments in foreign securities involve special risks that differ from those
associated with investments in domestic securities. The risks associated with
investments in foreign securities apply to securities issued by foreign
corporations and sovereign governments. These risks relate to political and
economic developments abroad, as well as those that result from the differences
between the regulation of domestic securities and issuers and foreign securities
and issuers. These risks may include, but are not limited to, expropriation,
confiscatory taxation, currency fluctuations, withholding taxes on interest,
limitations on the use or transfer of Fund assets, political or social
instability and adverse diplomatic developments. It may also be more difficult
to enforce contractual obligations or obtain court judgments abroad than would
be the case in the United States because of differences in the legal systems. If
the issuer of the debt or the governmental authorities that control the
repayment of the debt 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, 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 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 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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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:
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.I.A. concentrating
in Finance 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 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 been a portfolio
manager of the Fund 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
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
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
FEE ASSETS OF THE FEDERATED FUNDS
---------- ------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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.
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 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 will receive
periodic 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
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
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 $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
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 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.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 65.
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.37 $11.14 $ 9.85 $10.00
- --------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------
Net investment income 0.49 0.50 0.50 0.25
- --------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 0.74 0.41 1.28 (0.25)
- -------------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.23 0.91 1.78 0.00
- -------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- --------------------------------------------------
Distributions from net investment income (0.50) (0.52) (0.49) (0.15)
- -------------------------------------------------- ------ ------ ------ ------
Distributions from net realized gain on
investments and foreign currency transactions (0.12) (0.16) -- --
- -------------------------------------------------- ------ ------ ------ ------
Total distributions (0.62) (0.68) (0.49) (0.15)
- -------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.98 $11.37 $11.14 $ 9.85
- -------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 11.25% 8.54% 18.51% 0.02%
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------
Expenses 1.05% 1.05% 1.00% 0.88%*
- --------------------------------------------------
Net investment income 4.27% 4.72% 5.10% 5.07%*
- --------------------------------------------------
Expense waiver/reimbursement(c) 0.25% 0.31% 0.55% 0.59%*
- --------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets, end of period (000 omitted) $164,728 $156,635 $103,715 $43,793
- --------------------------------------------------
Average commission rate paid(d) $0.0078 $0.0043 -- --
- --------------------------------------------------
Portfolio turnover 130% 154% 157% 132%
- --------------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994, the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED GROWTH AND INCOME FUND
NOVEMBER 30, 1997
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
<S> <C>
*STOCKS -- 34.9%
- ----------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- 12.6%
- ----------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
18,000 Archer-Daniels-Midland Co. $ 384,322
----------------------------------------------------------------------------------------------------
3,200 Dow Chemical Co. 316,000
----------------------------------------------------------------------------------------------------
19,000 LTV Corporation 211,375
----------------------------------------------------------------------------------------------------
10,900 Louisiana-Pacific Corp. 220,044
---------------------------------------------------------------------------------------------------- ------------
Total 1,131,741
---------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.4%
- ----------------------------------------------------------------------------------------------------------------------
3,700 Eastman Kodak Co. 224,313
----------------------------------------------------------------------------------------------------
4,300 General Motors Corp., Class H 288,100
----------------------------------------------------------------------------------------------------
2,900 General Motors Corp. 176,900
----------------------------------------------------------------------------------------------------
10,400 Rubbermaid, Inc. 252,200
---------------------------------------------------------------------------------------------------- ------------
Total 941,513
---------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.2%
- ----------------------------------------------------------------------------------------------------------------------
2,400 CPC International, Inc. 248,100
----------------------------------------------------------------------------------------------------
14,000 PepsiCo, Inc. 516,250
----------------------------------------------------------------------------------------------------
4,400 Philip Morris Cos., Inc. 191,400
----------------------------------------------------------------------------------------------------
5,200 RJR Nabisco Holdings Corp. 189,475
----------------------------------------------------------------------------------------------------
13,300 Russell Corp. 406,481
----------------------------------------------------------------------------------------------------
6,500 Sara Lee Corp. 343,688
----------------------------------------------------------------------------------------------------
9,200 Unilever N.V. 534,175
---------------------------------------------------------------------------------------------------- ------------
Total 2,429,569
---------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.5%
- ----------------------------------------------------------------------------------------------------------------------
3,100 Atlantic Richfield Co. 252,650
----------------------------------------------------------------------------------------------------
4,900 Chevron Corp. 392,919
----------------------------------------------------------------------------------------------------
6,200 Exxon Corp. 378,200
----------------------------------------------------------------------------------------------------
10,500 Occidental Petroleum Corp. 311,719
----------------------------------------------------------------------------------------------------
4,400 Royal Dutch Petroleum Co., ADR 231,825
----------------------------------------------------------------------------------------------------
12,100 Sun Co., Inc. 489,294
----------------------------------------------------------------------------------------------------
6,800 Texaco, Inc. 384,200
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
12,200 USX-Marathon Group $ 417,850
----------------------------------------------------------------------------------------------------
9,100 YPF Sociedad Anonima, ADR 305,419
---------------------------------------------------------------------------------------------------- ------------
Total 3,164,076
---------------------------------------------------------------------------------------------------- ------------
FINANCE -- 1.5%
- ----------------------------------------------------------------------------------------------------------------------
6,000 Allmerica Financial Corp. 291,000
----------------------------------------------------------------------------------------------------
3,352 Allstate Corp. 287,853
----------------------------------------------------------------------------------------------------
7,300 Bear Stearns Cos., Inc. 302,950
----------------------------------------------------------------------------------------------------
7,100 Block (H&R), Inc. 291,100
----------------------------------------------------------------------------------------------------
7,700 Boston Properties, Inc. 251,213
----------------------------------------------------------------------------------------------------
3,000 CIGNA Corp. 501,750
----------------------------------------------------------------------------------------------------
1,300 General RE Corp. 258,050
----------------------------------------------------------------------------------------------------
5,600 Marsh & McLennan Cos., Inc. 416,850
----------------------------------------------------------------------------------------------------
5,700 Morgan Stanley, Dean Witter, Discover & Co. 309,581
----------------------------------------------------------------------------------------------------
6,000 Travelers Group, Inc. 303,000
---------------------------------------------------------------------------------------------------- ------------
Total 3,213,347
---------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.4%
- ----------------------------------------------------------------------------------------------------------------------
5,300 Abbott Laboratories 344,500
----------------------------------------------------------------------------------------------------
16,700 (b)Beverly Enterprises, Inc. 283,900
----------------------------------------------------------------------------------------------------
6,500 Bristol-Myers Squibb Co. 608,563
----------------------------------------------------------------------------------------------------
3,000 Merck & Co., Inc. 283,688
----------------------------------------------------------------------------------------------------
8,800 (b)Perrigo Co. 125,400
----------------------------------------------------------------------------------------------------
14,500 Pharmacia & Upjohn, Inc. 489,375
----------------------------------------------------------------------------------------------------
5,000 Smithkline Beecham, ADR 248,125
----------------------------------------------------------------------------------------------------
10,100 U.S. Surgical Corp. 266,388
----------------------------------------------------------------------------------------------------
4,800 United Healthcare Corp. 249,900
---------------------------------------------------------------------------------------------------- ------------
Total 2,899,839
---------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.0%
- ----------------------------------------------------------------------------------------------------------------------
16,500 ITT Industries, Inc. 523,875
----------------------------------------------------------------------------------------------------
10,500 Ingersoll-Rand Co. 429,188
----------------------------------------------------------------------------------------------------
7,400 Johnson Controls, Inc. 339,013
----------------------------------------------------------------------------------------------------
10,100 (b)Lexmark Intl. Group, Class A 321,938
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
2,100 Loews Corp. $ 222,863
----------------------------------------------------------------------------------------------------
5,100 PACCAR, Inc. 280,500
---------------------------------------------------------------------------------------------------- ------------
Total 2,117,377
---------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.7%
- ----------------------------------------------------------------------------------------------------------------------
6,000 Dayton-Hudson Corp. 398,625
----------------------------------------------------------------------------------------------------
38,400 (b)K Mart Corp. 482,400
----------------------------------------------------------------------------------------------------
15,500 Wal-Mart Stores, Inc. 619,031
---------------------------------------------------------------------------------------------------- ------------
Total 1,500,056
---------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.1%
- ----------------------------------------------------------------------------------------------------------------------
2,100 ABB AB, ADR 260,400
----------------------------------------------------------------------------------------------------
7,000 Browning-Ferris Industries, Inc. 249,813
----------------------------------------------------------------------------------------------------
2,000 News Corp., Ltd., ADR 43,375
----------------------------------------------------------------------------------------------------
27,300 News Corp., Ltd., ADR 539,175
----------------------------------------------------------------------------------------------------
12,900 Readers Digest Association, Inc., Class A 308,794
----------------------------------------------------------------------------------------------------
5,751 (b)TCI Ventures Group, Class A 130,116
----------------------------------------------------------------------------------------------------
1,400 (b)Tricon Global Restaurants, Inc. 47,338
----------------------------------------------------------------------------------------------------
7,100 (b)Viacom, Inc., Class A 246,725
----------------------------------------------------------------------------------------------------
4,400 (b)Viacom, Inc., Class B 154,000
----------------------------------------------------------------------------------------------------
19,600 Waste Management, Inc. 482,650
-------------------------------------------------------------------------------------------------- ------------
Total 2,462,386
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 1.3%
- ------------------------------------------------------------------------------------------------------------------------
7,900 AMP, Inc. 343,156
----------------------------------------------------------------------------------------------------
6,800 (b)Cabletron Systems, Inc. 156,400
----------------------------------------------------------------------------------------------------
14,100 First Data Corp. 399,206
----------------------------------------------------------------------------------------------------
2,900 International Business Machines Corp. 317,731
----------------------------------------------------------------------------------------------------
2,300 Matsushita Electric Industrial Co., ADR 356,644
----------------------------------------------------------------------------------------------------
31,700 (b)Novell, Inc. 293,225
----------------------------------------------------------------------------------------------------
3,400 Raytheon Co. 190,188
----------------------------------------------------------------------------------------------------
10,600 (b)Seagate Technology, Inc. 240,488
----------------------------------------------------------------------------------------------------
6,500 (b)Storage Technology Corp. 419,656
-------------------------------------------------------------------------------------------------- ------------
Total 2,716,694
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
LARGE-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.4%
- ----------------------------------------------------------------------------------------------------------------------
7,700 CNF Transporation, Inc. $ 334,950
----------------------------------------------------------------------------------------------------
7,397 KLM Royal Dutch Airlines 266,292
----------------------------------------------------------------------------------------------------
7,200 Ryder Systems, Inc. 261,450
---------------------------------------------------------------------------------------------------- ------------
Total 862,692
---------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 1.6%
- ----------------------------------------------------------------------------------------------------------------------
5,800 CMS Energy Corp. 228,375
----------------------------------------------------------------------------------------------------
4,100 Coastal Corp. 240,106
----------------------------------------------------------------------------------------------------
3,900 (b)Columbia Gas System, Inc. 283,725
----------------------------------------------------------------------------------------------------
11,000 Entergy Corp. 286,000
----------------------------------------------------------------------------------------------------
4,100 GTE Corp. 207,306
----------------------------------------------------------------------------------------------------
11,800 Houston Industries, Inc. 279,513
----------------------------------------------------------------------------------------------------
14,100 MCI Communications Corp. 619,519
----------------------------------------------------------------------------------------------------
13,200 P G & E Corp. 372,900
----------------------------------------------------------------------------------------------------
7,800 Public Service Enterprises Group, Inc. 227,663
----------------------------------------------------------------------------------------------------
17,049 (b)Tele-Communications, Inc., Class A 390,529
----------------------------------------------------------------------------------------------------
7,000 U.S. West, Inc. 316,313
---------------------------------------------------------------------------------------------------- ------------
Total 3,451,949
---------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE-COMPANY 26,891,239
---------------------------------------------------------------------------------------------------- ------------
SMALL-COMPANY -- 2.5%
- ----------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
2,000 BMC Industries, Inc. 37,125
----------------------------------------------------------------------------------------------------
1,300 Cambrex Corp. 58,988
----------------------------------------------------------------------------------------------------
1,800 (b)Carbide/Graphite Group, Inc. 69,525
----------------------------------------------------------------------------------------------------
2,800 (b)Chirex, Inc. 68,250
----------------------------------------------------------------------------------------------------
1,600 Furon Co. 63,200
----------------------------------------------------------------------------------------------------
1,100 Lone Star Industries, Inc. 57,338
----------------------------------------------------------------------------------------------------
1,500 (b)Lone Star Technologies, Inc. 43,500
----------------------------------------------------------------------------------------------------
4,000 Spartech Corp. 66,000
----------------------------------------------------------------------------------------------------
1,000 Valspar Corp. 30,375
---------------------------------------------------------------------------------------------------- ------------
Total 494,301
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
2,400 (b)Action Performance Companies, Inc. $ 69,600
----------------------------------------------------------------------------------------------------
1,700 (b)American Homestar Corporation 23,800
----------------------------------------------------------------------------------------------------
3,100 Brilliance China Automotive Holdings Ltd. 29,256
----------------------------------------------------------------------------------------------------
1,000 Carlisle Cos., Inc. 42,500
----------------------------------------------------------------------------------------------------
2,100 (b)Dura Automotive Systems, Inc. 55,388
----------------------------------------------------------------------------------------------------
1,400 (b)Equity Marketing, Inc. 41,300
----------------------------------------------------------------------------------------------------
1,300 (b)Gentex Corp. 32,175
----------------------------------------------------------------------------------------------------
3,700 (b)Helen of Troy Ltd. 52,725
----------------------------------------------------------------------------------------------------
800 Oakwood Homes Corp. 24,000
----------------------------------------------------------------------------------------------------
1,600 (b)Stanley Furniture Co. Inc. 44,000
----------------------------------------------------------------------------------------------------
700 Wynns International, Inc. 22,706
---------------------------------------------------------------------------------------------------- ------------
Total 437,450
---------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
1,000 (b)Blyth Industries, Inc. 25,688
----------------------------------------------------------------------------------------------------
1,700 (b)North Face, Inc. 36,975
----------------------------------------------------------------------------------------------------
1,700 (b)Rayovac Corp. 28,475
----------------------------------------------------------------------------------------------------
1,100 (b)Tommy Hilfinger Corp. 43,175
---------------------------------------------------------------------------------------------------- ------------
Total 134,313
---------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
500 Camco International, Inc. 31,375
----------------------------------------------------------------------------------------------------
2,100 (b)Key Energy Group, Inc. 51,056
----------------------------------------------------------------------------------------------------
300 (b)Patterson Energy Inc. 11,025
----------------------------------------------------------------------------------------------------
1,000 (b)TransCoastal Marine Services, Inc. 19,500
----------------------------------------------------------------------------------------------------
1,500 (b)Tuboscope Inc. 36,938
----------------------------------------------------------------------------------------------------
2,500 Vintage Petroleum, Inc. 48,438
---------------------------------------------------------------------------------------------------- ------------
Total 198,332
---------------------------------------------------------------------------------------------------- ------------
FINANCE -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
1,700 (b)Amresco, Inc. 47,600
----------------------------------------------------------------------------------------------------
1,100 CMAC Investment Corp. 57,131
----------------------------------------------------------------------------------------------------
2,100 City National Corp. 68,250
----------------------------------------------------------------------------------------------------
1,100 (b)Delphi Financial Group, Inc., Class A 44,138
----------------------------------------------------------------------------------------------------
2,500 (b)Delta Financial Corp. 41,406
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FINANCE -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
700 Executive Risk, Inc. $ 45,500
----------------------------------------------------------------------------------------------------
1,300 (b)FIRSTPLUS Financial Group, Inc. 49,563
----------------------------------------------------------------------------------------------------
1,800 (b)FirstFed Financial Corp. 65,700
----------------------------------------------------------------------------------------------------
1,800 Frontier Insurance Group, Inc. 43,313
----------------------------------------------------------------------------------------------------
1,200 GBC Bancorp 65,550
----------------------------------------------------------------------------------------------------
1,700 (b)Imperial Bancorp 79,369
----------------------------------------------------------------------------------------------------
2,200 North Fork Bancorp, Inc. 66,825
----------------------------------------------------------------------------------------------------
2,400 (b)Philadelphia Consolidated Holding Corp. 39,300
----------------------------------------------------------------------------------------------------
1,100 Sirrom Capital Corp. 48,400
----------------------------------------------------------------------------------------------------
2,700 Sovereign Bancorp, Inc. 51,131
----------------------------------------------------------------------------------------------------
1,900 Trans Financial, Inc. 65,313
----------------------------------------------------------------------------------------------------
2,100 (b)Triad Guaranty, Inc. 61,950
----------------------------------------------------------------------------------------------------
1,100 Vesta Insurance Group, Inc. 60,363
---------------------------------------------------------------------------------------------------- ------------
Total 1,000,802
---------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
2,100 Ballard Medical Products 48,431
----------------------------------------------------------------------------------------------------
1,600 (b)Complete Management, Inc. 26,600
----------------------------------------------------------------------------------------------------
900 (b)Curative Technologies, Inc. 25,650
----------------------------------------------------------------------------------------------------
2,800 (b)FPA Medical Management, Inc. 72,275
----------------------------------------------------------------------------------------------------
2,500 (b)Genesis Health Ventures, Inc. 60,625
----------------------------------------------------------------------------------------------------
3,200 (b)Healthdyne Technologies, Inc. 61,400
----------------------------------------------------------------------------------------------------
1,000 (b)Medicis Pharmaceutical Corp., Class A 42,750
----------------------------------------------------------------------------------------------------
2,100 Phycor, Inc. 51,713
----------------------------------------------------------------------------------------------------
3,400 (b)Prime Medical Services 45,050
----------------------------------------------------------------------------------------------------
1,200 (b)Somnus Medical Technologies, Inc. 13,800
----------------------------------------------------------------------------------------------------
1,100 (b)Universal Health Services, Inc., Class B 48,056
---------------------------------------------------------------------------------------------------- ------------
Total 496,350
---------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
2,500 (b)AFC Cable Systems, Inc. 66,875
----------------------------------------------------------------------------------------------------
2,500 (b)Ballantyne of Omaha, Inc. 45,938
----------------------------------------------------------------------------------------------------
1,600 (b)Cable Design Technologies, Class A 64,800
----------------------------------------------------------------------------------------------------
1,800 (b)Chicago Miniature Lamp, Inc. 60,975
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
1,000 (b)EVI, Inc. $ 51,438
----------------------------------------------------------------------------------------------------
1,900 (b)Royal Group Technologies Ltd. 45,719
----------------------------------------------------------------------------------------------------
2,500 (b)US Office Products Co. 49,688
---------------------------------------------------------------------------------------------------- ------------
Total 385,433
---------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
1,000 (b)CDW Computer Centers, Inc. 59,000
----------------------------------------------------------------------------------------------------
2,900 Claire's Stores, Inc. 65,613
----------------------------------------------------------------------------------------------------
1,000 (b)Express Scripts, Inc., Class A 59,000
----------------------------------------------------------------------------------------------------
2,800 (b)Funco, Inc. 51,800
----------------------------------------------------------------------------------------------------
2,200 (b)Microage, Inc. 44,275
----------------------------------------------------------------------------------------------------
1,100 (b)O'Reilly Automotive, Inc. 25,988
----------------------------------------------------------------------------------------------------
3,300 (b)Paul Harris Stores, Inc. 69,713
----------------------------------------------------------------------------------------------------
2,300 (b)Pomeroy Computer Resources 57,500
----------------------------------------------------------------------------------------------------
1,300 (b)Proffitts, Inc. 39,731
----------------------------------------------------------------------------------------------------
1,300 (b)Renters Choice, Inc. 29,250
----------------------------------------------------------------------------------------------------
2,200 (b)Zale Corp. 48,950
---------------------------------------------------------------------------------------------------- ------------
Total 550,820
---------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
900 (b)ASE Test Limited 50,400
----------------------------------------------------------------------------------------------------
1,500 (b)Allied Waste Industries, Inc. 32,813
----------------------------------------------------------------------------------------------------
2,700 (b)American Business Information, Class A 31,725
----------------------------------------------------------------------------------------------------
2,700 (b)American Business Information, Class B 29,700
----------------------------------------------------------------------------------------------------
2,300 (b)BARRA, Inc. 64,113
----------------------------------------------------------------------------------------------------
1,100 (b)Caribiner International, Inc. 46,681
----------------------------------------------------------------------------------------------------
1,400 (b)FactSet Research Systems 35,350
----------------------------------------------------------------------------------------------------
3,200 (b)Newpark Resources, Inc. 63,800
----------------------------------------------------------------------------------------------------
1,700 (b)Personnel Group of America, Inc. 62,156
----------------------------------------------------------------------------------------------------
2,500 (b)Prime Hospitality Corp. 47,813
----------------------------------------------------------------------------------------------------
3,400 (b)ProBusiness Services, Inc. 71,825
----------------------------------------------------------------------------------------------------
4,800 (b)Seattle Filmworks, Inc. 47,400
----------------------------------------------------------------------------------------------------
2,100 (b)Snyder Communications, Inc. 71,269
---------------------------------------------------------------------------------------------------- ------------
Total 655,045
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SMALL-COMPANY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 0.4%
- ----------------------------------------------------------------------------------------------------------------------
1,700 ATMI, Inc. $ 54,613
----------------------------------------------------------------------------------------------------
2,900 (b)Alphanet Solutions, Inc. 37,338
----------------------------------------------------------------------------------------------------
2,200 (b)Apex mPC Solutions, Inc. 48,400
----------------------------------------------------------------------------------------------------
1,500 (b)Applied Science & Technology, Inc. 31,500
----------------------------------------------------------------------------------------------------
2,300 (b)Applied Voice Technology, Inc. 64,400
----------------------------------------------------------------------------------------------------
1,800 (b)Benchmark Electronics, Inc. 50,625
----------------------------------------------------------------------------------------------------
2,000 (b)Benchmarq Microelectronics, Inc. 36,500
----------------------------------------------------------------------------------------------------
2,700 (b)Cybex Computer Products Corp. 70,200
----------------------------------------------------------------------------------------------------
2,200 (b)Cymer, Inc. 42,213
----------------------------------------------------------------------------------------------------
1,700 (b)DSP Group, Inc. 55,675
----------------------------------------------------------------------------------------------------
1,400 (b)Ducommun, Inc. 45,413
----------------------------------------------------------------------------------------------------
1,700 (b)Eltron International, Inc. 53,125
----------------------------------------------------------------------------------------------------
1,200 (b)HADCO Corp. 74,400
----------------------------------------------------------------------------------------------------
1,800 (b)II-VI, Inc. 43,425
----------------------------------------------------------------------------------------------------
1,800 (b)MRV Communications, Inc. 50,850
----------------------------------------------------------------------------------------------------
1,600 (b)Mastech Corp. 46,800
----------------------------------------------------------------------------------------------------
800 (b)Qlogic Corp. 26,500
----------------------------------------------------------------------------------------------------
1,500 (b)Three-Five Systems, Inc. 29,906
----------------------------------------------------------------------------------------------------
1,300 (b)Tollgrade Communications, Inc. 30,713
---------------------------------------------------------------------------------------------------- ------------
Total 892,596
---------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
700 Airlines Express International Corp. 20,081
----------------------------------------------------------------------------------------------------
1,850 Comair Holdings, Inc. 40,931
----------------------------------------------------------------------------------------------------
500 Expeditors International Washington, Inc. 19,469
---------------------------------------------------------------------------------------------------- ------------
Total 80,481
---------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
900 Cincinnati Bell, Inc. 26,550
----------------------------------------------------------------------------------------------------
1,400 IXC Communications, Inc. 48,563
----------------------------------------------------------------------------------------------------
700 MCN Corp. 26,731
----------------------------------------------------------------------------------------------------
800 Sonat, Inc. 34,850
---------------------------------------------------------------------------------------------------- ------------
Total 136,694
---------------------------------------------------------------------------------------------------- ------------
TOTAL SMALL-COMPANY 5,462,617
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- 11.8%
- ----------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
4,600 (b)Lone Star Technologies, Inc. $ 133,400
----------------------------------------------------------------------------------------------------
3,800 Martin Marietta Materials 131,575
----------------------------------------------------------------------------------------------------
2,600 Southdown, Inc. 149,988
----------------------------------------------------------------------------------------------------
6,800 (b)Steel Dynamics, Inc. 125,800
---------------------------------------------------------------------------------------------------- ------------
Total 540,763
---------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
4,500 Carlisle Cos., Inc. 191,250
----------------------------------------------------------------------------------------------------
10,000 (b)Furniture Brands International, Inc. 195,625
----------------------------------------------------------------------------------------------------
1,400 Sony Corp ADR 116,900
---------------------------------------------------------------------------------------------------- ------------
Total 503,775
---------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.0%
- ----------------------------------------------------------------------------------------------------------------------
3,300 (b)Consolidated Cigar Holdings, Inc. 90,956
----------------------------------------------------------------------------------------------------
1,500 Gillette Co. 138,469
----------------------------------------------------------------------------------------------------
5,300 (b)Jones Apparel Group, Inc. 258,375
----------------------------------------------------------------------------------------------------
5,700 Philip Morris Cos., Inc. 247,950
----------------------------------------------------------------------------------------------------
4,400 Procter & Gamble Co. 335,775
----------------------------------------------------------------------------------------------------
5,200 (b)Smithfield Foods, Inc. 183,950
----------------------------------------------------------------------------------------------------
4,200 St. John Knits, Inc. 160,388
----------------------------------------------------------------------------------------------------
4,400 (b)Tommy Hilfinger Corp. 172,700
----------------------------------------------------------------------------------------------------
4,800 Universal Corp. 189,900
----------------------------------------------------------------------------------------------------
5,600 Wolverine World Wide, Inc. 127,750
----------------------------------------------------------------------------------------------------
3,300 Wrigley (Wm.), Jr. Co. 261,113
---------------------------------------------------------------------------------------------------- ------------
Total 2,167,326
---------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.1%
- ----------------------------------------------------------------------------------------------------------------------
2,300 (b)BJ Services Co. 165,169
----------------------------------------------------------------------------------------------------
4,200 Baker Hughes, Inc. 175,875
----------------------------------------------------------------------------------------------------
2,200 British Petroleum Co., PLC - ADR 182,600
----------------------------------------------------------------------------------------------------
3,000 (b)Cooper Cameron Corp. 182,813
----------------------------------------------------------------------------------------------------
3,200 Diamond Offshore Drilling, Inc. 159,600
----------------------------------------------------------------------------------------------------
5,000 ENSCO International, Inc. 178,750
----------------------------------------------------------------------------------------------------
5,500 (b)Falcon Drilling Co., Inc. 177,375
----------------------------------------------------------------------------------------------------
4,600 (b)Friede Goldman International, Inc. 136,850
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
5,800 (b)Key Energy Group, Inc. $ 141,013
----------------------------------------------------------------------------------------------------
4,600 (b)Nabors Industries, Inc. 161,288
----------------------------------------------------------------------------------------------------
1,700 (b)Petroleum Geo-Services, ADR 109,331
----------------------------------------------------------------------------------------------------
4,900 (b)Rowan Companies, Inc. 166,600
----------------------------------------------------------------------------------------------------
3,100 (b)Smith International, Inc. 198,400
----------------------------------------------------------------------------------------------------
4,000 Tosco Corp. 130,250
----------------------------------------------------------------------------------------------------
4,600 (b)TransCoastal Marine Services, Inc. 89,700
---------------------------------------------------------------------------------------------------- ------------
Total 2,355,614
---------------------------------------------------------------------------------------------------- ------------
FINANCE -- 2.3%
- ----------------------------------------------------------------------------------------------------------------------
5,700 Ahmanson (H.F.) & Co. 339,150
----------------------------------------------------------------------------------------------------
2,900 Allstate Corp. 249,038
----------------------------------------------------------------------------------------------------
1,800 American International Group, Inc. 181,463
----------------------------------------------------------------------------------------------------
4,500 Bank of New York Co., Inc. 241,875
----------------------------------------------------------------------------------------------------
3,300 BankAmerica Corp. 240,900
----------------------------------------------------------------------------------------------------
8,500 (b)Catellus Development Corp. 157,250
----------------------------------------------------------------------------------------------------
1,600 Citicorp 191,900
----------------------------------------------------------------------------------------------------
5,600 Conseco, Inc. 260,750
----------------------------------------------------------------------------------------------------
4,800 (b)ETrade Group, Inc. 120,300
----------------------------------------------------------------------------------------------------
2,800 Equitable Companies Inc. 133,525
----------------------------------------------------------------------------------------------------
8,300 Frontier Insurance Group, Inc. 199,719
----------------------------------------------------------------------------------------------------
5,700 (b)Golden State Bancorp, Inc. 189,881
----------------------------------------------------------------------------------------------------
14,850 MBNA Corp. 394,453
----------------------------------------------------------------------------------------------------
1,900 MGIC Investment Corp. 111,031
----------------------------------------------------------------------------------------------------
4,100 Mellon Bank Corp. 232,419
----------------------------------------------------------------------------------------------------
3,700 Merrill Lynch & Co., Inc. 259,694
----------------------------------------------------------------------------------------------------
4,900 Morgan Stanley, Dean Witter, Discover & Co. 266,131
----------------------------------------------------------------------------------------------------
3,100 NationsBank Corp. 186,194
----------------------------------------------------------------------------------------------------
5,100 Old Republic International Corp. 183,919
----------------------------------------------------------------------------------------------------
3,900 T. Rowe Price Associates 253,500
----------------------------------------------------------------------------------------------------
4,700 Torchmark Corp. 191,819
----------------------------------------------------------------------------------------------------
8,250 Travelers Group, Inc. 416,625
---------------------------------------------------------------------------------------------------- ------------
Total 5,001,536
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- 1.7%
- ----------------------------------------------------------------------------------------------------------------------
7,000 (b)BioChem Pharma, Inc. $ 178,500
----------------------------------------------------------------------------------------------------
4,700 (b)Centocor, Inc. 204,450
----------------------------------------------------------------------------------------------------
3,600 (b)Dura Pharmaceuticals, Inc. 157,950
----------------------------------------------------------------------------------------------------
3,400 Guidant Corp. 218,450
----------------------------------------------------------------------------------------------------
6,800 HBO & Co. 305,150
----------------------------------------------------------------------------------------------------
7,500 (b)HEALTHSOUTH Corp. 196,875
----------------------------------------------------------------------------------------------------
6,300 Jones Medical Industries, Inc. 207,900
----------------------------------------------------------------------------------------------------
4,000 Lilly (Eli) & Co. 252,250
----------------------------------------------------------------------------------------------------
4,200 (b)MedPartners, Inc. 103,950
----------------------------------------------------------------------------------------------------
1,800 Merck & Co., Inc. 170,213
----------------------------------------------------------------------------------------------------
8,700 Omnicare, Inc. 251,213
----------------------------------------------------------------------------------------------------
2,000 Pfizer, Inc. 145,500
----------------------------------------------------------------------------------------------------
4,700 (b)Phycor, Inc. 115,738
----------------------------------------------------------------------------------------------------
2,600 (b)Quintiles Transnational Corp. 203,125
----------------------------------------------------------------------------------------------------
5,900 (b)Safeskin Corp. 280,988
----------------------------------------------------------------------------------------------------
3,600 Smithkline Beecham, ADR 178,650
----------------------------------------------------------------------------------------------------
4,400 (b)Universal Health Services, Inc., Class B 192,225
----------------------------------------------------------------------------------------------------
1,700 Warner-Lambert Co. 237,788
---------------------------------------------------------------------------------------------------- ------------
Total 3,600,915
---------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.9%
- ----------------------------------------------------------------------------------------------------------------------
4,000 (b)EVI, Inc. 205,750
----------------------------------------------------------------------------------------------------
5,600 General Electric Co. 413,000
----------------------------------------------------------------------------------------------------
5,550 (b)Halter Marine Group, Inc. 154,706
----------------------------------------------------------------------------------------------------
6,100 (b)Maverick Tube Corp. 174,231
----------------------------------------------------------------------------------------------------
3,200 Precision Castparts Corp. 190,000
----------------------------------------------------------------------------------------------------
10,100 (b)Royal Group Technologies Ltd. 243,031
----------------------------------------------------------------------------------------------------
6,000 Tyco International, Ltd. 235,500
----------------------------------------------------------------------------------------------------
11,250 (b)US Office Products Co. 223,594
---------------------------------------------------------------------------------------------------- ------------
Total 1,839,812
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- 0.7%
- ----------------------------------------------------------------------------------------------------------------------
6,000 (b)CompUSA, Inc. $ 219,375
----------------------------------------------------------------------------------------------------
9,600 (b)General Nutrition Cos., Inc. 327,600
----------------------------------------------------------------------------------------------------
4,750 Home Depot, Inc. 265,703
----------------------------------------------------------------------------------------------------
10,550 Pier 1 Imports, Inc. 236,056
----------------------------------------------------------------------------------------------------
3,300 (b)Safeway, Inc. 200,475
----------------------------------------------------------------------------------------------------
7,300 TJX Cos., Inc. 251,850
---------------------------------------------------------------------------------------------------- ------------
Total 1,501,059
---------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.6%
- ----------------------------------------------------------------------------------------------------------------------
2,600 (b)ASE Test Limited 145,600
----------------------------------------------------------------------------------------------------
6,700 (b)Corrections Corp. America 231,988
----------------------------------------------------------------------------------------------------
2,700 (b)HFS, Inc. 185,288
----------------------------------------------------------------------------------------------------
2,100 (b)Heftel Broadcasting Corp., Class A 155,138
----------------------------------------------------------------------------------------------------
7,400 (b)Newpark Resources, Inc. 147,538
----------------------------------------------------------------------------------------------------
10,000 (b)Philip Services Corp. 158,125
----------------------------------------------------------------------------------------------------
7,000 (b)Snyder Communications, Inc. 237,563
---------------------------------------------------------------------------------------------------- ------------
Total 1,261,240
---------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.2%
- ----------------------------------------------------------------------------------------------------------------------
1,200 (b)ASM Lithography Holding NV, ADR 75,000
----------------------------------------------------------------------------------------------------
4,500 (b)Advanced Fibre Communications 116,438
----------------------------------------------------------------------------------------------------
2,600 (b)America Online, Inc. 196,300
----------------------------------------------------------------------------------------------------
4,300 (b)Applied Materials, Inc. 141,900
----------------------------------------------------------------------------------------------------
5,000 (b)Cadence Design Systems, Inc. 126,250
----------------------------------------------------------------------------------------------------
3,200 (b)Cisco Systems, Inc. 276,000
----------------------------------------------------------------------------------------------------
4,000 (b)Compaq Computer Corp. 249,750
----------------------------------------------------------------------------------------------------
8,600 (b)Creative Technology Ltd. 228,975
----------------------------------------------------------------------------------------------------
2,700 (b)Dallas Semiconductor Corp. 131,963
----------------------------------------------------------------------------------------------------
1,900 (b)Dell Computer Corp. 159,956
----------------------------------------------------------------------------------------------------
4,600 (b)EMC Corp. Mass 139,438
----------------------------------------------------------------------------------------------------
4,000 (b)HNC Software 126,000
----------------------------------------------------------------------------------------------------
7,600 (b)Hyperion Software Corp. 327,513
----------------------------------------------------------------------------------------------------
2,500 Intel Corp. 194,063
----------------------------------------------------------------------------------------------------
2,600 Lucent Technologies, Inc. 208,325
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GROWTH-STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
6,300 (b)Mastech Corp. $ 184,275
----------------------------------------------------------------------------------------------------
1,500 (b)Metromedia Fibre Network, Inc. 25,313
----------------------------------------------------------------------------------------------------
2,100 (b)Microsoft Corp. 297,150
----------------------------------------------------------------------------------------------------
7,200 (b)Ortel Corp. 128,700
----------------------------------------------------------------------------------------------------
1,900 (b)PRI Automation, Inc. 64,838
----------------------------------------------------------------------------------------------------
1,800 (b)Peoplesoft, Inc. 117,788
----------------------------------------------------------------------------------------------------
3,600 (b)Rambus, Inc. 200,925
----------------------------------------------------------------------------------------------------
5,200 (b)SCI Systems, Inc. 238,225
----------------------------------------------------------------------------------------------------
6,500 (b)Sandisk Corp. 159,250
----------------------------------------------------------------------------------------------------
1,800 (b)Speedfam International, Inc. 46,125
----------------------------------------------------------------------------------------------------
3,700 (b)Tellabs, Inc. 192,400
----------------------------------------------------------------------------------------------------
2,600 Texas Instruments, Inc. 128,050
----------------------------------------------------------------------------------------------------
4,200 (b)World Access, Inc. 102,900
---------------------------------------------------------------------------------------------------- ------------
Total 4,583,810
---------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
3,000 (b)Continental Airlines, Inc., Class B 136,688
----------------------------------------------------------------------------------------------------
6,500 Expeditors International Washington, Inc. 253,094
---------------------------------------------------------------------------------------------------- ------------
Total 389,782
---------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.6%
- ----------------------------------------------------------------------------------------------------------------------
5,700 Cincinnati Bell, Inc. 168,150
----------------------------------------------------------------------------------------------------
3,800 Coastal Corp. 222,538
----------------------------------------------------------------------------------------------------
8,800 (b)ICG Communications, Inc. 204,600
----------------------------------------------------------------------------------------------------
9,400 (b)IXC Communications, Inc. 326,063
----------------------------------------------------------------------------------------------------
3,600 Sonat, Inc. 156,825
----------------------------------------------------------------------------------------------------
3,900 (b)Teleport Communications Group, Inc., Class A 191,100
---------------------------------------------------------------------------------------------------- ------------
Total 1,269,276
---------------------------------------------------------------------------------------------------- ------------
TOTAL GROWTH STOCKS 25,014,908
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
UTILITY STOCKS -- 5.5%
- ----------------------------------------------------------------------------------------------------------------------
ELECTRIC UTILITIES: CENTRAL -- 1.1%
- ----------------------------------------------------------------------------------------------------------------------
10,000 American Electric Power Co., Inc. $ 495,625
----------------------------------------------------------------------------------------------------
12,000 CMS Energy Corp. 472,500
----------------------------------------------------------------------------------------------------
12,000 Cinergy Corp. 427,500
----------------------------------------------------------------------------------------------------
17,100 DPL, Inc. 448,875
----------------------------------------------------------------------------------------------------
10,000 NIPSCO Industries, Inc. 468,125
----------------------------------------------------------------------------------------------------
4,000 Northern States Power Co. 219,500
---------------------------------------------------------------------------------------------------- ------------
Total 2,532,125
---------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: EAST -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
7,800 Baltimore Gas & Electric Co. 239,363
----------------------------------------------------------------------------------------------------
15,100 DQE, Inc. 501,131
---------------------------------------------------------------------------------------------------- ------------
Total 740,494
---------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: SOUTH -- 1.7%
- ----------------------------------------------------------------------------------------------------------------------
5,800 Carolina Power & Light Co. 216,775
----------------------------------------------------------------------------------------------------
5,800 Dominion Resources, Inc. 225,475
----------------------------------------------------------------------------------------------------
13,400 Duke Energy Corp. 696,800
----------------------------------------------------------------------------------------------------
11,200 FPL Group, Inc. 626,500
----------------------------------------------------------------------------------------------------
14,500 Houston Industries, Inc. 343,469
----------------------------------------------------------------------------------------------------
28,800 Southern Co. 691,200
----------------------------------------------------------------------------------------------------
16,400 TECO Energy, Inc. 420,250
----------------------------------------------------------------------------------------------------
9,100 Texas Utilities Co. 364,000
---------------------------------------------------------------------------------------------------- ------------
Total 3,584,469
---------------------------------------------------------------------------------------------------- ------------
ELECTRIC UTILITIES: WEST -- 0.9%
- ----------------------------------------------------------------------------------------------------------------------
12,900 Edison International 345,881
----------------------------------------------------------------------------------------------------
17,300 P G & E Corp. 488,725
----------------------------------------------------------------------------------------------------
14,200 Pacificorp 331,038
----------------------------------------------------------------------------------------------------
13,900 Pinnacle West Capital Corp. 536,019
---------------------------------------------------------------------------------------------------- ------------
Total 1,701,663
---------------------------------------------------------------------------------------------------- ------------
NATURAL GAS DISTRIBUTION -- 0.6%
- ----------------------------------------------------------------------------------------------------------------------
5,800 Consolidated Natural Gas Co. 350,175
----------------------------------------------------------------------------------------------------
13,500 MCN Corp. 515,531
----------------------------------------------------------------------------------------------------
9,500 Pacific Enterprises 336,063
---------------------------------------------------------------------------------------------------- ------------
Total 1,201,769
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
UTILITY STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
OIL/GAS TRANSMISSION -- 0.9%
- ----------------------------------------------------------------------------------------------------------------------
3,900 Coastal Corp. $ 228,394
----------------------------------------------------------------------------------------------------
4,700 Columbia Gas System, Inc. 341,925
----------------------------------------------------------------------------------------------------
12,900 Enron Corp. 499,875
----------------------------------------------------------------------------------------------------
6,000 Sonat, Inc. 261,375
----------------------------------------------------------------------------------------------------
10,000 Williams Companies, Inc. 534,375
---------------------------------------------------------------------------------------------------- ------------
Total 1,865,944
---------------------------------------------------------------------------------------------------- ------------
TOTAL UTILITY STOCKS 11,626,464
---------------------------------------------------------------------------------------------------- ------------
FOREIGN EQUITY -- 2.5%
- ----------------------------------------------------------------------------------------------------------------------
ARGENTINA -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
1,900 (b)Banco Rio de la Plata SA, ADR 23,869
----------------------------------------------------------------------------------------------------
2,121 Compania Naviera Perez Companc SA, Class B 15,149
----------------------------------------------------------------------------------------------------
800 Telecom Argentina S.A., ADR 24,550
----------------------------------------------------------------------------------------------------
700 Telefonica De Argentina ADR 23,144
---------------------------------------------------------------------------------------------------- ------------
Total 86,712
---------------------------------------------------------------------------------------------------- ------------
AUSTRALIA -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
3,000 Australia & New Zealand Banking Group, Melbourne 20,567
----------------------------------------------------------------------------------------------------
12,200 Austrim Ltd 27,158
----------------------------------------------------------------------------------------------------
6,400 Coles Myer Limited 31,466
----------------------------------------------------------------------------------------------------
246,000 (b)Cue Energy Resources NL 22,677
----------------------------------------------------------------------------------------------------
4,800 (b)News Corp., Ltd. 25,631
----------------------------------------------------------------------------------------------------
10,600 Oil Search Ltd. 20,918
----------------------------------------------------------------------------------------------------
4,200 Woodside Petroleum Ltd. 30,111
---------------------------------------------------------------------------------------------------- ------------
Total 178,528
---------------------------------------------------------------------------------------------------- ------------
AUSTRIA -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
400 (b)Bank Austria AG, Pfd. 16,342
---------------------------------------------------------------------------------------------------- ------------
BELGIUM -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
10 UCB (groupe) 33,036
---------------------------------------------------------------------------------------------------- ------------
BRAZIL -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
64,000 Centrais Eletricas Brasileiras SA, Preference, Series B 31,155
----------------------------------------------------------------------------------------------------
387,000 Companhia Energetica de Minas Gerais, Preference 18,664
----------------------------------------------------------------------------------------------------
103,000 Petroleo Brasileiro SA, Preference 22,563
----------------------------------------------------------------------------------------------------
183,000 Telecomunicacoes Brasileiras SA 16,992
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
BRAZIL -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
2,479 Telecomunicacoes de Sao Paulo SA $ 47
----------------------------------------------------------------------------------------------------
74,233 Telecomunicacoes de Sao Paulo SA, Preference 19,541
---------------------------------------------------------------------------------------------------- ------------
Total 108,962
---------------------------------------------------------------------------------------------------- ------------
CHILE -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
250 (a)Chilectra SA, ADR 6,240
----------------------------------------------------------------------------------------------------
425 Compania Telecomunicacion Chile, ADR 11,502
---------------------------------------------------------------------------------------------------- ------------
Total 17,742
---------------------------------------------------------------------------------------------------- ------------
CHINA -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
8,000 (b)China Telecommunications 13,350
---------------------------------------------------------------------------------------------------- ------------
COLOMBIA -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
700 Banco Ganadero SA, ADR 26,688
----------------------------------------------------------------------------------------------------
800 Banco Industrial Colombiano, ADR 11,600
---------------------------------------------------------------------------------------------------- ------------
Total 38,288
---------------------------------------------------------------------------------------------------- ------------
DENMARK -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
500 BG Bank AS 32,477
----------------------------------------------------------------------------------------------------
300 Novo-Nordisk, Class B 36,738
----------------------------------------------------------------------------------------------------
1,080 (b)Sydbank AS 57,923
---------------------------------------------------------------------------------------------------- ------------
Total 127,138
---------------------------------------------------------------------------------------------------- ------------
FINLAND -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
1,600 Enso Oy, Class R 14,045
----------------------------------------------------------------------------------------------------
800 Partek Corp. 14,841
----------------------------------------------------------------------------------------------------
1,500 Rauma 25,885
---------------------------------------------------------------------------------------------------- ------------
Total 54,771
---------------------------------------------------------------------------------------------------- ------------
FRANCE -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
821 AXA 59,580
----------------------------------------------------------------------------------------------------
200 Accor SA 37,809
----------------------------------------------------------------------------------------------------
250 Bertrand Faure 17,024
----------------------------------------------------------------------------------------------------
150 (b)CLF-Dexia France 15,576
----------------------------------------------------------------------------------------------------
75 Canal Plus 13,048
----------------------------------------------------------------------------------------------------
800 Compagnie Financiere de Paribas, Class A 57,798
----------------------------------------------------------------------------------------------------
320 Compagnie de Saint Gobain 43,474
----------------------------------------------------------------------------------------------------
210 Elf Aquitaine SA 24,368
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FRANCE -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
204 (b)France Telecommunications $ 7,492
----------------------------------------------------------------------------------------------------
330 Groupe Danon BSN SA 52,659
----------------------------------------------------------------------------------------------------
45 L'Oreal 17,228
----------------------------------------------------------------------------------------------------
300 Pechiney Ord A 11,780
----------------------------------------------------------------------------------------------------
420 (b)SGS-Thomson Microelectronics N.V. 29,618
----------------------------------------------------------------------------------------------------
817 Schneider SA 43,734
----------------------------------------------------------------------------------------------------
200 Synthelabo 25,410
----------------------------------------------------------------------------------------------------
1,000 Thomson-csf 28,933
----------------------------------------------------------------------------------------------------
560 Total SA-B 58,815
---------------------------------------------------------------------------------------------------- ------------
Total 544,346
---------------------------------------------------------------------------------------------------- ------------
GERMANY -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
1,155 Bayer AG 42,748
----------------------------------------------------------------------------------------------------
50 Bayerische Motoren Werke AG 37,341
----------------------------------------------------------------------------------------------------
1,900 Commerzbank AG, Frankfurt 66,045
----------------------------------------------------------------------------------------------------
2,225 Dresdner Bank AG, Frankfurt 86,300
----------------------------------------------------------------------------------------------------
160 Mannesmann AG 74,488
----------------------------------------------------------------------------------------------------
600 Siemens AG 35,231
----------------------------------------------------------------------------------------------------
200 Singulus Technologies AG 8,846
----------------------------------------------------------------------------------------------------
2,400 Skw Trostberg 82,949
---------------------------------------------------------------------------------------------------- ------------
Total 433,948
---------------------------------------------------------------------------------------------------- ------------
HONG KONG -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
4,000 (b)Cheung Kong 28,201
----------------------------------------------------------------------------------------------------
8,000 China Resources Enterprises Ltd. 17,231
----------------------------------------------------------------------------------------------------
839 HSBC Holdings PLC 20,242
----------------------------------------------------------------------------------------------------
4,000 Hutchison Whampoa 26,648
----------------------------------------------------------------------------------------------------
6,000 (b)New World Development Co. Ltd. 22,237
----------------------------------------------------------------------------------------------------
19,000 Peregrine Investments 18,680
---------------------------------------------------------------------------------------------------- ------------
Total 133,239
---------------------------------------------------------------------------------------------------- ------------
INDONESIA -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
6,000 PT Indosat 13,612
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
ITALY -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
6,400 Eni $ 37,361
----------------------------------------------------------------------------------------------------
3,000 Istituto Bancario San Paolo di Torino 24,850
----------------------------------------------------------------------------------------------------
4,000 La Rinascente S.P.A. 30,332
----------------------------------------------------------------------------------------------------
9,600 Telecom Italia SPA 59,849
---------------------------------------------------------------------------------------------------- ------------
Total 152,392
---------------------------------------------------------------------------------------------------- ------------
JAPAN -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
1,200 Circle K Japan Co. Ltd. 60,270
----------------------------------------------------------------------------------------------------
7,000 Fujitsu Ltd. 78,433
----------------------------------------------------------------------------------------------------
2,000 Hitachi Maxell 44,819
----------------------------------------------------------------------------------------------------
1,000 Ito-Yokado Co., Ltd. 45,132
----------------------------------------------------------------------------------------------------
1,300 Mabuchi Motor Co. 68,145
----------------------------------------------------------------------------------------------------
28,000 (b)Mazda Motor Corp. 78,323
----------------------------------------------------------------------------------------------------
9,000 Minolta Co 51,832
----------------------------------------------------------------------------------------------------
6,000 Mitsubishi Estate Co. Ltd. 69,579
----------------------------------------------------------------------------------------------------
500 Nintendo Corp. Ltd. 51,714
----------------------------------------------------------------------------------------------------
8 Nippon Telegraph & Telephone Corp. 65,818
----------------------------------------------------------------------------------------------------
2,000 Sankyo Co. Ltd. 63,781
----------------------------------------------------------------------------------------------------
300 Shokoh Fund & Co. 85,328
----------------------------------------------------------------------------------------------------
1,000 Sony Corp. 85,406
----------------------------------------------------------------------------------------------------
6,000 Sumitomo Bank Ltd., Osaka 76,161
----------------------------------------------------------------------------------------------------
17,000 Tokyu Land Corp 33,833
---------------------------------------------------------------------------------------------------- ------------
Total 958,574
----------------------------------------------------------------------------------------------------------------
MEXICO -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
1,200 Empresas ICA Sociedad Controladora S.A., ADR 18,600
----------------------------------------------------------------------------------------------------
3,200 Fomento Economico Mexicano, SA de C.V., Class B 26,376
----------------------------------------------------------------------------------------------------
35,000 (a)(b)Grupo Financiero Bancomer, S.A. de C.V., Class B 20,241
----------------------------------------------------------------------------------------------------
400 Telefonos de Mexico, Class L, ADR 19,800
----------------------------------------------------------------------------------------------------
1,400 (b)Tubos de Acero de Mexico SA, ADR 30,975
---------------------------------------------------------------------------------------------------- ------------
Total 115,992
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
NETHERLANDS -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
1,317 ABN-Amro Holdings NV $ 25,117
----------------------------------------------------------------------------------------------------
200 (b)ASM Lithography Holding NV, ADR 12,500
----------------------------------------------------------------------------------------------------
1,233 ING Groep, N.V. 50,132
----------------------------------------------------------------------------------------------------
700 Koninklijke PTT Nederland NV 28,108
----------------------------------------------------------------------------------------------------
300 Philips Electronics N.V. 19,821
----------------------------------------------------------------------------------------------------
2,400 VNU - Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 57,485
----------------------------------------------------------------------------------------------------
343 Wolters Kluwer NV 45,410
---------------------------------------------------------------------------------------------------- ------------
Total 238,573
---------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
16,000 Air New Zealand Ltd., Class B 32,575
---------------------------------------------------------------------------------------------------- ------------
NORWAY -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
750 Saga Petroleum A.S., Class A 13,454
----------------------------------------------------------------------------------------------------
900 Schibsted 15,268
----------------------------------------------------------------------------------------------------
500 Smedvig ASA, Class B 12,724
---------------------------------------------------------------------------------------------------- ------------
Total 41,446
---------------------------------------------------------------------------------------------------- ------------
SINGAPORE -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
700 (b)Creative Technology Ltd. 18,638
----------------------------------------------------------------------------------------------------
10,000 Natsteel Broadway Ltd. 14,650
----------------------------------------------------------------------------------------------------
1,000 Singapore Press Holdings Ltd. 13,674
----------------------------------------------------------------------------------------------------
6,000 Wing Tai Holdings, Ltd. 7,715
---------------------------------------------------------------------------------------------------- ------------
Total 54,677
---------------------------------------------------------------------------------------------------- ------------
SPAIN -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
2,250 (b)Banco Bilbao Vizcaya SA 67,978
----------------------------------------------------------------------------------------------------
440 Banco Popular Espanol 28,033
----------------------------------------------------------------------------------------------------
2,760 Endesa S.A. 51,920
----------------------------------------------------------------------------------------------------
1,200 Iberdrola SA 15,331
----------------------------------------------------------------------------------------------------
1,200 Repsol SA 51,908
----------------------------------------------------------------------------------------------------
2,180 Telefonica de Espana 62,866
---------------------------------------------------------------------------------------------------- ------------
Total 278,036
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SWEDEN -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
240 Electrolux B $ 18,898
----------------------------------------------------------------------------------------------------
5,120 Munksjo AB 48,405
----------------------------------------------------------------------------------------------------
3,000 Skand Enskilda BKN, Class A 35,356
----------------------------------------------------------------------------------------------------
750 Trygg-hansa B 23,360
----------------------------------------------------------------------------------------------------
1,100 Volvo AB, Class B 29,347
---------------------------------------------------------------------------------------------------- ------------
Total 155,366
---------------------------------------------------------------------------------------------------- ------------
SWITZERLAND -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
10 (b)Baloise Holdings-REG 17,815
----------------------------------------------------------------------------------------------------
58 Holderbank Financiere Glaris AG, Class B 50,564
----------------------------------------------------------------------------------------------------
35 Nestle SA 51,501
----------------------------------------------------------------------------------------------------
58 Novartis AG-REG 92,667
----------------------------------------------------------------------------------------------------
6 (b)Roche Holding AG 53,696
----------------------------------------------------------------------------------------------------
40 UBS-Union Bank of Switzerland 50,919
----------------------------------------------------------------------------------------------------
119 Zurich Versicherungsgesellschaft 50,077
---------------------------------------------------------------------------------------------------- ------------
Total 367,239
---------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
3,500 BBA Group PLC 22,255
----------------------------------------------------------------------------------------------------
2,752 Barclays PLC 66,371
----------------------------------------------------------------------------------------------------
26 Boc Group PLC 415
----------------------------------------------------------------------------------------------------
4,690 Boots Co. PLC 68,912
----------------------------------------------------------------------------------------------------
2,728 British Aerospace PLC 74,454
----------------------------------------------------------------------------------------------------
3,122 British Petroleum Co. PLC 42,709
----------------------------------------------------------------------------------------------------
2,000 British Sky Broadcasting Group PLC 14,862
----------------------------------------------------------------------------------------------------
3,800 Cadbury Schweppes PLC 39,470
----------------------------------------------------------------------------------------------------
3,290 Compass Group 39,284
----------------------------------------------------------------------------------------------------
3,879 EMI Group PLC 29,219
----------------------------------------------------------------------------------------------------
3,431 GKN PLC 74,577
----------------------------------------------------------------------------------------------------
3,000 (b)Gallaher Group PLC 16,213
----------------------------------------------------------------------------------------------------
6,560 General Electric Co. PLC 42,710
----------------------------------------------------------------------------------------------------
1,819 Glaxo Wellcome PLC 39,937
----------------------------------------------------------------------------------------------------
19 Granada Group PLC 272
----------------------------------------------------------------------------------------------------
4,257 Grand Metropolitan PLC 38,752
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
SHARES OR
UNITS OR VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
3,200 Marks & Spencer PLC $ 32,913
----------------------------------------------------------------------------------------------------
2,000 National Westminster Bank, PLC, London 30,333
----------------------------------------------------------------------------------------------------
1,200 Next 14,997
----------------------------------------------------------------------------------------------------
1,960 Pearson 27,310
----------------------------------------------------------------------------------------------------
2,000 PowerGen PLC 25,823
----------------------------------------------------------------------------------------------------
2,268 Reckitt & Colman PLC 33,057
----------------------------------------------------------------------------------------------------
3,700 Reed International PLC 39,400
----------------------------------------------------------------------------------------------------
1,600 Royal & Sun Alliance Insurance Group PLC 14,403
----------------------------------------------------------------------------------------------------
4,000 Shell Transport & Trading Co. 27,225
----------------------------------------------------------------------------------------------------
3,326 Siebe PLC 60,498
----------------------------------------------------------------------------------------------------
20 Smithkline Beecham PLC 186
----------------------------------------------------------------------------------------------------
6,000 Vodafone Group PLC 40,128
----------------------------------------------------------------------------------------------------
1,640 Zeneca Group 52,349
---------------------------------------------------------------------------------------------------- ------------
Total 1,009,034
---------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN EQUITY 5,203,918
---------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $47,813,784) 74,199,146
---------------------------------------------------------------------------------------------------- ------------
BONDS -- 65.5%
- ----------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 32.3%
- ----------------------------------------------------------------------------------------------------------------------
(C)REPURCHASE AGREEMENTS -- 6.6%
- ----------------------------------------------------------------------------------------------------------------------
$10,600,000 BT Securities Corporation, 5.730%, dated 11/28/1997, due 12/1/1997 10,600,000
----------------------------------------------------------------------------------------------------
1,800,000 Credit Suisse First Boston, Inc., 5.550%, dated 11/10/1997, due 12/17/1997 1,800,000
----------------------------------------------------------------------------------------------------
1,500,000 Swiss Bank Capital Markets, 5.550%, dated 11/12/1997, due 12/15/1997 1,500,000
---------------------------------------------------------------------------------------------------- ------------
Total 13,900,000
---------------------------------------------------------------------------------------------------- ------------
U.S. TREASURY SECURITIES -- 25.7%
- ----------------------------------------------------------------------------------------------------------------------
1,100,000 United States Treasury Bill, 12/18/1997 1,098,458
----------------------------------------------------------------------------------------------------
6,500,000 United States Treasury Bond, 7.25%, 5/15/2004 6,975,540
----------------------------------------------------------------------------------------------------
6,500,000 United States Treasury Bond, 8.125%, 5/15/2021 8,088,665
----------------------------------------------------------------------------------------------------
13,398,000 United States Treasury Note, 5.75%, 8/15/2003 13,325,919
----------------------------------------------------------------------------------------------------
19,525,000 United States Treasury Note, 6.125%, 8/15/2007 19,912,181
----------------------------------------------------------------------------------------------------
5,000,000 United States Treasury Note, 6.50%, 10/15/2006 5,200,700
---------------------------------------------------------------------------------------------------- ------------
Total 54,601,463
---------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 68,501,463
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES
- ----------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 18.6%
- ----------------------------------------------------------------------------------------------------------------------
$2,050,000 Federal Home Loan Mortgage Corp., 6.00%, 11/1/2027 $ 2,007,073
----------------------------------------------------------------------------------------------------
431,756 Federal Home Loan Mortgage Corp., 9.00%, 5/1/2017 462,247
----------------------------------------------------------------------------------------------------
308,781 Federal Home Loan Mortgage Corp., 9.50%, 6/1/2021 335,509
----------------------------------------------------------------------------------------------------
321,661 Federal Home Loan Mortgage Corp., 7.50%, 5/1/2024 329,803
----------------------------------------------------------------------------------------------------
873,031 Federal Home Loan Mortgage Corp., 7.00%, 8/1/2025 879,850
----------------------------------------------------------------------------------------------------
913,540 Federal Home Loan Mortgage Corp., 7.50%, 12/1/2022 938,663
----------------------------------------------------------------------------------------------------
214,598 Federal Home Loan Mortgage Corp., 7.00%, 7/1/2024 216,542
----------------------------------------------------------------------------------------------------
848,855 Federal Home Loan Mortgage Corp., 6.50%, 9/1/2025 837,981
----------------------------------------------------------------------------------------------------
957,403 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2026 963,090
----------------------------------------------------------------------------------------------------
835,275 Federal Home Loan Mortgage Corp., 7.00%, 2/1/2026 842,843
----------------------------------------------------------------------------------------------------
1,680,409 Federal Home Loan Mortgage Corp., 7.50%, 6/1/2026 1,721,377
----------------------------------------------------------------------------------------------------
779,871 Federal Home Loan Mortgage Corp., 9.00%, 11/1/2006 817,890
----------------------------------------------------------------------------------------------------
292,489 Federal Home Loan Mortgage Corp., 8.00%, 11/1/2009 302,726
----------------------------------------------------------------------------------------------------
1,682,612 Federal Home Loan Mortgage Corp., 6.50%, 3/1/2011 1,678,405
----------------------------------------------------------------------------------------------------
261,078 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 264,503
----------------------------------------------------------------------------------------------------
509,486 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 516,170
----------------------------------------------------------------------------------------------------
473,158 Federal Home Loan Mortgage Corp., 6.50%, 5/1/2011 471,975
----------------------------------------------------------------------------------------------------
848,395 Federal Home Loan Mortgage Corp., 7.50%, 8/1/2003 855,284
----------------------------------------------------------------------------------------------------
655,377 Federal National Mortgage Association, 7.50%, 9/1/2009 670,942
----------------------------------------------------------------------------------------------------
440,706 Federal National Mortgage Association, 7.00%, 7/1/2024 443,875
----------------------------------------------------------------------------------------------------
909,603 Federal National Mortgage Association, 7.50%, 5/1/2026 928,932
----------------------------------------------------------------------------------------------------
136,063 Federal National Mortgage Association, 7.50%, 6/1/2009 139,295
----------------------------------------------------------------------------------------------------
122,572 Federal National Mortgage Association, 8.50%, 2/1/2025 128,394
----------------------------------------------------------------------------------------------------
456,601 Federal National Mortgage Association, 7.50%, 7/1/2025 467,304
----------------------------------------------------------------------------------------------------
446,413 Federal National Mortgage Association, 7.00%, 7/1/2025 449,064
----------------------------------------------------------------------------------------------------
865,634 Federal National Mortgage Association, 6.50%, 9/1/2025 852,468
----------------------------------------------------------------------------------------------------
793,838 Federal National Mortgage Association, 6.50%, 1/1/2003 794,584
----------------------------------------------------------------------------------------------------
1,010,160 Federal National Mortgage Association, 7.00%, 7/1/2026 1,012,554
----------------------------------------------------------------------------------------------------
2,705,459 Federal National Mortgage Association, 8.00%, 5/1/2027 2,800,664
----------------------------------------------------------------------------------------------------
423,571 Federal National Mortgage Association, 10.50%, 1/1/2021 473,738
----------------------------------------------------------------------------------------------------
1,500,000 (e)Federal National Mortgage Association, 6.00%, 1/1/2099 TBA 1,468,594
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES--CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
$2,574,000 Government National Mortgage Association, 7.00%, 11/20/2027 $ 2,566,767
----------------------------------------------------------------------------------------------------
587,527 Government National Mortgage Association, 10.00%, 10/15/2018 650,504
----------------------------------------------------------------------------------------------------
771,677 Government National Mortgage Association, 8.50%, 10/15/2022 815,084
----------------------------------------------------------------------------------------------------
827,449 Government National Mortgage Association, 6.50%, 1/15/2024 818,918
----------------------------------------------------------------------------------------------------
853,755 Government National Mortgage Association, 8.00%, 11/15/2024 886,838
----------------------------------------------------------------------------------------------------
99,450 Government National Mortgage Association, 9.50%, 12/15/2025 108,462
----------------------------------------------------------------------------------------------------
214,435 Government National Mortgage Association, 7.00%, 8/15/2024 215,574
----------------------------------------------------------------------------------------------------
1,742,459 Government National Mortgage Association, 7.50%, 4/15/2024 1,785,480
----------------------------------------------------------------------------------------------------
1,057,047 Government National Mortgage Association, 7.00%, 11/15/2024 1,063,326
----------------------------------------------------------------------------------------------------
1,633,230 Government National Mortgage Association, 9.00%, 11/15/2017 1,772,055
----------------------------------------------------------------------------------------------------
1,750,898 Government National Mortgage Association, 8.00%, 9/15/2017 1,838,986
----------------------------------------------------------------------------------------------------
1,800,000 Government National Mortgage Association, 7.50%, 12/15/2099 1,837,692
---------------------------------------------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES 39,432,025
---------------------------------------------------------------------------------------------------- ------------
INVESTMENT GRADE BONDS -- 7.4%
- ----------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
250,000 McDonnell Douglas Finance, Note, 9.40%, 10/15/2001 265,000
---------------------------------------------------------------------------------------------------- ------------
BANKING -- 1.0%
- ----------------------------------------------------------------------------------------------------------------------
330,000 Chase Manhattan, Sub. Note, 8.00%, 5/1/2005 332,871
----------------------------------------------------------------------------------------------------
250,000 Crestar Financial Corp, Sub. Note, 8.75%, 11/15/2004 280,708
----------------------------------------------------------------------------------------------------
400,000 Exp-Imp BK Korea, Note, 6.50%, 5/15/2000 381,937
----------------------------------------------------------------------------------------------------
300,000 National Bank of Canada, Sub. Note, 8.125%, 8/15/2004 324,687
----------------------------------------------------------------------------------------------------
285,000 PNC Funding Corp, Sub. Note, 6.875%, 7/15/2007 290,273
----------------------------------------------------------------------------------------------------
400,000 Santander Finance Issuances, Bank Guarantee, 7.875%, 4/15/2005 426,012
---------------------------------------------------------------------------------------------------- ------------
Total 2,036,488
---------------------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
150,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 146,822
---------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
250,000 SCI Television, Sr. Secd. Note, 11.00%, 6/30/2005 260,448
---------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
350,000 Continental Cablevision, Sr. Note, 8.50%, 9/15/2001 372,313
----------------------------------------------------------------------------------------------------
515,000 TKR Cable Inc., 10.50%, 10/30/2007 573,092
---------------------------------------------------------------------------------------------------- ------------
Total 945,405
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
$450,000 (a)Bayer Corp., Deb., 6.50%, 10/1/2002 $ 453,929
---------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
275,000 Waste Management, Deb., 8.75%, 5/1/2018 309,625
---------------------------------------------------------------------------------------------------- ------------
EDUCATION -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
375,000 Boston University, 7.625%, 7/15/2097 404,677
---------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
300,000 Harris Corp, Deb., 10.375%, 12/1/2018 326,319
---------------------------------------------------------------------------------------------------- ------------
FINANCE-RETAIL -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
150,000 Household Finance, Deb., 6.45%, 2/1/2009 146,790
---------------------------------------------------------------------------------------------------- ------------
FINANCIAL INTERMEDIARIES -- 0.8%
- ----------------------------------------------------------------------------------------------------------------------
400,000 DLJ, Note, 6.875%, 11/1/2005 402,964
----------------------------------------------------------------------------------------------------
400,000 Green Tree Financial Corp, Sr. Sub. Note, 10.25%, 6/1/2002 459,420
----------------------------------------------------------------------------------------------------
300,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.375%, 1/15/2007 308,892
----------------------------------------------------------------------------------------------------
225,000 Salomon, Inc., Note, 7.20%, 2/1/2004 231,017
----------------------------------------------------------------------------------------------------
247,665 (a)World Financial, Pass Thru Cert., Series 96 WFP-B, 6.91%, 9/1/2013 255,323
---------------------------------------------------------------------------------------------------- ------------
Total 1,657,616
---------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
350,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 382,165
---------------------------------------------------------------------------------------------------- ------------
GOVERNMENT AGENCY -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
250,000 Federal National Mortgage Association, 7.43%, 8/4/2005 252,170
----------------------------------------------------------------------------------------------------
250,000 Federal National Mortgage Association, 8.59%, 2/3/2005 251,228
---------------------------------------------------------------------------------------------------- ------------
Total 503,398
---------------------------------------------------------------------------------------------------- ------------
INSURANCE -- 1.2%
- ----------------------------------------------------------------------------------------------------------------------
250,000 AFC Capital Trust I, Bond, 8.207%, 2/3/2027 270,660
----------------------------------------------------------------------------------------------------
450,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 473,697
----------------------------------------------------------------------------------------------------
350,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 420,273
----------------------------------------------------------------------------------------------------
515,000 Continental Corp, Note, 8.25%, 4/15/1999 529,842
----------------------------------------------------------------------------------------------------
250,000 Sunamerica Inc, Medium Term Note, 7.34%, 8/30/2005 260,775
----------------------------------------------------------------------------------------------------
425,000 Sunamerica, Inc., Sr. Note, 9.00%, 1/15/1999 439,021
----------------------------------------------------------------------------------------------------
250,000 USF&G Corp., Company Guarantee, 8.47%, 1/10/2027 264,578
---------------------------------------------------------------------------------------------------- ------------
Total 2,658,846
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
$350,000 Viacom, Inc., Sr. Note, 7.75%, 6/1/2005 $ 353,962
---------------------------------------------------------------------------------------------------- ------------
METALS & MINING -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
150,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 158,151
----------------------------------------------------------------------------------------------------
450,000 Santa Fe Pacific Gold Co, Note, 8.375%, 7/1/2005 492,894
---------------------------------------------------------------------------------------------------- ------------
Total 651,045
---------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
350,000 USX Corp., Note, 6.375%, 7/15/1998 351,565
---------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
400,000 News Amer Hldgs, Sr. Note, 7.50%, 3/1/2000 408,924
---------------------------------------------------------------------------------------------------- ------------
RETAILERS -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
250,000 Harcourt General, Sr. Deb., 7.20%, 8/1/2027 251,410
----------------------------------------------------------------------------------------------------
400,000 May Department Stores, Deb., 8.125%, 8/15/2035 441,708
---------------------------------------------------------------------------------------------------- ------------
Total 693,118
---------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
250,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 259,523
---------------------------------------------------------------------------------------------------- ------------
SOVEREIGN GOVERNMENT -- 0.7%
- ----------------------------------------------------------------------------------------------------------------------
300,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2009 314,919
----------------------------------------------------------------------------------------------------
450,000 Republic of South Africa, Global Bond Deb., 9.625%, 12/15/1999 475,875
----------------------------------------------------------------------------------------------------
400,000 Republic of Colombia, Note, 7.25%, 2/15/2003 381,800
----------------------------------------------------------------------------------------------------
375,000 Swedish Export Credit, 9.875%, 3/15/2038 397,658
---------------------------------------------------------------------------------------------------- ------------
Total 1,570,252
---------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
225,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 259,369
---------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
200,000 Duke Power Co., 1st Mtg. Note, 7.00%, 9/1/2005 203,390
----------------------------------------------------------------------------------------------------
250,000 Enersis S.A., Note, 7.40%, 12/1/2016 251,295
----------------------------------------------------------------------------------------------------
200,000 Gulf States Util, FMB, 6.75%, 10/1/1998 200,388
---------------------------------------------------------------------------------------------------- ------------
Total 655,073
---------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENT GRADE BONDS 15,700,359
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- 2.5%
- ----------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
$50,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 $ 50,250
---------------------------------------------------------------------------------------------------- ------------
AUTOMOBILE -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
38,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 42,370
----------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 56,750
----------------------------------------------------------------------------------------------------
50,000 Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 6/15/2007 52,375
---------------------------------------------------------------------------------------------------- ------------
Total 151,495
---------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
75,000 First Nationwide Escrow , Sr. Sub. Note, 10.625%, 10/1/2003 83,813
---------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)ACME Television, LLC, Sr. Disc. Note, 9/30/2004 36,750
----------------------------------------------------------------------------------------------------
American Radio Systems Corp., 525 Exchangeable Pfd. Shares Stock, 11.375% 61,950
----------------------------------------------------------------------------------------------------
Capstar Broadcasting Partners, Inc., 500 Sr. Pfd., $12.00 56,375
----------------------------------------------------------------------------------------------------
Chancellor Media Corp., 529 Exchangeable Pfd. Shares Stock, $12.00 62,687
----------------------------------------------------------------------------------------------------
50,000 (a)Fox/Liberty Networks, LLC, Sr. Disc. Note, 8/15/2007 31,375
----------------------------------------------------------------------------------------------------
50,000 Jacor Communications, Inc, Sr. Sub. Note, 9.75%, 12/15/2006 53,375
----------------------------------------------------------------------------------------------------
50,000 Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, 6/15/2007 52,000
----------------------------------------------------------------------------------------------------
(a)Sinclair Broadcast Group, Inc., Pfd., 500 Shares Series A $11.625 55,250
----------------------------------------------------------------------------------------------------
50,000 Sinclair Broadcast Group, Sr. Sub. Note, 9.00%, 7/15/2007 50,625
---------------------------------------------------------------------------------------------------- ------------
Total 460,387
---------------------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)Dialog Corporation plc, Sr. Sub. Note, 11.00%, 11/15/2007 51,125
----------------------------------------------------------------------------------------------------
32,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 35,840
----------------------------------------------------------------------------------------------------
50,000 Outsourcing Solutions Inc, Sr. Sub. Note, 11.00%, 11/1/2006 56,000
----------------------------------------------------------------------------------------------------
17,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 19,423
---------------------------------------------------------------------------------------------------- ------------
Total 162,388
---------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
13 (a)(b)CS Wireless Systems, Inc., unit, 0/11.75%, 3/1/2006 0
----------------------------------------------------------------------------------------------------
50,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 54,375
----------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
----------------------------------------------------------------------------------------------------
125,000 (a)Diamond Cable, Sr. Disc. Note, 0/10.75%, 2/15/2007 83,125
----------------------------------------------------------------------------------------------------
50,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 41,750
----------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
$50,000 FrontierVision Holdings, 9/15/2007 $ 34,875
----------------------------------------------------------------------------------------------------
100,000 International Cabletel, Sr. Disc. Note, 0/12.75%, 4/15/2005 82,500
----------------------------------------------------------------------------------------------------
50,000 Lenfest Communication, Sr. Note, 8.375%, 11/1/2005 50,438
----------------------------------------------------------------------------------------------------
50,000 Pegasus Communications , Sr. Note, 9.625%, 10/15/2005 50,250
----------------------------------------------------------------------------------------------------
25,000 Pegasus Media , Note, 12.50%, 7/1/2005 28,625
----------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 54,750
----------------------------------------------------------------------------------------------------
100,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 76,750
----------------------------------------------------------------------------------------------------
50,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 32,750
---------------------------------------------------------------------------------------------------- ------------
Total 645,938
---------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
25,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 21,500
---------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)Glenoit Corporation, Sr. Sub. Note, 11.00%, 4/15/2007 54,250
----------------------------------------------------------------------------------------------------
50,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006 53,250
----------------------------------------------------------------------------------------------------
75,000 Westpoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 78,938
---------------------------------------------------------------------------------------------------- ------------
Total 186,438
---------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 54,500
----------------------------------------------------------------------------------------------------
50,000 ICON Fitness Corp., Sr. Disc. Note, 11/15/2006 29,250
----------------------------------------------------------------------------------------------------
50,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 50,375
----------------------------------------------------------------------------------------------------
50,000 Renaissance Cosmetics, Inc.,Sr. Note, 11.75%, 2/15/2004 47,250
----------------------------------------------------------------------------------------------------
50,000 Revlon Consumer Products, Sr. Sub. Note, 10.50%, 2/15/2003 53,063
----------------------------------------------------------------------------------------------------
50,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 52,500
---------------------------------------------------------------------------------------------------- ------------
Total 286,938
---------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 54,750
---------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)Fairchild Semiconductor, Sr. Sub., 10.125%, 3/15/2007 53,000
----------------------------------------------------------------------------------------------------
50,000 (a)Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 51,875
---------------------------------------------------------------------------------------------------- ------------
Total 104,875
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
$25,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 $ 27,875
----------------------------------------------------------------------------------------------------
50,000 Digiorgio Corp., Sr. Note, 10.00%, 6/15/2007 49,250
----------------------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 56,375
---------------------------------------------------------------------------------------------------- ------------
Total 133,500
---------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 International Home Foods, Sr. Sub. Note, 10.375%, 11/1/2006 54,750
----------------------------------------------------------------------------------------------------
25,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 27,875
---------------------------------------------------------------------------------------------------- ------------
Total 82,625
---------------------------------------------------------------------------------------------------- ------------
FOOD SERVICES -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)AmeriServe Food Dist. Inc, Sr. Sub. Note, 10.125%, 7/15/2007 52,000
---------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
25,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 26,750
----------------------------------------------------------------------------------------------------
50,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 54,750
---------------------------------------------------------------------------------------------------- ------------
Total 81,500
---------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 55,875
----------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 10.125%, 3/1/2005 54,313
----------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 8.625%, 1/15/2007 51,375
---------------------------------------------------------------------------------------------------- ------------
Total 161,563
---------------------------------------------------------------------------------------------------- ------------
HOME PRODUCTS & FURNISHINGS -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 (a)Werner Holding Co. Inc., Sr. Sub. Note, 10.00%, 11/15/2007 51,250
---------------------------------------------------------------------------------------------------- ------------
HOTELS, MOTELS, INNS & CASINOS -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 Courtyard By Marriott, Sr. Note, 10.75%, 2/1/2008 54,375
----------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
25,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 28,125
----------------------------------------------------------------------------------------------------
50,000 (a)Continental Global, Inc., Sr. Note, 11.00%, 4/1/2007 53,750
----------------------------------------------------------------------------------------------------
50,000 Euramax International Plc, Sr. Sub. Note, 11.25%, 10/1/2006 54,375
----------------------------------------------------------------------------------------------------
50,000 (a)Roller Bearing Co. of America, Inc., Sr. Sub. Note, 9.625%, 6/15/2007 50,625
----------------------------------------------------------------------------------------------------
50,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 51,750
---------------------------------------------------------------------------------------------------- ------------
Total 238,625
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
$100,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 $ 78,000
----------------------------------------------------------------------------------------------------
25,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 27,125
----------------------------------------------------------------------------------------------------
50,000 (a)Livent Inc., Sr. Note, 9.375%, 10/15/2004 50,000
----------------------------------------------------------------------------------------------------
50,000 Premier Parks, Sr. Note, 9.75%, 1/15/2007 53,500
----------------------------------------------------------------------------------------------------
50,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 53,000
----------------------------------------------------------------------------------------------------
50,000 Viacom Inc, Sub. Deb., 8.00%, 7/7/2006 50,000
---------------------------------------------------------------------------------------------------- ------------
Total 311,625
---------------------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 53,250
----------------------------------------------------------------------------------------------------
50,000 Clark Material Handling , Sr. Note, 10.75%, 11/15/2006 53,000
----------------------------------------------------------------------------------------------------
50,000 (a)National Equipment Serv., Sr. Sub. Note, 10.00%, 11/30/2004 49,250
----------------------------------------------------------------------------------------------------
50,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 56,750
---------------------------------------------------------------------------------------------------- ------------
Total 212,250
---------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 54,438
----------------------------------------------------------------------------------------------------
50,000 Falcon Drilling Company, Sr. Note, 9.75%, 1/15/2001 52,500
----------------------------------------------------------------------------------------------------
50,000 Forcenergy Inc., Sr. Sub. Note, 9.50%, 11/1/2006 52,875
----------------------------------------------------------------------------------------------------
50,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 54,250
---------------------------------------------------------------------------------------------------- ------------
Total 214,063
---------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 56,250
----------------------------------------------------------------------------------------------------
50,000 Hollinger International, Sr. Sub. Note, 9.25%, 3/15/2007 52,000
----------------------------------------------------------------------------------------------------
Primedia, Inc., Pfd., 500 Series D, $10.00 51,875
---------------------------------------------------------------------------------------------------- ------------
Total 160,125
---------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
50,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 55,250
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SURFACE TRANSPORTATION -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
$25,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 $ 26,375
----------------------------------------------------------------------------------------------------
50,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 55,063
----------------------------------------------------------------------------------------------------
50,000 Statia Terminals, 1st Mtg. Note, 11.75%, 11/15/2003 53,000
----------------------------------------------------------------------------------------------------
50,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 54,688
---------------------------------------------------------------------------------------------------- ------------
Total 189,126
---------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
100,000 Brooks Fiber Properties, Inc. Sr. Disc. Note, 0/10.875%, 3/1/2006 82,750
----------------------------------------------------------------------------------------------------
75,000 Call-Net Enterprises, Inc, Sr. Disc. Note, 8/15/2007 50,625
----------------------------------------------------------------------------------------------------
50,000 Comcast Cellular Holdings, Sr. Note, 9.50%, 5/1/2007 52,250
----------------------------------------------------------------------------------------------------
50,000 (a)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
----------------------------------------------------------------------------------------------------
100,000 Intermedia Communications, Sr. Disc. Note, 0/12.50%, 5/15/2006 78,000
----------------------------------------------------------------------------------------------------
50,000 (a)Mcleod USA Incorporated, Sr. Note, 9.250%, 7/15/2007 51,000
----------------------------------------------------------------------------------------------------
50,000 (a)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
----------------------------------------------------------------------------------------------------
50,000 Millicom International, Sr. Disc. Note, 0/13.50%, 6/1/2006 36,500
----------------------------------------------------------------------------------------------------
(b)NEXTEL Communications, Inc., 116 Class A 2,929
----------------------------------------------------------------------------------------------------
75,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 65,063
----------------------------------------------------------------------------------------------------
50,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 51,875
----------------------------------------------------------------------------------------------------
50,000 (a)Qwest Communications, Sr. Note, 10.875%, 4/1/2007 55,750
----------------------------------------------------------------------------------------------------
50,000 (a)RCN Corporation, Sr. Disc. Note, 0/11.125%, 10/15/2007 29,250
----------------------------------------------------------------------------------------------------
50,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 54,250
----------------------------------------------------------------------------------------------------
100,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 79,625
----------------------------------------------------------------------------------------------------
50,000 (a)Telesystem International, Sr. Disc. Note, 6/30/2007 30,875
----------------------------------------------------------------------------------------------------
50,000 (a)Teligent, Inc., Sr. Note, 11.50%, 12/1/2007 50,250
----------------------------------------------------------------------------------------------------
50,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 52,375
---------------------------------------------------------------------------------------------------- ------------
Total 935,117
---------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
50,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 54,250
----------------------------------------------------------------------------------------------------
El Paso Electric Co., 604 PIK Pfd., Shares Series A, 11.40% 66,138
---------------------------------------------------------------------------------------------------- ------------
Total 120,388
---------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 5,262,154
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- 4.7%
- ----------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
315,000 Federal National Mortgage Association, 6.50%, 7/10/2002 $ 219,534
----------------------------------------------------------------------------------------------------
128,000 Queensland Treas-Global , Local Government Guarantee, Deb., 10.50%, 5/15/2003 104,772
----------------------------------------------------------------------------------------------------
25,000 West Aust T Corp, Local Government Guarantee, 8.00%, 7/15/2003 18,541
---------------------------------------------------------------------------------------------------- ------------
Total 342,847
---------------------------------------------------------------------------------------------------- ------------
BELGIAN FRANC -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
2,112,000 Belgian Govt., Bond, 6.50%, 3/31/2005 61,733
----------------------------------------------------------------------------------------------------
6,000,000 Belgium Kingdom, 7.75%, 10/15/2004 187,069
---------------------------------------------------------------------------------------------------- ------------
Total 248,802
---------------------------------------------------------------------------------------------------- ------------
CANADIAN DOLLAR -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
290,000 Canada Government, Deb., 6.50%, 6/1/2004 215,416
----------------------------------------------------------------------------------------------------
375,000 Ontario Hydro, 9.00%, 6/24/2002 302,111
----------------------------------------------------------------------------------------------------
102,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 80,758
---------------------------------------------------------------------------------------------------- ------------
Total 598,285
---------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
1,844,000 Denmark - Bullet, Bond, 8.00%, 3/15/2006 313,780
----------------------------------------------------------------------------------------------------
1,200,000 Denmark, 8.00%, 5/15/2003 200,298
---------------------------------------------------------------------------------------------------- ------------
Total 514,078
---------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
28,000 France O.A.T., Deb., 8.25%, 4/25/2022 39,628
----------------------------------------------------------------------------------------------------
1,044,000 France O.A.T., Bond, 7.25%, 4/25/2006 199,664
----------------------------------------------------------------------------------------------------
150,500 France O.A.T., Bond, 7.50%, 4/25/2005 189,546
---------------------------------------------------------------------------------------------------- ------------
Total 428,838
---------------------------------------------------------------------------------------------------- ------------
DEUTSCHE MARK -- 1.1%
- ----------------------------------------------------------------------------------------------------------------------
137,000 DG-HYPBK 5.75%, 1/22/2007 78,541
----------------------------------------------------------------------------------------------------
188,000 Deutschland Republic, Deb., 6.25%, 1/4/2024 109,666
----------------------------------------------------------------------------------------------------
33,000,000 KFW International Finance, 6.00%, 11/29/1999 286,108
----------------------------------------------------------------------------------------------------
350,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 212,362
----------------------------------------------------------------------------------------------------
1,400,000 KFW International Finance, 7.00%, 5/12/2000 250,377
----------------------------------------------------------------------------------------------------
280,000 Tennessee Valley Authority - Global Bond, 6.375%, 9/18/2006 166,476
----------------------------------------------------------------------------------------------------
1,100,000 Treuhandanstalt, 7.75%, 10/1/2002 694,806
----------------------------------------------------------------------------------------------------
744,000 Treuhandanstalt, Foreign Gov't. Guarantee, 6.875%, 6/11/2003 456,103
---------------------------------------------------------------------------------------------------- ------------
Total 2,254,439
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
GREEK DRACHMA -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
34,000,000 Hellenic Republic, FRN 14.00%, 10/23/2003 $ 116,877
---------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
110,000,000 BTPS, Bond, 10.50%, 11/1/2000 72,390
----------------------------------------------------------------------------------------------------
520,000,000 BTPS, Deb., 12.00%, 5/18/1999 327,486
----------------------------------------------------------------------------------------------------
1,040,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 730,226
---------------------------------------------------------------------------------------------------- ------------
Total 1,130,102
---------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.5%
- ----------------------------------------------------------------------------------------------------------------------
65,000,000 Export-Import Bank Japan, 4.375%, 10/1/2003 591,302
----------------------------------------------------------------------------------------------------
42,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 381,538
---------------------------------------------------------------------------------------------------- ------------
Total 972,840
---------------------------------------------------------------------------------------------------- ------------
NETHERLAND GUILDER -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
70,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 37,108
----------------------------------------------------------------------------------------------------
30,000 Bank Ned Gemeenten, Bond, 7.75%, 12/20/2004 17,058
----------------------------------------------------------------------------------------------------
90,000 Lkb-global Bd, Bank Guarantee, 6.00%, 1/25/2006 52,285
----------------------------------------------------------------------------------------------------
700,000 Netherlands Government, 5.75%, 1/15/2004 362,628
----------------------------------------------------------------------------------------------------
210,000 Netherlands Government, 6.00%, 1/15/2006 110,004
---------------------------------------------------------------------------------------------------- ------------
Total 579,083
---------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
143,000 New Zealand Government, 8.00%, 2/15/2001 91,003
----------------------------------------------------------------------------------------------------
105,000 New Zealand Government, Bond, 8.00%, 7/15/1998 65,071
---------------------------------------------------------------------------------------------------- ------------
Total 156,074
---------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE -- 0.1%
- ----------------------------------------------------------------------------------------------------------------------
800,000 NGB Bond, 9.00%, 1/31/1999 116,895
----------------------------------------------------------------------------------------------------
630,000 Norwegian Government, Bond, 7.00%, 5/31/2001 93,168
----------------------------------------------------------------------------------------------------
473,000 Norwegian Government, Foreign Government Guarantee, 5.75%, 11/30/2004 66,983
---------------------------------------------------------------------------------------------------- ------------
Total 277,046
---------------------------------------------------------------------------------------------------- ------------
PORTUGUESE ESCUDO -- 0.0%
- ----------------------------------------------------------------------------------------------------------------------
10,250,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 64,947
---------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH AND INCOME FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- ----------------------------------------------------------------------------------------------------------------------
SPANISH PESETA -- 0.3%
- ----------------------------------------------------------------------------------------------------------------------
40,000,000 Spanish Government, Bond,10.00%, 2/28/2005 $ 337,804
----------------------------------------------------------------------------------------------------
29,000,000 Spanish Government, Bond, 8.80%, 4/30/2006 234,192
----------------------------------------------------------------------------------------------------
6,510,000 Spanish Government, Bond, 9.40%, 4/30/1999 46,370
----------------------------------------------------------------------------------------------------
6,480,000 Spanish Government, Deb., 10.10%, 2/28/2001 49,961
---------------------------------------------------------------------------------------------------- ------------
Total 668,327
---------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.2%
- ----------------------------------------------------------------------------------------------------------------------
1,000,000 Stadshypotekskas, Foreign Government Guarantee, Series 1551, 7.50%, 3/17/1999 132,257
----------------------------------------------------------------------------------------------------
2,300,000 Sweden, 6.00%, 2/9/2005 294,584
---------------------------------------------------------------------------------------------------- ------------
Total 426,841
---------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.6%
- -----------------------------------------------------------------------------------------------------------------------
127,000 British Gas PLC, 8.875%, 7/8/2008 238,218
----------------------------------------------------------------------------------------------------
108,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 203,890
----------------------------------------------------------------------------------------------------
365,000 UK Conversion, 9.00%, 3/3/2000 639,951
----------------------------------------------------------------------------------------------------
108,000 United Kingdom Treasury, Bond, 7.50%, 12/7/2006 194,086
----------------------------------------------------------------------------------------------------
30,000 United Kingdom Treasury, Bond, 8.00%, 12/7/2015 58,805
---------------------------------------------------------------------------------------------------- ------------
Total 1,334,950
---------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 10,114,376
---------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $152,788,627) 139,010,377
---------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $200,602,411)(D) $213,209,523
---------------------------------------------------------------------------------------------------- ------------
* The Fund purchases index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividends and capital
gain payments to shareholders and corporate actions while maintaining
exposure to the index and minimize trading costs. The underlying face
amount, at value of open index futures contracts is $1,079,625 at November
30, 1997, which represents 0.5% of net assets. Taking into consideration
these open index futures contracts, the Fund's effective total exposure to
stocks is 31.5%, and increasing the total exposure to small company stocks
is 3.0%.
(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $2,221,893 which represents 1.04% of net assets.
(b) Non-income producing security.
(c) The repurchase agreements are full collateralized by U.S. government and/or
agency obligations. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $200,685,920.
The net unrealized appreciation of investments on a federal tax basis
amounts to $12,523,603 which is comprised of $15,678,887 appreciation and
$3,155,284 depreciation at November 30, 1997.
(e) This security is subject to dollar roll transactions.
Certain securities may be classified in multiple categorizations based on
purpose of individual purchases.
FEDERATED MANAGED GROWTH AND INCOME FUND
Note: The categories of investments are shown as a percentage of
net assets ($212,226,797) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt FRN -- Floating Rate Note GTD -- Guaranty LLC
- -- Limited Liability Corporation PIK -- Payment in Kind PLC -- Public Limited
Company PP -- Principal Payment SA -- Support Agreement SPA -- Standby Purchase
Agreement TBA -- To Be Announced TRANs -- Tax and Revenue Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED GROWTH AND INCOME FUND
NOVEMBER 30, 1997
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $200,602,411,
and tax cost $200,685,920) $213,209,523
- -------------------------------------------------------------------------------------------------------------
Cash 3,580
- -------------------------------------------------------------------------------------------------------------
Cash denominated in foreign currencies (at identified cost $640) 626
- -------------------------------------------------------------------------------------------------------------
Income receivable 1,863,155
- -------------------------------------------------------------------------------------------------------------
Receivable for investments sold 2,158,518
- -------------------------------------------------------------------------------------------------------------
Receivable for shares sold 310,199
- -------------------------------------------------------------------------------------------------------------
Deferred organizational costs 52,013
- -------------------------------------------------------------------------------------------------------------
Other assets 14,303
- ---------------------------------------------------------------------------------------------- ------------
Total assets 217,611,917
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------
Payable for investments purchased $ 3,732,386
- ----------------------------------------------------------------------------------------------
Payable for shares redeemed 82,360
- ----------------------------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 522
- ----------------------------------------------------------------------------------------------
Payable for dollar roll transactions 1,494,948
- ----------------------------------------------------------------------------------------------
Payable for taxes withheld 1,775
- ----------------------------------------------------------------------------------------------
Payable for daily variation margin 625
- ----------------------------------------------------------------------------------------------
Accrued expenses 72,504
- ------------------------------------------------------------------------------- ------------
Total liabilities 5,385,120
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS for 17,721,265 shares outstanding $212,226,797
- ---------------------------------------------------------------------------------------------- ============
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------------------
Paid in capital $187,336,495
- -------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 12,609,822
- -------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on investments, foreign currency
transactions and futures contracts 10,956,599
- -------------------------------------------------------------------------------------------------------------
Undistributed net investment income 1,323,881
- ---------------------------------------------------------------------------------------------- ------------
Total Net Assets $212,226,797
- ---------------------------------------------------------------------------------------------- ============
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -------------------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -------------------------------------------------------------------------------------------------------------
$164,727,526 [DIVIDED BY] 13,751,196 shares outstanding $11.98
- ---------------------------------------------------------------------------------------------- ============
SELECT SHARES:
- -------------------------------------------------------------------------------------------------------------
$47,499,271 [DIVIDED BY] 3,970,069 shares outstanding $11.96
- ---------------------------------------------------------------------------------------------- ============
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
FEDERATED MANAGED GROWTH AND INCOME FUND
YEAR ENDED NOVEMBER 30, 1997
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $28,415) $ 1,346,997
- ----------------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $39,319) (net of foreign taxes withheld of $1,275) 9,532,769
- ---------------------------------------------------------------------------------------------- ------------
Total income 10,879,766
- ----------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------
Investment advisory fee $ 1,535,953
- ----------------------------------------------------------------------------------------------
Administrative personnel and services fee 155,085
- ----------------------------------------------------------------------------------------------
Custodian fees 104,479
- ----------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 124,840
- ----------------------------------------------------------------------------------------------
Directors'/Trustees' fees 5,042
- ----------------------------------------------------------------------------------------------
Auditing fees 16,953
- ----------------------------------------------------------------------------------------------
Legal fees 4,034
- ----------------------------------------------------------------------------------------------
Portfolio accounting fees 90,078
- ----------------------------------------------------------------------------------------------
Distribution services fee -- Select Shares 344,598
- ----------------------------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 397,118
- ----------------------------------------------------------------------------------------------
Shareholder services fee -- Select Shares 114,866
- ----------------------------------------------------------------------------------------------
Share registration costs 41,496
- ----------------------------------------------------------------------------------------------
Printing and postage 51,550
- ----------------------------------------------------------------------------------------------
Insurance premiums 4,444
- ----------------------------------------------------------------------------------------------
Taxes 3,012
- ----------------------------------------------------------------------------------------------
Miscellaneous 21,955
- ------------------------------------------------------------------------------ ------------
Total expenses 3,015,503
- ------------------------------------------------------------------------------
Waivers --
- ---------------------------------------------------------------
Waiver of investment advisory fee $ (101,972)
- ---------------------------------------------------------------
Waiver of distribution services fee -- Select Shares (114,866)
- ---------------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (317,695)
- --------------------------------------------------------------- ------------
Total waivers (534,533)
- ------------------------------------------------------------------------------- ------------
Net expenses 2,480,970
- ---------------------------------------------------------------------------------------------- ============
Net investment income 8,398,796
- ---------------------------------------------------------------------------------------------- ============
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ----------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions 10,949,153
- ----------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments and translation of
assets and liabilities in foreign currency 2,187,689
- ---------------------------------------------------------------------------------------------- ============
Net realized and unrealized gain on investments and foreign currency 13,136,842
- ---------------------------------------------------------------------------------------------- ============
Change in net assets resulting from operations $ 21,535,638
- ---------------------------------------------------------------------------------------------- ============
(See Notes which are an integral part of the Financial Statements)
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED GROWTH AND INCOME FUND
YEAR ENDED NOVEMBER 30,
---------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------------
OPERATIONS --
- ----------------------------------------------------------------------------------------
Net investment income $ 8,398,796 $ 7,708,963
- ----------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions ($11,034,226
and $2,127,966, respectively, as computed for federal tax purposes) 10,949,153 2,283,641
- ----------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 2,187,68 4,291,960
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 21,535,638 14,284,564
- --------------------------------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
- ----------------------------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------------------------
Institutional Shares (6,945,797) (5,990,819)
- ----------------------------------------------------------------------------------------
Select Shares (1,683,717) (1,327,197)
- ----------------------------------------------------------------------------------------
Distributions from net realized gains on investments and foreign currency transactions
- ----------------------------------------------------------------------------------------
Institutional Shares (1,660,283) (1,517,396)
- ----------------------------------------------------------------------------------------
Select Shares (461,933) (372,550)
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to shareholders (10,751,730) (9,207,962)
- --------------------------------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS --
- ----------------------------------------------------------------------------------------
Proceeds from sale of shares 70,870,478 103,412,568
- ----------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared 6,401,094 5,072,213
- ----------------------------------------------------------------------------------------
Cost of shares redeemed (76,711,981) (41,180,003)
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 559,591 67,304,778
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets 11,343,499 72,381,380
- ----------------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------------
Beginning of period 200,883,298 128,501,918
- --------------------------------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of $1,323,881 and
$1,646,433, respectively) $212,226,797 $200,883,298
- --------------------------------------------------------------------------------------- ------------ ------------
(See Notes which are an integral part of the Financial Statements)
</TABLE>
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED GROWTH AND INCOME FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Growth And Income Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is to seek current income and capital appreciation.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are valued at the prices furnished by an
independent pricing service. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
With respect to valuation of foreign securities, trading in foreign countries
may be completed at times which vary from the closing of the New York Stock
Exchange. Therefore, foreign securities are valued at the latest closing price
on the exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. Dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities, market discount, foreign currency transactions, non-taxable
dividends, wash sales and futures. The following reclassifications have been
made to the financial statements.
INCREASE (DECREASE)
- ----------------------------------------------
ACCUMULATED
PAID-IN NET REALIZED UNDISTRIBUTED NET
CAPITAL GAIN/LOSS INVESTMENT INCOME
- -------- -------------- --------------------
$1,059 $90,775 $(91,834)
Net investment income, net realized gains/losses and net assets were not
affected by this reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. For the period ended November 30, 1997, the Fund had
realized gains of $3,039 on future contracts.
At November 30, 1997, the Fund had outstanding futures contracts as set forth
below:
CONTRACTS TO UNREALIZED
EXPIRATION DATE RECEIVE POSITION APPRECIATION
- ---------------- --------------- ---------- ----------------
December 1997 Russell 2000 Long 5,119
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund may enter into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date.At November 30, 1997, the Fund had
outstanding foreign currency commitments as set forth below:
<TABLE>
<CAPTION>
FOREIGN CURRENCY
CONTRACTS SETTLEMENT UNITS TO CONTRACTS UNREALIZED
PURCHASED DATE RECEIVE IN EXCHANGE FOR AT VALUE DEPRECIATION
- ------------- ---------- ---------------- --------------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Belgian Franc 12/01/1997 1,183,540 $33,051 $32,529 $(522)
</TABLE>
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
- ------------------------------------------------ ----------------------- ----------------
<S> <C> <C>
Bayer Corp.,Deb. 03/26/1996 - 04/17/1996 $444,985
World Financial, Pass Thru Cert. 11/18/1996 247,463
ACME Television, LLC 09/24/1997 37,183
FOX/Liberty Networks,LLC 08/15/1997 32,052
Sinclair Broadcast Group, Inc. 03/05/1997 50,000
Dialog Corporation plc 11/10/1997 50,000
Chilectra S.A.,ADR 02/28/1996 5,428
CS Wireless Systems, Inc. 02/16/1996 -
Diamond Cable 03/12/1997 80,550
Glenoit Corporation 03/26/1997 49,905
Allied waste N.A., Inc. 11/25/1996 50,000
Fairchild Semiconductor 03/06/1997 50,000
Viasystems, Inc. 06/02/1997 50,000
Ameriserve Food Dist. Inc. 10/16/1997 52,750
Werner Holding Co. Inc. 11/14/1997 50,000
Continental Global, Inc. 03/26/1997 50,000
Rollar Bearing Co. of America, Inc. 06/18/1997 50,000
Livent Inc. 10/10/1997 50,250
National Equipment Serv. 11/20/1997 49,384
Hermes Europe Railtel B.V. 08/14/1997 51,094
Mcleod USA Incorporated 07/15/1997 50,000
Metronet Communications Corp. 07/18/1997 50,000
Qwest Communications Intl, Inc. 03/25/1997 50,000
RCN Corporation 10/10/1997 29,613
Telesystem International 06/24/1997 27,900
Teligent Inc. 11/21/1997 50,000
Grupo Financiero Bancomer, S.A. de C.V., Class B 11/06/1995 - 01/17/1996 16,067
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 4,487,267 $ 51,304,428 7,128,986 $ 78,333,565
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 400,790 4,522,191 334,449 3,648,682
- ------------------------------------------------
Shares redeemed (4,916,395) (56,006,233) (2,992,691) (32,944,715)
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from Institutional
Share transactions (28,338) $ (179,614) 4,470,744 $ 49,037,532
- ------------------------------------------------ =========== ============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 1,716,458 $ 19,566,050 2,283,902 $ 25,079,003
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 166,372 1,878,903 130,571 1,423,531
- ------------------------------------------------
Shares redeemed (1,808,151) (20,705,748) (747,832) (8,235,288)
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from Select
Share transactions 74,679 $ 739,205 1,666,641 $18,267,246
- ------------------------------------------------ =========== ============ =========== ============
Net change resulting from
share transactions 46,341 $ 559,591 6,137,385 $67,304,778
- ------------------------------------------------ =========== ============ =========== ============
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets.The Adviser may voluntarily choose to waive any portion
of its fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp.("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses up to
0.75% of average daily net assets of Select Shares annually, to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. Federated
Shareholder Services may voluntarily choose to waive any portion of its fee. FSS
can modify or terminate this voluntary waiver at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $86,568 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five year period following the Fund's effective
date. For the year ended November 30, 1997, the Fund expensed $22,395 of
organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $249,713,498
- ------------------------------------------------ ============
SALES $252,545,497
- ------------------------------------------------ ============
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
Percent of Percent of
Industry Net Assets Industry Net Assets
- ------------------------------------ ---------- ------------------------------------------ ----------
<S> <C> <S> <C>
Aerospace & Military Technology 0.2 Healthcare 3.5
Agency 1.0 Industrial Components 0.0
Automotive 0.1 Industrial Products & Equipment 0.1
Banking 1.4 Insurance 1.3
Basic Industry 1.0 Leisure & Entertainment 0.3
Beverage & Tobacco 1.0 Machinery & Engineering 0.1
Broadcast Radio & T.V. 0.5 Machinery & Equipment 0.1
Building Materials & Components 0.1 Manufacturing 0.0
Business & Public Services 0.1 Metals & Mining 0.3
Business Equipment & Services 0.1 Metals - Steel 0.0
Cable Television 0.7 Miscellaneous Materials & Commodities 7.1
Chemicals & Plastics 0.3 Multi-Industry 0.1
Clothing & Textiles 0.1 Natural Gas Distribution 0.6
Construction & Housing 0.1 Oil & Gas 1.2
Consumer Durables 0.9 Printing & Publishing 0.3
Consumer Non-Durables 2.2 Producer Manufacturing 2.0
Consumer Products 0.1 Real Estate 0.1
Ecological Services & Equipment 0.2 Recreation, Other Consumer Goods 0.1
Electric Utilities 4.0 Retail Trade 2.0
Electrical & Electronics 0.1 Services 2.0
Electronics 0.2 Soverign 3.0
Energy Minerals 2.8 Soverign Government 1.0
Energy Sources 0.1 State & Provincial 0.1
Finance 4.4 Surface Transportation 0.2
Financial Intermediaries 0.9 Technology 4.0
Financial Services 0.1 Telecommunications & Cellular 0.2
Food & Drug Retailers 0.1 Transportation 0.6
Food & Household Products 0.2 Treasury Securities 25.7
Forest Products & Paper 0.2 Utilities 3.0
Government Agency 17.9
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Growth and Income Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Growth and Income Fund (an investment portfolio of Managed
Series Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of November 30, 1997, and the related statement of
operations for the year then ended, and the statement of changes in net assets,
and the financial highlights (see pages 2 and 20 of the prospectus) for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Growth and Income Fund, an investment portfolio of Managed
Series Trust, as of November 30, 1997, the results of its operations for the
year then ended, and the changes in its net assets and its financial highlights
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] FEDERATED INVESTORS
FEDERATED MANAGED
GROWTH AND
INCOME FUND
Select Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust,
an Open-End Management Investment Company
FEDERATED MANAGED
GROWTH AND INCOME FUND
SELECT SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT
PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K404
3122006A-SEL (1/98)
[RECYCLE LOGO]
RECYCLED PAPER
3157 PROS Final.edg Page 78
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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Institutional Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 6
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Institutional Shares 14
Administration of the Fund 14
Brokerage Transactions 15
Net Asset Value 15
Investing in Institutional Shares 15
Share Purchases 15
Minimum Investment Required 16
What Shares Cost 16
Systematic Investment Program 16
Confirmations and Account Statements 16
Dividends 16
Capital Gains 16
Redeeming Institutional Shares 16
Through a Financial Institution 17
Telephone Redemption 17
Written Requests 17
Systematic Withdrawal Program 17
Accounts with Low Balances 18
Shareholder Information 18
Voting Rights 18
Tax Information 18
Federal Income Tax 18
State and Local Taxes 18
Performance Information 18
Other Classes of Shares 19
Financial Highlights -- Select Shares 20
Financial Statements 21
Report of Independent Public Accountants 62
Appendix 63
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.69%
12b-1 Fee None
Total Other Expenses 0.36%
Shareholder Services Fee (after waiver)(2) 0.05%
Total Operating Expenses (after waivers)(3) 1.05%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholders services fee. The shareholder
service provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.31% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see Investing in Institutional Shares and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
EXAMPLE
- --------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
1 Year $ 11
3 Years $ 33
5 Years $ 58
10 Years $128
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants page 62.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1997 1996 1995 1994(A)
-------- -------- -------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.23 $11.52 $ 9.82 $10.00
- -------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------
Net investment income 0.38 0.41 0.40 0.20
- -------------------------------------------------
Net realized and unrealized
gain (loss) on investments, foreign
currency, and futures contracts 1.19 0.97 1.70 (0.26)
- ------------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.57 1.38 2.10 (0.06)
- ------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- -------------------------------------------------
Distributions from
net investment income (0.40) (0.44) (0.40) (0.12)
- -------------------------------------------------
Distributions from net realized gain
on investments, foreign currency
transactions, and futures contracts (0.30) (0.23) -- --
- ------------------------------------------------- ------ ------ ------ ------
Total distributions (0.70) (0.67) (0.40) (0.12)
- ------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.10 $12.23 $11.52 $ 9.82
- ------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 13.39% 12.54% 21.79% (0.59%)
- -------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------
Expenses 1.05% 1.05% 1.00% 0.89%*
- -------------------------------------------------
Net investment income 3.07% 3.77% 4.29% 4.28%*
- -------------------------------------------------
Expense waiver/reimbursement(c) 0.26% 0.40% 0.76% 0.90%*
- -------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------
Net assets, end of period (000 omitted) $163,519 $136,255 $68,313 $28,973
- -------------------------------------------------
Average commission rate paid(d) $0.0068 $0.0020 -- --
- -------------------------------------------------
Portfolio turnover 136% 95% 106% 71%
- -------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994 the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
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.
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 15% 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.
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 Portfolio 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.
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.
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, 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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested.
The Fund will invest only in CMOs which are rated AAA or Aaa by an NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's (Aaa, Aa, A, or Baa), Standard & Poor's (AAA, AA, A, or
BBB), or Fitch Investors Service, Inc. ("Fitch") (AAA, AA, A, or
BBB);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest 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 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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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:
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 been a portfolio
manager of the Fund 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 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.
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 Masters 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.
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.
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 a Portfolio 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.
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.I.A. concentrating
in Finance 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 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
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
FEE DAILY NET ASSETS
- -------- ------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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 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 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 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
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 quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL 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 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 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 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.
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants page 62.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1997 1996 1995 1994(A)
-------- -------- -------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.20 $11.50 $ 9.81 $10.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.30 0.36 0.23 0.15
- ------------------------------------------------
Net realized and unrealized gain (loss) on
investments, foreign currency, and futures
contracts 1.18 0.94 1.79 (0.24)
- ------------------------------------------------ ------ ------ ------ ------
Total from investment operations 1.48 1.30 2.02 (0.09)
- ------------------------------------------------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.32) (0.37) (0.33) (0.10)
- ------------------------------------------------
Distributions from net realized gain on
investments, foreign currency transactions,
and futures contracts (0.30) (0.23) -- --
- ------------------------------------------------ ------ ------ ------ ------
Total distributions (0.62) (0.60) (0.33) (0.10)
- ------------------------------------------------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.06 $12.20 $11.50 $ 9.81
- ------------------------------------------------ ------ ------ ------ ------
TOTAL RETURN(B) 12.56% 11.75% 20.95% (0.90%)
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 1.75% 1.75% 1.75% 1.70%*
- ------------------------------------------------
Net investment income 2.37% 3.06% 3.48% 3.53%*
- ------------------------------------------------
Expense waiver/reimbursement(c) 0.31% 0.45% 0.76% 1.15%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $72,746 $60,208 $27,358 $2,952
- ------------------------------------------------
Average commission rate paid(d) $0.0068 $0.0020 -- --
- ------------------------------------------------
Portfolio turnover 136% 95% 106% 71%
- ------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994 the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<C> <S> <C>
*STOCKS -- 52.7%
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- 15.5%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
24,200 Archer-Daniels-Midland Co. $ 517,276
--------------------------------------------------------------------------------------------------
4,300 Dow Chemical Co. 424,626
--------------------------------------------------------------------------------------------------
25,700 LTV Corporation 285,913
--------------------------------------------------------------------------------------------------
14,800 Louisiana-Pacific Corp. 298,775
-------------------------------------------------------------------------------------------------- ------------
Total 1,526,590
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
5,100 Eastman Kodak Co. 309,189
--------------------------------------------------------------------------------------------------
5,800 General Motors Corp., Class H 388,600
--------------------------------------------------------------------------------------------------
3,800 General Motors Corp. 231,800
--------------------------------------------------------------------------------------------------
14,100 Rubbermaid, Inc. 341,926
-------------------------------------------------------------------------------------------------- ------------
Total 1,271,515
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
3,300 CPC International, Inc. 341,139
--------------------------------------------------------------------------------------------------
19,000 PepsiCo, Inc. 700,626
--------------------------------------------------------------------------------------------------
5,900 Philip Morris Cos., Inc. 256,650
--------------------------------------------------------------------------------------------------
7,100 RJR Nabisco Holdings Corp. 258,706
--------------------------------------------------------------------------------------------------
17,900 Russell Corp. 547,069
--------------------------------------------------------------------------------------------------
8,900 Sara Lee Corp. 470,588
--------------------------------------------------------------------------------------------------
13,200 Unilever N.V. 766,425
-------------------------------------------------------------------------------------------------- ------------
Total 3,341,203
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.8%
- --------------------------------------------------------------------------------------------------------------------
4,200 Atlantic Richfield Co. 342,300
--------------------------------------------------------------------------------------------------
6,600 Chevron Corp. 529,239
--------------------------------------------------------------------------------------------------
8,400 Exxon Corp. 512,400
--------------------------------------------------------------------------------------------------
14,200 Occidental Petroleum Corp. 421,564
--------------------------------------------------------------------------------------------------
5,900 Royal Dutch Petroleum Co., ADR 310,857
--------------------------------------------------------------------------------------------------
16,400 Sun Co., Inc. 663,175
--------------------------------------------------------------------------------------------------
9,600 Texaco, Inc. 542,400
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
16,500 USX-Marathon Group $ 565,125
--------------------------------------------------------------------------------------------------
12,700 YPF Sociedad Anonima, ADR 426,244
-------------------------------------------------------------------------------------------------- ------------
Total 4,313,304
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
8,400 Allmerica Financial Corp. 407,400
--------------------------------------------------------------------------------------------------
4,600 Allstate Corp. 395,026
--------------------------------------------------------------------------------------------------
9,900 Bear Stearns Cos., Inc. 410,850
--------------------------------------------------------------------------------------------------
10,000 Block (H&R), Inc. 410,000
--------------------------------------------------------------------------------------------------
11,000 Boston Properties, Inc. 358,876
--------------------------------------------------------------------------------------------------
4,100 CIGNA Corp. 685,726
--------------------------------------------------------------------------------------------------
1,800 General RE Corp. 357,300
--------------------------------------------------------------------------------------------------
7,600 Marsh & McLennan Cos., Inc. 565,726
--------------------------------------------------------------------------------------------------
7,600 Morgan Stanley, Dean Witter, Discover & Co. 412,775
--------------------------------------------------------------------------------------------------
8,100 Travelers Group, Inc. 409,050
-------------------------------------------------------------------------------------------------- ------------
Total 4,412,729
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
7,100 Abbott Laboratories 461,500
--------------------------------------------------------------------------------------------------
24,100 (a)Beverly Enterprises, Inc. 409,700
--------------------------------------------------------------------------------------------------
8,700 Bristol-Myers Squibb Co. 814,539
--------------------------------------------------------------------------------------------------
4,100 Merck & Co., Inc. 387,707
--------------------------------------------------------------------------------------------------
11,900 (a)Perrigo Co. 169,576
--------------------------------------------------------------------------------------------------
19,900 Pharmacia & Upjohn, Inc. 671,625
--------------------------------------------------------------------------------------------------
7,000 Smithkline Beecham, ADR 347,375
--------------------------------------------------------------------------------------------------
13,800 U.S. Surgical Corp. 363,975
--------------------------------------------------------------------------------------------------
6,800 United Healthcare Corp. 354,025
-------------------------------------------------------------------------------------------------- ------------
Total 3,980,022
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
22,400 ITT Industries, Inc. 711,200
--------------------------------------------------------------------------------------------------
14,300 Ingersoll-Rand Co. 584,514
--------------------------------------------------------------------------------------------------
10,100 Johnson Controls, Inc. 462,707
--------------------------------------------------------------------------------------------------
13,800 (a)Lexmark Intl. Group, Class A 439,876
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,900 Loews Corp. $ 307,764
--------------------------------------------------------------------------------------------------
6,800 PACCAR, Inc. 374,000
-------------------------------------------------------------------------------------------------- ------------
Total 2,880,061
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
8,200 Dayton-Hudson Corp. 544,788
--------------------------------------------------------------------------------------------------
52,300 (a)K Mart Corp. 657,019
--------------------------------------------------------------------------------------------------
21,100 Wal-Mart Stores, Inc. 842,681
-------------------------------------------------------------------------------------------------- ------------
Total 2,044,488
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
2,900 ABB AB, ADR 359,600
--------------------------------------------------------------------------------------------------
9,500 Browning-Ferris Industries, Inc. 339,031
--------------------------------------------------------------------------------------------------
37,200 News Corp., Ltd., ADR 734,700
--------------------------------------------------------------------------------------------------
2,600 News Corp., Ltd., ADR 56,388
--------------------------------------------------------------------------------------------------
17,400 Readers Digest Association, Inc., Class A 416,513
--------------------------------------------------------------------------------------------------
7,807 (a)TCI Ventures Group, Class A 176,633
--------------------------------------------------------------------------------------------------
1,900 (a)Tricon Global Restaurants, Inc. 64,244
--------------------------------------------------------------------------------------------------
9,800 (a)Viacom, Inc., Class A 340,550
--------------------------------------------------------------------------------------------------
6,200 (a)Viacom, Inc., Class B 217,000
--------------------------------------------------------------------------------------------------
26,800 Waste Management, Inc. 659,950
-------------------------------------------------------------------------------------------------- ------------
Total 3,364,609
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
10,600 AMP, Inc. 460,438
--------------------------------------------------------------------------------------------------
9,200 (a)Cabletron Systems, Inc. 211,600
--------------------------------------------------------------------------------------------------
19,200 First Data Corp. 543,600
--------------------------------------------------------------------------------------------------
4,000 International Business Machines Corp. 438,250
--------------------------------------------------------------------------------------------------
3,000 Matsushita Electric Industrial Co., ADR 465,188
--------------------------------------------------------------------------------------------------
44,000 (a)Novell, Inc. 407,000
--------------------------------------------------------------------------------------------------
4,600 Raytheon Co. 257,313
--------------------------------------------------------------------------------------------------
14,300 (a)Seagate Technology, Inc. 324,431
--------------------------------------------------------------------------------------------------
8,900 (a)Storage Technology Corp. 574,606
-------------------------------------------------------------------------------------------------- ------------
Total 3,682,426
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
10,800 CNF Transporation, Inc. $ 469,800
--------------------------------------------------------------------------------------------------
10,445 KLM Royal Dutch Airlines 376,020
--------------------------------------------------------------------------------------------------
9,200 Ryder Systems, Inc. 334,075
-------------------------------------------------------------------------------------------------- ------------
Total 1,179,895
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
7,800 CMS Energy Corp. 307,125
--------------------------------------------------------------------------------------------------
5,500 Coastal Corp. 322,094
--------------------------------------------------------------------------------------------------
5,200 Columbia Gas System, Inc. 378,300
--------------------------------------------------------------------------------------------------
15,000 Entergy Corp. 390,000
--------------------------------------------------------------------------------------------------
5,500 GTE Corp. 278,094
--------------------------------------------------------------------------------------------------
15,900 Houston Industries, Inc. 376,631
--------------------------------------------------------------------------------------------------
19,200 MCI Communications Corp. 843,600
--------------------------------------------------------------------------------------------------
17,800 P G & E Corp. 502,850
--------------------------------------------------------------------------------------------------
11,200 Public Service Enterprises Group, Inc. 326,900
--------------------------------------------------------------------------------------------------
23,193 (a)Tele-Communications, Inc., Class A 531,265
--------------------------------------------------------------------------------------------------
9,500 U.S. West, Inc. 429,281
-------------------------------------------------------------------------------------------------- ------------
Total 4,686,140
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE COMPANY 36,682,982
-------------------------------------------------------------------------------------------------- ------------
LARGE COMPANY GROWTH STOCKS -- 14.8%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
6,300 (a)Lone Star Technologies, Inc. 182,700
--------------------------------------------------------------------------------------------------
5,300 Martin Marietta Materials 183,513
--------------------------------------------------------------------------------------------------
3,700 Southdown, Inc. 213,444
--------------------------------------------------------------------------------------------------
9,600 (a)Steel Dynamics, Inc. 177,600
-------------------------------------------------------------------------------------------------- ------------
Total 757,257
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
6,400 Carlisle Cos., Inc. 272,000
--------------------------------------------------------------------------------------------------
14,000 (a)Furniture Brands International, Inc. 273,875
--------------------------------------------------------------------------------------------------
1,900 Sony Corp ADR 158,650
-------------------------------------------------------------------------------------------------- ------------
Total 704,525
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
6,600 (a)Consolidated Cigar Holdings, Inc. $ 181,913
--------------------------------------------------------------------------------------------------
2,100 Gillette Co. 193,856
--------------------------------------------------------------------------------------------------
7,500 (a)Jones Apparel Group, Inc. 365,625
--------------------------------------------------------------------------------------------------
8,100 Philip Morris Cos., Inc. 352,350
--------------------------------------------------------------------------------------------------
6,100 Procter & Gamble Co. 465,506
--------------------------------------------------------------------------------------------------
7,300 (a)Smithfield Foods, Inc. 258,238
--------------------------------------------------------------------------------------------------
5,500 St. John Knits, Inc. 210,031
--------------------------------------------------------------------------------------------------
6,300 (a)Tommy Hilfiger Corp. 247,275
--------------------------------------------------------------------------------------------------
8,000 Universal Corp. 316,500
--------------------------------------------------------------------------------------------------
7,900 Wolverine World Wide, Inc. 180,219
--------------------------------------------------------------------------------------------------
4,600 Wrigley (Wm.), Jr. Co. 363,975
-------------------------------------------------------------------------------------------------- ------------
Total 3,135,488
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
3,200 (a)BJ Services Co. 229,800
--------------------------------------------------------------------------------------------------
5,800 Baker Hughes, Inc. 242,875
--------------------------------------------------------------------------------------------------
3,100 British Petroleum Co., PLC - ADR 257,300
--------------------------------------------------------------------------------------------------
4,300 (a)Cooper Cameron Corp. 262,031
--------------------------------------------------------------------------------------------------
4,500 Diamond Offshore Drilling, Inc. 224,438
--------------------------------------------------------------------------------------------------
7,000 ENSCO International, Inc. 250,250
--------------------------------------------------------------------------------------------------
7,700 (a)Falcon Drilling Co., Inc. 248,325
--------------------------------------------------------------------------------------------------
6,500 (a)Friede Goldman International, Inc. 193,375
--------------------------------------------------------------------------------------------------
8,100 (a)Key Energy Group, Inc. 196,931
--------------------------------------------------------------------------------------------------
6,500 (a)Nabors Industries, Inc. 227,906
--------------------------------------------------------------------------------------------------
2,200 (a)Petroleum Geo-Services, ADR 141,488
--------------------------------------------------------------------------------------------------
6,800 (a)Rowan Companies, Inc. 231,200
--------------------------------------------------------------------------------------------------
4,300 (a)Smith International, Inc. 275,200
--------------------------------------------------------------------------------------------------
5,500 Tosco Corp. 179,094
--------------------------------------------------------------------------------------------------
6,800 (a)TransCoastal Marine Services, Inc. 132,600
-------------------------------------------------------------------------------------------------- ------------
Total 3,292,813
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- 3.0%
- --------------------------------------------------------------------------------------------------------------------
7,900 Ahmanson (H.F.) & Co. $ 470,050
--------------------------------------------------------------------------------------------------
4,000 Allstate Corp. 343,500
--------------------------------------------------------------------------------------------------
2,600 American International Group, Inc. 262,113
--------------------------------------------------------------------------------------------------
6,300 Bank of New York Co., Inc. 338,625
--------------------------------------------------------------------------------------------------
4,700 BankAmerica Corp. 343,100
--------------------------------------------------------------------------------------------------
12,600 (a)Catellus Development Corp. 233,100
--------------------------------------------------------------------------------------------------
2,400 Citicorp 287,850
--------------------------------------------------------------------------------------------------
7,900 Conseco, Inc. 367,844
--------------------------------------------------------------------------------------------------
6,700 ETrade Group, Inc. 167,919
--------------------------------------------------------------------------------------------------
3,900 Equitable Companies Inc. 185,981
--------------------------------------------------------------------------------------------------
11,600 Frontier Insurance Group, Inc. 279,125
--------------------------------------------------------------------------------------------------
7,900 (a)Golden State Bancorp, Inc. 263,169
--------------------------------------------------------------------------------------------------
21,000 MBNA Corp. 557,813
--------------------------------------------------------------------------------------------------
2,700 MGIC Investment Corp. 157,781
--------------------------------------------------------------------------------------------------
5,700 Mellon Bank Corp. 323,119
--------------------------------------------------------------------------------------------------
5,200 Merrill Lynch & Co., Inc. 364,975
--------------------------------------------------------------------------------------------------
6,800 Morgan Stanley, Dean Witter, Discover & Co. 369,325
--------------------------------------------------------------------------------------------------
4,300 NationsBank Corp. 258,269
--------------------------------------------------------------------------------------------------
7,100 Old Republic International Corp. 256,044
--------------------------------------------------------------------------------------------------
5,400 T. Rowe Price Associates 351,000
--------------------------------------------------------------------------------------------------
6,600 Torchmark Corp. 269,363
--------------------------------------------------------------------------------------------------
11,700 Travelers Group, Inc. 590,850
-------------------------------------------------------------------------------------------------- ------------
Total 7,040,915
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 2.1%
- --------------------------------------------------------------------------------------------------------------------
9,500 (a)BioChem Pharma, Inc. 242,250
--------------------------------------------------------------------------------------------------
6,600 (a)Centocor, Inc. 287,100
--------------------------------------------------------------------------------------------------
5,000 (a)Dura Pharmaceuticals, Inc. 219,375
--------------------------------------------------------------------------------------------------
4,700 Guidant Corp. 301,975
--------------------------------------------------------------------------------------------------
9,600 HBO & Co. 430,800
--------------------------------------------------------------------------------------------------
10,600 (a)HEALTHSOUTH Corp. 278,250
--------------------------------------------------------------------------------------------------
8,900 Jones Medical Industries, Inc. 293,700
--------------------------------------------------------------------------------------------------
5,600 Lilly (Eli) & Co. 353,150
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,900 (a)MedPartners, Inc. $ 146,025
--------------------------------------------------------------------------------------------------
2,400 Merck & Co., Inc. 226,950
--------------------------------------------------------------------------------------------------
12,100 Omnicare, Inc. 349,388
--------------------------------------------------------------------------------------------------
2,600 Pfizer, Inc. 189,150
--------------------------------------------------------------------------------------------------
6,600 (a)Phycor, Inc. 162,525
--------------------------------------------------------------------------------------------------
3,700 (a)Quintiles Transnational Corp. 289,063
--------------------------------------------------------------------------------------------------
8,300 (a)Safeskin Corp. 395,288
--------------------------------------------------------------------------------------------------
4,800 Smithkline Beecham, ADR 238,200
--------------------------------------------------------------------------------------------------
6,300 (a)Universal Health Services, Inc., Class B 275,231
--------------------------------------------------------------------------------------------------
2,400 Warner-Lambert Co. 335,700
-------------------------------------------------------------------------------------------------- ------------
Total 5,014,120
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
5,600 (a)EVI, Inc. 288,050
--------------------------------------------------------------------------------------------------
7,800 General Electric Co. 575,250
--------------------------------------------------------------------------------------------------
7,800 (a)Halter Marine Group, Inc. 217,425
--------------------------------------------------------------------------------------------------
8,300 (a)Maverick Tube Corp. 237,069
--------------------------------------------------------------------------------------------------
4,500 Precision Castparts Corp. 267,188
--------------------------------------------------------------------------------------------------
14,200 (a)Royal Group Technologies Ltd. 341,688
--------------------------------------------------------------------------------------------------
8,400 Tyco International, Ltd. 329,700
--------------------------------------------------------------------------------------------------
15,900 (a)US Office Products Co. 316,013
-------------------------------------------------------------------------------------------------- ------------
Total 2,572,383
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
7,800 (a)CompUSA, Inc. 285,188
--------------------------------------------------------------------------------------------------
13,000 (a)General Nutrition Cos., Inc. 443,625
--------------------------------------------------------------------------------------------------
6,600 Home Depot, Inc. 369,188
--------------------------------------------------------------------------------------------------
14,750 Pier 1 Imports, Inc. 330,031
--------------------------------------------------------------------------------------------------
4,600 (a)Safeway, Inc. 279,450
--------------------------------------------------------------------------------------------------
10,400 TJX Cos., Inc. 358,800
-------------------------------------------------------------------------------------------------- ------------
Total 2,066,282
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
3,700 (a)ASE Test Limited 207,200
--------------------------------------------------------------------------------------------------
9,300 (a)Corrections Corp. America 322,013
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SERVICES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,800 (a)HFS, Inc. $ 260,775
--------------------------------------------------------------------------------------------------
2,800 (a)Heftel Broadcasting Corp., Class A 206,850
--------------------------------------------------------------------------------------------------
10,200 (a)Newpark Resources, Inc. 203,363
--------------------------------------------------------------------------------------------------
14,100 (a)Philip Services Corp. 222,956
--------------------------------------------------------------------------------------------------
9,800 (a)Snyder Communications, Inc. 332,588
-------------------------------------------------------------------------------------------------- ------------
Total 1,755,745
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.7%
- --------------------------------------------------------------------------------------------------------------------
1,700 (a)ASM Lithography Holding NV, ADR 106,250
--------------------------------------------------------------------------------------------------
6,200 (a)Advanced Fibre Communications 160,425
--------------------------------------------------------------------------------------------------
3,600 (a)America Online, Inc. 271,800
--------------------------------------------------------------------------------------------------
6,000 (a)Applied Materials, Inc. 198,000
--------------------------------------------------------------------------------------------------
7,000 (a)Cadence Design Systems, Inc. 176,750
--------------------------------------------------------------------------------------------------
4,500 (a)Cisco Systems, Inc. 388,125
--------------------------------------------------------------------------------------------------
5,600 Compaq Computer Corp. 349,650
--------------------------------------------------------------------------------------------------
11,200 (a)Creative Technology Ltd. 298,200
--------------------------------------------------------------------------------------------------
3,800 Dallas Semiconductor Corp. 185,725
--------------------------------------------------------------------------------------------------
2,600 (a)Dell Computer Corp. 218,888
--------------------------------------------------------------------------------------------------
6,400 (a)EMC Corp. Mass 194,000
--------------------------------------------------------------------------------------------------
5,700 (a)HNC Software 179,550
--------------------------------------------------------------------------------------------------
10,700 (a)Hyperion Software Corp. 461,103
--------------------------------------------------------------------------------------------------
3,500 Intel Corp. 271,688
--------------------------------------------------------------------------------------------------
3,700 Lucent Technologies, Inc. 296,463
--------------------------------------------------------------------------------------------------
8,900 (a)Mastech Corp. 260,325
--------------------------------------------------------------------------------------------------
1,200 (a)Metromedia Fibre Network, Inc. 20,250
--------------------------------------------------------------------------------------------------
2,900 (a)Microsoft Corp. 410,350
--------------------------------------------------------------------------------------------------
9,500 (a)Ortel Corp. 169,813
--------------------------------------------------------------------------------------------------
2,700 (a)PRI Automation, Inc. 92,138
--------------------------------------------------------------------------------------------------
2,400 (a)Peoplesoft, Inc. 157,050
--------------------------------------------------------------------------------------------------
5,100 (a)Rambus, Inc. 284,644
--------------------------------------------------------------------------------------------------
7,200 SCI Systems, Inc. 329,850
--------------------------------------------------------------------------------------------------
9,100 (a)Sandisk Corp. 222,950
--------------------------------------------------------------------------------------------------
2,500 (a)Speedfam International, Inc. 64,063
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,300 (a)Tellabs, Inc. $ 275,600
--------------------------------------------------------------------------------------------------
3,800 Texas Instruments, Inc. 187,150
--------------------------------------------------------------------------------------------------
5,500 (a)World Access, Inc. 134,750
-------------------------------------------------------------------------------------------------- ------------
Total 6,365,550
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500 (a)Continental Airlines, Inc., Class B 22,781
--------------------------------------------------------------------------------------------------
9,100 Expeditors International Washington, Inc. 354,331
-------------------------------------------------------------------------------------------------- ------------
Total 377,112
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
8,100 Cincinnati Bell, Inc. 238,950
--------------------------------------------------------------------------------------------------
5,300 Coastal Corp. 310,381
--------------------------------------------------------------------------------------------------
12,300 (a)ICG Communications, Inc. 285,975
--------------------------------------------------------------------------------------------------
13,300 (a)IXC Communications, Inc. 461,344
--------------------------------------------------------------------------------------------------
5,100 Sonat, Inc. 222,169
--------------------------------------------------------------------------------------------------
5,500 (a)Teleport Communications Group, Inc., Class A 269,500
-------------------------------------------------------------------------------------------------- ------------
Total 1,788,319
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE COMPANY GROWTH STOCKS 34,870,509
-------------------------------------------------------------------------------------------------- ------------
SMALL COMPANY STOCKS -- 11.3%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
9,500 BMC Industries, Inc. 176,344
--------------------------------------------------------------------------------------------------
6,400 Cambrex Corp. 290,400
--------------------------------------------------------------------------------------------------
8,500 (a)Carbide/Graphite Group, Inc. 328,313
--------------------------------------------------------------------------------------------------
13,800 (a)Chirex, Inc. 336,375
--------------------------------------------------------------------------------------------------
7,400 Furon Co. 292,300
--------------------------------------------------------------------------------------------------
5,300 Lone Star Industries, Inc. 276,263
--------------------------------------------------------------------------------------------------
7,100 (a)Lone Star Technologies, Inc. 205,900
--------------------------------------------------------------------------------------------------
18,700 Spartech Corp. 308,550
--------------------------------------------------------------------------------------------------
5,000 Valspar Corp. 151,875
-------------------------------------------------------------------------------------------------- ------------
Total 2,366,320
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
11,700 (a)Action Performance Companies, Inc. 339,300
--------------------------------------------------------------------------------------------------
8,000 (a)American Homestar Corporation 112,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
14,800 Brilliance China Automotive Holdings Ltd. $ 139,675
--------------------------------------------------------------------------------------------------
4,800 Carlisle Cos., Inc. 204,000
--------------------------------------------------------------------------------------------------
1,800 (a)Dura Automotive Systems, Inc. 47,475
--------------------------------------------------------------------------------------------------
6,700 (a)Equity Marketing, Inc. 197,650
--------------------------------------------------------------------------------------------------
2,000 (a)Gentex Corp. 49,500
--------------------------------------------------------------------------------------------------
17,700 (a)Helen of Troy Ltd. 252,225
--------------------------------------------------------------------------------------------------
3,900 Oakwood Homes Corp. 117,000
--------------------------------------------------------------------------------------------------
7,500 (a)Stanley Furniture Co. Inc. 206,250
--------------------------------------------------------------------------------------------------
3,500 Wynns International, Inc. 113,531
-------------------------------------------------------------------------------------------------- ------------
Total 1,778,606
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
4,700 (a)Blyth Industries, Inc. 120,731
--------------------------------------------------------------------------------------------------
7,900 (a)North Face, Inc. 171,825
--------------------------------------------------------------------------------------------------
8,000 (a)Rayovac Corp. 134,000
--------------------------------------------------------------------------------------------------
5,100 (a)Tommy Hilfiger Corp. 200,175
-------------------------------------------------------------------------------------------------- ------------
Total 626,731
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
2,400 Camco International, Inc. 150,600
--------------------------------------------------------------------------------------------------
10,300 (a)Key Energy Group, Inc. 250,419
--------------------------------------------------------------------------------------------------
3,700 (a)Patterson Energy Inc. 135,975
--------------------------------------------------------------------------------------------------
5,000 (a)TransCoastal Marine Services, Inc. 97,500
--------------------------------------------------------------------------------------------------
7,300 (a)Tuboscope Inc. 179,763
--------------------------------------------------------------------------------------------------
11,600 Vintage Petroleum, Inc. 224,750
-------------------------------------------------------------------------------------------------- ------------
Total 1,039,007
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
8,300 (a)Amresco, Inc. 232,400
--------------------------------------------------------------------------------------------------
5,100 CMAC Investment Corp. 264,881
--------------------------------------------------------------------------------------------------
10,200 City National Corp. 331,500
--------------------------------------------------------------------------------------------------
5,400 (a)Delphi Financial Group, Inc., Class A 216,675
--------------------------------------------------------------------------------------------------
11,900 (a)Delta Financial Corp. 197,094
--------------------------------------------------------------------------------------------------
3,600 Executive Risk, Inc. 234,000
--------------------------------------------------------------------------------------------------
6,100 (a)FIRSTPLUS Financial Group, Inc. 232,563
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
8,500 (a)FirstFed Financial Corp. $ 310,250
--------------------------------------------------------------------------------------------------
7,100 Frontier Insurance Group, Inc. 170,844
--------------------------------------------------------------------------------------------------
6,000 GBC Bancorp 327,750
--------------------------------------------------------------------------------------------------
8,100 (a)Imperial Bancorp 378,169
--------------------------------------------------------------------------------------------------
10,200 North Fork Bancorp, Inc. 309,825
--------------------------------------------------------------------------------------------------
11,500 (a)Philadelphia Consolidated Holding Corp. 188,313
--------------------------------------------------------------------------------------------------
3,800 Sirrom Capital Corp. 167,200
--------------------------------------------------------------------------------------------------
17,700 Sovereign Bancorp, Inc. 335,194
--------------------------------------------------------------------------------------------------
9,200 Trans Financial, Inc. 316,250
--------------------------------------------------------------------------------------------------
10,000 (a)Triad Guaranty, Inc. 295,000
--------------------------------------------------------------------------------------------------
4,900 Vesta Insurance Group, Inc. 268,888
-------------------------------------------------------------------------------------------------- ------------
Total 4,776,796
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
900 (a)Ascent Pediatrics, Inc. 7,200
--------------------------------------------------------------------------------------------------
10,200 Ballard Medical Products 235,238
--------------------------------------------------------------------------------------------------
7,500 (a)Complete Management, Inc. 124,688
--------------------------------------------------------------------------------------------------
4,200 (a)Curative Technologies, Inc. 119,700
--------------------------------------------------------------------------------------------------
11,900 (a)FPA Medical Management, Inc. 307,169
--------------------------------------------------------------------------------------------------
11,900 (a)Genesis Health Ventures, Inc. 288,575
--------------------------------------------------------------------------------------------------
15,500 (a)Healthdyne Technologies, Inc. 297,406
--------------------------------------------------------------------------------------------------
6,500 (a)Hologic, Inc. 168,188
--------------------------------------------------------------------------------------------------
4,600 (a)Medicis Pharmaceutical Corp., Class A 196,650
--------------------------------------------------------------------------------------------------
10,100 Phycor, Inc. 248,713
--------------------------------------------------------------------------------------------------
16,100 (a)Prime Medical Services 213,325
--------------------------------------------------------------------------------------------------
5,900 (a)Somnus Medical Technologies, Inc. 67,850
--------------------------------------------------------------------------------------------------
5,100 (a)Universal Health Services, Inc., Class B 222,806
-------------------------------------------------------------------------------------------------- ------------
Total 2,497,508
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
11,375 (a)AFC Cable Systems, Inc. 304,281
--------------------------------------------------------------------------------------------------
12,000 (a)Ballantyne of Omaha, Inc. 220,500
--------------------------------------------------------------------------------------------------
8,100 (a)Cable Design Technologies, Class A 328,050
--------------------------------------------------------------------------------------------------
9,300 (a)Chicago Miniature Lamp, Inc. 315,038
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
4,800 (a)EVI, Inc. $ 246,900
--------------------------------------------------------------------------------------------------
9,000 (a)Royal Group Technologies Ltd. 216,563
--------------------------------------------------------------------------------------------------
11,900 (a)US Office Products Co. 236,513
-------------------------------------------------------------------------------------------------- ------------
Total 1,867,845
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
4,800 (a)CDW Computer Centers, Inc. 283,200
--------------------------------------------------------------------------------------------------
14,000 Claire's Stores, Inc. 316,750
--------------------------------------------------------------------------------------------------
4,800 (a)Express Scripts, Inc., Class A 283,200
--------------------------------------------------------------------------------------------------
8,100 (a)Funco, Inc. 149,850
--------------------------------------------------------------------------------------------------
10,800 (a)Microage, Inc. 217,350
--------------------------------------------------------------------------------------------------
11,700 (a)O'Reilly Automotive, Inc. 276,413
--------------------------------------------------------------------------------------------------
15,300 (a)Paul Harris Stores, Inc. 323,213
--------------------------------------------------------------------------------------------------
11,000 (a)Pomeroy Computer Resources 275,000
--------------------------------------------------------------------------------------------------
6,400 (a)Proffitts, Inc. 195,600
--------------------------------------------------------------------------------------------------
12,200 (a)Renters Choice, Inc. 274,500
--------------------------------------------------------------------------------------------------
10,700 (a)Zale Corp. 238,075
-------------------------------------------------------------------------------------------------- ------------
Total 2,833,151
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
4,300 (a)ASE Test Limited 240,800
--------------------------------------------------------------------------------------------------
7,000 (a)Allied Waste Industries, Inc. 153,125
--------------------------------------------------------------------------------------------------
12,800 (a)American Business Information, Class A 150,400
--------------------------------------------------------------------------------------------------
12,100 (a)American Business Information, Class B 133,100
--------------------------------------------------------------------------------------------------
10,950 (a)BARRA, Inc. 305,231
--------------------------------------------------------------------------------------------------
5,300 (a)Caribiner International, Inc. 224,919
--------------------------------------------------------------------------------------------------
1,400 (a)Daisytek International Corp. 54,950
--------------------------------------------------------------------------------------------------
6,800 (a)FactSet Research Systems 171,700
--------------------------------------------------------------------------------------------------
15,200 (a)Newpark Resources, Inc. 303,050
--------------------------------------------------------------------------------------------------
8,000 (a)Personnel Group of America, Inc. 292,500
--------------------------------------------------------------------------------------------------
12,000 (a)Prime Hospitality Corp. 229,500
--------------------------------------------------------------------------------------------------
15,700 (a)ProBusiness Services, Inc. 331,663
--------------------------------------------------------------------------------------------------
23,300 (a)Seattle Filmworks, Inc. 230,088
--------------------------------------------------------------------------------------------------
10,100 (a)Snyder Communications, Inc. 342,769
-------------------------------------------------------------------------------------------------- ------------
Total 3,163,795
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
8,400 ATMI, Inc. $ 269,850
--------------------------------------------------------------------------------------------------
15,200 (a)Alphanet Solutions, Inc. 195,700
--------------------------------------------------------------------------------------------------
10,700 (a)Apex mPC Solutions, Inc. 235,400
--------------------------------------------------------------------------------------------------
7,100 (a)Applied Science & Technology, Inc. 149,100
--------------------------------------------------------------------------------------------------
12,900 (a)Applied Voice Technology, Inc. 361,200
--------------------------------------------------------------------------------------------------
10,200 (a)Benchmark Electronics, Inc. 286,875
--------------------------------------------------------------------------------------------------
9,400 (a)Benchmarq Microelectronics, Inc. 171,550
--------------------------------------------------------------------------------------------------
11,100 (a)Cybex Computer Products Corp. 288,600
--------------------------------------------------------------------------------------------------
10,800 (a)Cymer, Inc. 207,225
--------------------------------------------------------------------------------------------------
14,800 (a)DSP Group, Inc. 484,700
--------------------------------------------------------------------------------------------------
6,900 (a)Ducommun, Inc. 223,819
--------------------------------------------------------------------------------------------------
8,000 (a)Eltron International, Inc. 250,000
--------------------------------------------------------------------------------------------------
5,800 (a)HADCO Corp. 359,600
--------------------------------------------------------------------------------------------------
9,900 (a)II-VI, Inc. 238,838
--------------------------------------------------------------------------------------------------
9,800 (a)MRV Communications, Inc. 276,850
--------------------------------------------------------------------------------------------------
7,800 (a)Mastech Corp. 228,150
--------------------------------------------------------------------------------------------------
7,000 (a)Qlogic Corp. 231,875
--------------------------------------------------------------------------------------------------
7,000 (a)Three-Five Systems, Inc. 139,563
--------------------------------------------------------------------------------------------------
6,000 (a)Tollgrade Communications, Inc. 141,750
-------------------------------------------------------------------------------------------------- ------------
Total 4,740,645
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
3,600 Airlines Express International Corp. 103,275
--------------------------------------------------------------------------------------------------
8,850 Comair Holdings, Inc. 195,806
--------------------------------------------------------------------------------------------------
2,200 Expeditors International Washington, Inc. 85,663
-------------------------------------------------------------------------------------------------- ------------
Total 384,744
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
4,200 Cincinnati Bell, Inc. 123,900
--------------------------------------------------------------------------------------------------
6,700 IXC Communications, Inc. 232,406
--------------------------------------------------------------------------------------------------
3,400 MCN Corp. 129,838
--------------------------------------------------------------------------------------------------
3,600 Sonat, Inc. 156,825
-------------------------------------------------------------------------------------------------- ------------
Total 642,969
-------------------------------------------------------------------------------------------------- ------------
TOTAL SMALL COMPANY 26,718,117
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- 11.1%
- --------------------------------------------------------------------------------------------------------------------
ARGENTINA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
9,700 (a)Banco Rio de la Plata S.A., ADR $ 121,856
--------------------------------------------------------------------------------------------------
8,070 Compania Naviera Perez Companc S.A., Class B 57,641
--------------------------------------------------------------------------------------------------
2,200 Telecom Argentina S.A., ADR 67,513
--------------------------------------------------------------------------------------------------
1,800 Telefonica De Argentina ADR 59,513
-------------------------------------------------------------------------------------------------- ------------
Total 306,523
-------------------------------------------------------------------------------------------------- ------------
AUSTRALIA -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
18,000 Australia & New Zealand Banking Group, Melbourne 123,405
--------------------------------------------------------------------------------------------------
61,700 Austrim Ltd 137,350
--------------------------------------------------------------------------------------------------
40,000 Coles Myer Limited 196,661
--------------------------------------------------------------------------------------------------
792,000 (a)Cue Energy Resources NL 73,010
--------------------------------------------------------------------------------------------------
31,000 (a)News Corp., Ltd. 165,537
--------------------------------------------------------------------------------------------------
50,000 Oil Search Ltd. 98,672
--------------------------------------------------------------------------------------------------
32,000 Woodside Petroleum Ltd. 229,416
-------------------------------------------------------------------------------------------------- ------------
Total 1,024,051
-------------------------------------------------------------------------------------------------- ------------
AUSTRIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
2,100 (a)Bank Austria AG, Pfd. 85,797
-------------------------------------------------------------------------------------------------- ------------
BELGIUM -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
45 UCB (groupe) 148,662
-------------------------------------------------------------------------------------------------- ------------
BRAZIL -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
324,000 Centrais Eletricas Brasileiras S.A., Preference, Series B 157,721
--------------------------------------------------------------------------------------------------
1,523,000 Companhia Energetica de Minas Gerais, Preference 73,451
--------------------------------------------------------------------------------------------------
750,000 Petroleo Brasileiro S.A., Preference 164,293
--------------------------------------------------------------------------------------------------
1,766,000 Telecomunicacoes Brasileiras S.A. 163,975
--------------------------------------------------------------------------------------------------
17,710 Telecomunicacoes de Sao Paulo S.A. 335
--------------------------------------------------------------------------------------------------
530,137 Telecomunicacoes de Sao Paulo S.A., Preference 139,552
-------------------------------------------------------------------------------------------------- ------------
Total 699,327
-------------------------------------------------------------------------------------------------- ------------
CHILE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
600 Banco de A. Edwards, ADR 10,500
--------------------------------------------------------------------------------------------------
750 (b)Chilectra S.A., ADR 18,720
--------------------------------------------------------------------------------------------------
850 Compania Telecomunicacion Chile, ADR 23,003
-------------------------------------------------------------------------------------------------- ------------
Total 52,223
-------------------------------------------------------------------------------------------------- ------------
CHINA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
42,000 (a)China Telecommunications 70,088
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
COLOMBIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,400 Banco Ganadero S.A., ADR $ 53,375
--------------------------------------------------------------------------------------------------
1,500 Banco Industrial Colombiano, ADR 21,750
-------------------------------------------------------------------------------------------------- ------------
Total 75,125
-------------------------------------------------------------------------------------------------- ------------
DENMARK -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
2,700 BG Bank AS 175,377
--------------------------------------------------------------------------------------------------
1,250 (a)Bang & Olufsen Holding B 73,558
--------------------------------------------------------------------------------------------------
1,450 Novo-Nordisk, Class B 177,567
--------------------------------------------------------------------------------------------------
2,900 (a)Sydbank AS 155,533
--------------------------------------------------------------------------------------------------
2,100 Unidanmark A 148,293
-------------------------------------------------------------------------------------------------- ------------
Total 730,328
-------------------------------------------------------------------------------------------------- ------------
FINLAND -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
8,150 Enso Oy, Class R 71,543
--------------------------------------------------------------------------------------------------
4,000 Partek Corp, 74,203
--------------------------------------------------------------------------------------------------
7,000 Rauma 120,795
-------------------------------------------------------------------------------------------------- ------------
Total 266,541
-------------------------------------------------------------------------------------------------- ------------
FRANCE -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
2,100 AXA 152,396
--------------------------------------------------------------------------------------------------
1,000 Accor S.A. 189,047
--------------------------------------------------------------------------------------------------
1,200 Bertrand Faure 81,717
--------------------------------------------------------------------------------------------------
800 (a)CLF-Dexia France 83,072
--------------------------------------------------------------------------------------------------
400 Canal Plus 69,588
--------------------------------------------------------------------------------------------------
1,800 Compagnie Financiere de Paribas, Class A 130,046
--------------------------------------------------------------------------------------------------
710 Compagnie de Saint Gobain 96,458
--------------------------------------------------------------------------------------------------
1,050 Elf Aquitaine S.A. 121,839
--------------------------------------------------------------------------------------------------
1,039 (a)France Telecommunications 38,158
--------------------------------------------------------------------------------------------------
660 (a)Generale Geophysique 71,553
--------------------------------------------------------------------------------------------------
1,600 Groupe Danon BSN S.A. 255,315
--------------------------------------------------------------------------------------------------
225 L'Oreal 86,138
--------------------------------------------------------------------------------------------------
1,500 Pechiney Ord A 58,899
--------------------------------------------------------------------------------------------------
2,120 (a)SGS-Thomson Microelectronics N.V. 149,502
--------------------------------------------------------------------------------------------------
5,248 Schneider S.A. 280,922
--------------------------------------------------------------------------------------------------
3,400 Scor S.A. 146,233
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FRANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
1,100 Synthelabo $ 139,752
--------------------------------------------------------------------------------------------------
5,200 Thomson-csf 150,451
--------------------------------------------------------------------------------------------------
1,600 Total S.A.-B 168,042
-------------------------------------------------------------------------------------------------- ------------
Total 2,469,128
-------------------------------------------------------------------------------------------------- ------------
GERMANY, FEDERAL REPUBLIC OF -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
5,875 Bayer AG 217,443
--------------------------------------------------------------------------------------------------
210 Bayerische Motoren Werke AG 156,830
--------------------------------------------------------------------------------------------------
10,050 Commerzbank AG, Frankfurt 349,342
--------------------------------------------------------------------------------------------------
2,230 Deutsche Bank, AG 143,018
--------------------------------------------------------------------------------------------------
6,065 Dresdner Bank AG, Frankfurt 235,240
--------------------------------------------------------------------------------------------------
550 Mannesmann AG 256,053
--------------------------------------------------------------------------------------------------
3,000 Siemens AG 176,155
--------------------------------------------------------------------------------------------------
900 (a)Singulus Technologies AG 39,807
--------------------------------------------------------------------------------------------------
13,000 Skw Trostberg 449,305
-------------------------------------------------------------------------------------------------- ------------
Total 2,023,193
-------------------------------------------------------------------------------------------------- ------------
HONG KONG -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
292,000 (a)Angang New Steel Co. Ltd. 46,083
--------------------------------------------------------------------------------------------------
26,000 (a)Cheung Kong 183,305
--------------------------------------------------------------------------------------------------
35,000 China Resources Enterprises Ltd. 75,385
--------------------------------------------------------------------------------------------------
3,751 HSBC Holdings PLC 90,496
--------------------------------------------------------------------------------------------------
17,000 Hutchison Whampoa 113,256
--------------------------------------------------------------------------------------------------
24,000 (a)New World Development Co. Ltd. 88,949
--------------------------------------------------------------------------------------------------
40,000 Peregrine Investments 39,326
-------------------------------------------------------------------------------------------------- ------------
Total 636,800
-------------------------------------------------------------------------------------------------- ------------
INDONESIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
28,000 PT Indosat 63,523
-------------------------------------------------------------------------------------------------- ------------
IRELAND -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
6,000 (a)Elan Corp. PLC, ADR 316,500
-------------------------------------------------------------------------------------------------- ------------
ITALY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
17,150 Eni 100,117
--------------------------------------------------------------------------------------------------
16,000 Istituto Bancario San Paolo di Torino 132,534
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ITALY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
11,000 La Rinascente S.P.A. $ 83,412
--------------------------------------------------------------------------------------------------
25,000 Telecom Italia S.P.A. 155,856
-------------------------------------------------------------------------------------------------- ------------
Total 471,919
-------------------------------------------------------------------------------------------------- ------------
JAPAN -- 2.4%
- --------------------------------------------------------------------------------------------------------------------
13,200 Circle K Japan Co. Ltd. 662,974
--------------------------------------------------------------------------------------------------
30,000 Fujitsu Ltd. 336,141
--------------------------------------------------------------------------------------------------
10,000 Hitachi Maxell 224,094
--------------------------------------------------------------------------------------------------
7,000 Ito-Yokado Co., Ltd. 315,926
--------------------------------------------------------------------------------------------------
2,900 Mabuchi Motor Co. 152,016
--------------------------------------------------------------------------------------------------
125,000 (a)Mazda Motor Corp. 349,657
--------------------------------------------------------------------------------------------------
36,000 Minolta Co. 207,326
--------------------------------------------------------------------------------------------------
40,000 Mitsubishi Estate Co. Ltd. 463,859
--------------------------------------------------------------------------------------------------
4,000 Nintendo Corp. Ltd. 413,712
--------------------------------------------------------------------------------------------------
34 Nippon Telegraph & Telephone Corp. 279,726
--------------------------------------------------------------------------------------------------
17,000 Sankyo Co. Ltd. 542,135
--------------------------------------------------------------------------------------------------
1,400 Shokoh Fund & Co. 398,198
--------------------------------------------------------------------------------------------------
6,000 Sony Corp. 512,439
--------------------------------------------------------------------------------------------------
17,000 Sumitomo Bank Ltd., Osaka 215,788
--------------------------------------------------------------------------------------------------
60,000 Sumitomo Realty & Dev 401,959
--------------------------------------------------------------------------------------------------
48,000 Tokyu Land Corp. 95,530
-------------------------------------------------------------------------------------------------- ------------
Total 5,571,480
-------------------------------------------------------------------------------------------------- ------------
MEXICO -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
3,600 Empresas ICA Sociedad Controladora S.A., ADR 55,800
--------------------------------------------------------------------------------------------------
9,000 Fomento Economico Mexicano, S.A. de C.V., Class B 74,183
--------------------------------------------------------------------------------------------------
310,000 (a)(b)Grupo Financiero Bancomer, S.A. de C.V., Class B 179,278
--------------------------------------------------------------------------------------------------
3,400 Telefonos de Mexico, Class L, ADR 168,300
--------------------------------------------------------------------------------------------------
3,000 (a)Tubos de Acero de Mexico S.A., ADR 66,375
-------------------------------------------------------------------------------------------------- ------------
Total 543,936
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
7,313 ABN-Amro Holdings N.V. 139,467
--------------------------------------------------------------------------------------------------
900 (a)ASM Lithography Holding N.V., ADR 56,250
--------------------------------------------------------------------------------------------------
960 Akzo Nobel N.V. 168,880
--------------------------------------------------------------------------------------------------
3,228 ING Groep, N.V. 131,245
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,500 Koninklijke PTT Nederland N.V. $ 140,542
--------------------------------------------------------------------------------------------------
1,600 Philips Electronics N.V. 105,711
--------------------------------------------------------------------------------------------------
6,600 VNU - Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 158,084
--------------------------------------------------------------------------------------------------
959 Wolters Kluwer N.V. 126,963
-------------------------------------------------------------------------------------------------- ------------
Total 1,027,142
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
32,000 Air New Zealand Ltd., Class B 65,150
-------------------------------------------------------------------------------------------------- ------------
NORWAY -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
3,700 Saga Petroleum A.S., Class A 66,371
--------------------------------------------------------------------------------------------------
4,500 Schibsted 76,341
--------------------------------------------------------------------------------------------------
2,100 Smedvig ASA, Class B 53,439
-------------------------------------------------------------------------------------------------- ------------
Total 196,151
-------------------------------------------------------------------------------------------------- ------------
PHILIPPINES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50 (a)Filinvest Land, Inc. 2
-------------------------------------------------------------------------------------------------- ------------
SINGAPORE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
3,600 (a)Creative Technology Ltd. 95,850
--------------------------------------------------------------------------------------------------
52,000 Natsteel Broadway Ltd. 76,180
--------------------------------------------------------------------------------------------------
3,000 Singapore Press Holdings Ltd., Foreign Shares 41,022
--------------------------------------------------------------------------------------------------
27,000 Wing Tai Holdings, Ltd. 34,719
-------------------------------------------------------------------------------------------------- ------------
Total 247,771
-------------------------------------------------------------------------------------------------- ------------
SPAIN -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
6,000 (a)Banco Bilbao Vizcaya S.A. 181,276
--------------------------------------------------------------------------------------------------
2,200 Banco Popular Espanol 140,165
--------------------------------------------------------------------------------------------------
7,600 Endesa S.A. 142,968
--------------------------------------------------------------------------------------------------
4,050 Iberdrola S.A. 51,742
--------------------------------------------------------------------------------------------------
3,425 Repsol S.A. 148,154
--------------------------------------------------------------------------------------------------
1,300 Tabacalera 99,390
--------------------------------------------------------------------------------------------------
5,950 Telefonica de Espana 171,585
--------------------------------------------------------------------------------------------------
4,200 Vidrala S.A. 179,706
--------------------------------------------------------------------------------------------------
1,100 Zardoya-Otis S.A. 127,993
-------------------------------------------------------------------------------------------------- ------------
Total 1,242,979
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SWEDEN -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,250 Electrolux B $ 98,426
--------------------------------------------------------------------------------------------------
11,300 Munksjo AB 106,832
--------------------------------------------------------------------------------------------------
27,000 Skand Enskilda BKN, Class A 318,202
--------------------------------------------------------------------------------------------------
3,770 Skandia Forsakrings AB 198,717
--------------------------------------------------------------------------------------------------
3,800 Trygg-hansa B 118,358
--------------------------------------------------------------------------------------------------
5,600 Volvo AB, Class B 149,401
-------------------------------------------------------------------------------------------------- ------------
Total 989,936
-------------------------------------------------------------------------------------------------- ------------
SWITZERLAND -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
100 (a)ABB AG 133,048
--------------------------------------------------------------------------------------------------
50 (a)Baloise Holdings-REG Registered 89,073
--------------------------------------------------------------------------------------------------
1,500 Credit Suisse Group-Registered 219,351
--------------------------------------------------------------------------------------------------
260 Holderbank Financiere Glaris AG, Class B 226,666
--------------------------------------------------------------------------------------------------
170 Nestle S.A. 250,147
--------------------------------------------------------------------------------------------------
306 Novartis AG-Registered 488,896
--------------------------------------------------------------------------------------------------
32 (a)Roche Holding AG 286,380
--------------------------------------------------------------------------------------------------
205 UBS-Union Bank of Switzerland 260,959
--------------------------------------------------------------------------------------------------
327 Zurich Versicherungsgesellschaft 137,607
-------------------------------------------------------------------------------------------------- ------------
Total 2,092,127
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
18,100 BBA Group PLC 115,093
--------------------------------------------------------------------------------------------------
7,369 Barclays PLC 177,722
--------------------------------------------------------------------------------------------------
10,000 Bass PLC 143,557
--------------------------------------------------------------------------------------------------
8,587 Boc Group PLC 137,049
--------------------------------------------------------------------------------------------------
6,200 Boots Co. PLC 91,099
--------------------------------------------------------------------------------------------------
7,484 British Aerospace PLC 204,258
--------------------------------------------------------------------------------------------------
14,756 British Petroleum Co. PLC 201,864
--------------------------------------------------------------------------------------------------
10,000 British Sky Broadcasting Group PLC 74,312
--------------------------------------------------------------------------------------------------
20,065 Cadbury Schweppes PLC 208,410
--------------------------------------------------------------------------------------------------
18,100 Compass Group 216,124
--------------------------------------------------------------------------------------------------
20,710 EMI Group PLC 155,998
--------------------------------------------------------------------------------------------------
14,300 Energy Group PLC 153,481
--------------------------------------------------------------------------------------------------
9,355 GKN PLC 203,342
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
SHARES, UNITS VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
15,000 (a)Gallaher Group PLC $ 81,067
--------------------------------------------------------------------------------------------------
17,450 General Electric Co. PLC 113,612
--------------------------------------------------------------------------------------------------
10,886 Glaxo Wellcome PLC 239,010
--------------------------------------------------------------------------------------------------
10,652 Granada Group PLC 152,377
--------------------------------------------------------------------------------------------------
13,004 Grand Metropolitan PLC 118,378
--------------------------------------------------------------------------------------------------
13,500 Marks & Spencer PLC 138,853
--------------------------------------------------------------------------------------------------
10,000 National Westminster Bank, PLC, London 151,663
--------------------------------------------------------------------------------------------------
12,000 Next 149,974
--------------------------------------------------------------------------------------------------
9,980 Pearson 139,056
--------------------------------------------------------------------------------------------------
11,300 PowerGen PLC 145,902
--------------------------------------------------------------------------------------------------
7,282 Reckitt & Colman PLC 106,137
--------------------------------------------------------------------------------------------------
16,400 Reed International PLC 174,636
--------------------------------------------------------------------------------------------------
4,284 Rio Tinto plc 51,732
--------------------------------------------------------------------------------------------------
8,000 Royal & Sun Alliance Insurance Group PLC 72,015
--------------------------------------------------------------------------------------------------
20,000 Shell Transport & Trading Co. 136,125
--------------------------------------------------------------------------------------------------
9,568 Siebe PLC 174,037
--------------------------------------------------------------------------------------------------
49,000 Smith & Nephew PLC 141,513
--------------------------------------------------------------------------------------------------
70 Smithkline Beecham PLC 650
--------------------------------------------------------------------------------------------------
19,514 Tomkins PLC 99,201
--------------------------------------------------------------------------------------------------
30,000 Vodafone Group PLC 200,641
--------------------------------------------------------------------------------------------------
4,350 Zeneca Group 138,853
-------------------------------------------------------------------------------------------------- ------------
Total 4,807,741
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN STOCKS 26,224,143
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $107,382,653) 124,495,751
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 46.5%
- --------------------------------------------------------------------------------------------------------------------
TREASURY -- 25.0%
- --------------------------------------------------------------------------------------------------------------------
(C)REPURCHASE AGREEMENT AND GOVERNMENT SECURITIES -- 6.8%
- --------------------------------------------------------------------------------------------------------------------
$16,005,000 BT Securities Corporation, 5.73%, dated 11/28/1997, due 12/1/1997 (at amortized cost) 16,005,000
-------------------------------------------------------------------------------------------------- ------------
UNITED STATES TREASURY SECURITIES -- 18.2%
- --------------------------------------------------------------------------------------------------------------------
1,800,000 United States Treasury Bill, 12/18/1997 1,797,477
--------------------------------------------------------------------------------------------------
7,000,000 United States Treasury Bond, 8.125%, 5/15/2021 8,710,870
--------------------------------------------------------------------------------------------------
8,473,000 United States Treasury Note, 5.75%, 8/15/2003 8,427,415
--------------------------------------------------------------------------------------------------
5,860,000 United States Treasury Note, 6.125%, 8/15/2007 5,976,204
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TREASURY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$5,500,000 United States Treasury Note, 6.25%, 2/15/2003 $ 5,596,195
--------------------------------------------------------------------------------------------------
12,000,000 United States Treasury Note, 6.50%, 10/15/2006 12,481,680
-------------------------------------------------------------------------------------------------- ------------
Total 42,989,841
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 58,994,841
-------------------------------------------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES -- 9.1%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 9.1%
- --------------------------------------------------------------------------------------------------------------------
614,053 Federal Home Loan Mortgage Corp., 9.50%, 6/1/2021 667,205
--------------------------------------------------------------------------------------------------
311,817 Federal Home Loan Mortgage Corp., 8.00%, 5/1/2006 320,978
--------------------------------------------------------------------------------------------------
488,707 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2027 490,784
--------------------------------------------------------------------------------------------------
310,632 Federal Home Loan Mortgage Corp., 7.50%, 10/1/2025 318,205
--------------------------------------------------------------------------------------------------
946,614 Federal Home Loan Mortgage Corp., 7.00%, 2/1/2026 952,237
--------------------------------------------------------------------------------------------------
915,259 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 935,568
--------------------------------------------------------------------------------------------------
435,639 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 445,306
--------------------------------------------------------------------------------------------------
565,493 Federal Home Loan Mortgage Corp., 8.00%, 10/1/2010 585,285
--------------------------------------------------------------------------------------------------
791,224 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2011 800,371
--------------------------------------------------------------------------------------------------
143,535 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 145,418
--------------------------------------------------------------------------------------------------
429,105 Federal Home Loan Mortgage Corp., 6.50%, 10/1/2010 428,166
--------------------------------------------------------------------------------------------------
612,067 Federal Home Loan Mortgage Corp., 6.50%, 5/1/2011 610,537
--------------------------------------------------------------------------------------------------
966,076 Federal Home Loan Mortgage Corp., 6.00%, 7/1/2011 948,040
--------------------------------------------------------------------------------------------------
300,547 Federal National Mortgage Association, 7.00%, 5/1/2001 303,553
--------------------------------------------------------------------------------------------------
475,487 Federal National Mortgage Association, 8.50%, 3/1/2025 498,072
--------------------------------------------------------------------------------------------------
423,302 Federal National Mortgage Association, 6.00%, 2/1/2003 419,466
--------------------------------------------------------------------------------------------------
1,303,871 Federal National Mortgage Association, 7.00%, 2/1/2024 1,315,280
--------------------------------------------------------------------------------------------------
930,643 Federal National Mortgage Association, 7.50%, 11/1/2010 952,746
--------------------------------------------------------------------------------------------------
122,572 Federal National Mortgage Association, 8.50%, 2/1/2025 128,394
--------------------------------------------------------------------------------------------------
761,002 Federal National Mortgage Association, 7.50%, 7/1/2025 778,840
--------------------------------------------------------------------------------------------------
436,226 Federal National Mortgage Association, 7.00%, 8/1/2025 438,817
--------------------------------------------------------------------------------------------------
469,958 Federal National Mortgage Association, 6.50%, 10/1/2025 462,810
--------------------------------------------------------------------------------------------------
1,113,391 Federal National Mortgage Association, 6.50%, 10/1/2025 1,094,141
--------------------------------------------------------------------------------------------------
914,948 Federal National Mortgage Association, 8.00%, 5/1/2027 947,145
--------------------------------------------------------------------------------------------------
990,000 Government National Mortgage Association, 7.00%, 11/20/2027 987,218
--------------------------------------------------------------------------------------------------
897,956 Government National Mortgage Association, 8.50%, 2/15/2022 948,467
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$570,480 Government National Mortgage Association, 7.00%, 1/15/2024 $ 573,869
--------------------------------------------------------------------------------------------------
471,238 Government National Mortgage Association, 6.50%, 1/15/2024 466,379
--------------------------------------------------------------------------------------------------
224,441 Government National Mortgage Association, 7.00%, 5/15/2024 225,774
--------------------------------------------------------------------------------------------------
242,605 Government National Mortgage Association, 8.00%, 11/15/2024 252,006
--------------------------------------------------------------------------------------------------
479,331 Government National Mortgage Association, 7.50%, 3/15/2026 489,368
--------------------------------------------------------------------------------------------------
454,085 Government National Mortgage Association, 8.00%, 5/15/2025 471,113
--------------------------------------------------------------------------------------------------
419,125 Government National Mortgage Association, 8.00%, 7/15/2025 434,582
--------------------------------------------------------------------------------------------------
883,459 Government National Mortgage Association, 7.50%, 2/15/2026 905,272
--------------------------------------------------------------------------------------------------
639,460 Government National Mortgage Association, 9.00%, 11/15/2017 693,814
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTAGE-BACKED SECURITIES 21,435,226
-------------------------------------------------------------------------------------------------- ------------
HIGH YIELD BONDS -- 3.0%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 50,250
-------------------------------------------------------------------------------------------------- ------------
AUTOMOBILE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 83,625
--------------------------------------------------------------------------------------------------
100,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 113,500
-------------------------------------------------------------------------------------------------- ------------
Total 197,125
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
175,000 First Nationwide Escrow, Sr. Sub. Note, 10.625%, 10/1/2003 195,563
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 701 PIK Pfd. Shares , 11.375% 82,718
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 600 PIK Pfd. Shares, Series A, 12.25% 84,300
--------------------------------------------------------------------------------------------------
100,000 (b)Fox/Liberty Networks, LLC, Sr. Disc. Note, 9.75%, 8/15/2007 62,750
--------------------------------------------------------------------------------------------------
(b)Sinclair Broadcast Group, Inc., 500 Pfd. Shares, $11.625 55,250
--------------------------------------------------------------------------------------------------
100,000 Sinclair Broadcast Group, Inc. Sr. Sub. Note, 10.00%, 9/30/2005 106,000
--------------------------------------------------------------------------------------------------
100,000 Sullivan Broadcasting, Sr. Sub. Note, 10.25%, 12/15/2005 107,000
-------------------------------------------------------------------------------------------------- ------------
Total 498,018
-------------------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
98,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 109,760
--------------------------------------------------------------------------------------------------
50,000 Outsourcing Solutions Inc., Sr. Sub. Note, 11.00%, 11/1/2006 56,000
--------------------------------------------------------------------------------------------------
67,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 76,548
-------------------------------------------------------------------------------------------------- ------------
Total 242,308
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
$100,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 $ 108,750
--------------------------------------------------------------------------------------------------
50,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 11/1/2005 52,875
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
100,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 107,750
--------------------------------------------------------------------------------------------------
150,000 (b)Diamond Cable Comm. PLC, Sr. Disc. Note, 0/11.75%, 2/15/2007 99,750
--------------------------------------------------------------------------------------------------
100,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 83,500
--------------------------------------------------------------------------------------------------
25,000 International Cabletel, Sr. Defd. Cpn. Note, 0/11.50%, 2/1/2006 19,188
--------------------------------------------------------------------------------------------------
100,000 International Cabletel, Sr. Disc. Note, 0/12.75%, 4/15/2005 82,500
--------------------------------------------------------------------------------------------------
Pegasus Communications Corp., 50 PIK Pfd. Shares, Series A, 12.75% 55,250
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Inc., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 54,750
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 54,750
--------------------------------------------------------------------------------------------------
200,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 153,500
--------------------------------------------------------------------------------------------------
100,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 65,500
-------------------------------------------------------------------------------------------------- ------------
Total 993,813
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 64,500
--------------------------------------------------------------------------------------------------
(a)Sterling Chemicals Holdings, Inc., 75 Warrants, 8/15/2008 2,850
--------------------------------------------------------------------------------------------------
50,000 Uniroyal Technology Corporation, Sr. Secd. Note, 11.75%, 6/1/2003 51,750
-------------------------------------------------------------------------------------------------- ------------
Total 119,100
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Floorcoverings., Sr. Sub. Note, 10.00%, 1/15/2007 51,875
--------------------------------------------------------------------------------------------------
50,000 (b)Glenoit Corporation, Sr. Sub. Note, 11.00%, 4/15/2007 54,250
-------------------------------------------------------------------------------------------------- ------------
Total 106,125
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
50,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 52,750
--------------------------------------------------------------------------------------------------
100,000 Hosiery Corp. Of America, Sr. Sub. Note, 13.75%, 8/1/2002 108,500
--------------------------------------------------------------------------------------------------
(a)Hosiery Corp. of America, 50 Common Shares 350
--------------------------------------------------------------------------------------------------
100,000 ICON Fitness Corp., Sr. Disc. Note, 0/14.00%, 11/15/2006 58,500
--------------------------------------------------------------------------------------------------
100,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 100,750
--------------------------------------------------------------------------------------------------
50,000 Renaissance Cosmetics, Inc., Sr. Note, 11.75%, 2/15/2004 47,250
--------------------------------------------------------------------------------------------------
75,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 78,750
-------------------------------------------------------------------------------------------------- ------------
Total 446,850
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONTAINER & GLASS PRODUCTS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
$50,000 Plastic Containers, Inc., Sr. Secd. Note, 10.00%, 12/15/2006 $ 53,250
-------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
100,000 Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 109,500
--------------------------------------------------------------------------------------------------
(a)ICF Kaiser International, 120 Warrants, 12/31/1998 45
-------------------------------------------------------------------------------------------------- ------------
Total 109,545
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)Fairchild Semiconductor, Sr. Sub., 10.125%, 3/15/2007 53,000
-------------------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 111,500
--------------------------------------------------------------------------------------------------
75,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 84,563
-------------------------------------------------------------------------------------------------- ------------
Total 196,063
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007 52,750
--------------------------------------------------------------------------------------------------
75,000 International Home Foods, Sr. Sub. Note, 10.375%, 11/1/2006 82,125
--------------------------------------------------------------------------------------------------
100,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 111,500
-------------------------------------------------------------------------------------------------- ------------
Total 246,375
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 80,250
--------------------------------------------------------------------------------------------------
75,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 82,125
-------------------------------------------------------------------------------------------------- ------------
Total 162,375
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
125,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 139,688
--------------------------------------------------------------------------------------------------
100,000 Tenet Healthcare, Sr. Sub. Note, 10.125%, 3/1/2005 108,625
-------------------------------------------------------------------------------------------------- ------------
Total 248,313
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 112,500
--------------------------------------------------------------------------------------------------
50,000 Continental Global, Inc., Sr. Note, 11.00%, 4/1/2007 53,750
--------------------------------------------------------------------------------------------------
75,000 Euramax International Plc, Sr. Sub. Note, 11.25%, 10/1/2006 81,563
--------------------------------------------------------------------------------------------------
50,000 International Knife & Saw, Sr. Sub. Note, 11.375%, 11/15/2006 53,750
-------------------------------------------------------------------------------------------------- ------------
Total 301,563
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
100,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 78,000
--------------------------------------------------------------------------------------------------
50,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 54,250
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$100,000 Premier Parks, Sr. Note, 12.00%, 8/15/2003 $ 111,500
--------------------------------------------------------------------------------------------------
50,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 53,000
--------------------------------------------------------------------------------------------------
100,000 Viacom Inc, Sub. Deb., 8.00%, 7/7/2006 100,000
-------------------------------------------------------------------------------------------------- ------------
Total 396,750
-------------------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 106,500
--------------------------------------------------------------------------------------------------
50,000 Clark Material Handling , Sr. Note, 10.75%, 11/15/2006 53,000
--------------------------------------------------------------------------------------------------
75,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 85,125
-------------------------------------------------------------------------------------------------- ------------
Total 244,625
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 Forcenergy Inc., Sr. Sub. Note, 9.50%, 11/1/2006 79,313
--------------------------------------------------------------------------------------------------
100,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 108,500
-------------------------------------------------------------------------------------------------- ------------
Total 187,813
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 112,500
--------------------------------------------------------------------------------------------------
50,000 Hollinger International, Sr. Sub. Note, 9.25%, 3/15/2007 52,000
-------------------------------------------------------------------------------------------------- ------------
Total 164,500
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
(a)(b)Bar Technologies, Inc., 50 Warrants, 4/01/2001 3,000
--------------------------------------------------------------------------------------------------
100,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 110,500
-------------------------------------------------------------------------------------------------- ------------
Total 113,500
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 52,750
--------------------------------------------------------------------------------------------------
75,000 Statia Terminals, 1st Mtg. Note, 11.75%, 11/15/2003 79,500
--------------------------------------------------------------------------------------------------
100,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 109,375
--------------------------------------------------------------------------------------------------
100,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 99,250
-------------------------------------------------------------------------------------------------- ------------
Total 340,875
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
100,000 Brooks Fiber Properties, Inc. Sr. Disc. Note, 0/10.875%, 3/1/2006 82,750
--------------------------------------------------------------------------------------------------
150,000 Cellular Communication, Sr. Disc. Note, 13.25% accrual, 8/15/2000 117,000
--------------------------------------------------------------------------------------------------
(a)Cellular Communications International, Inc., 150 Warrants, 8/15/2003 3,000
--------------------------------------------------------------------------------------------------
50,000 (b)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$100,000 Intermedia Communications, Sr. Disc. Note, 0/11.25%, 7/15/2007 $ 69,000
--------------------------------------------------------------------------------------------------
100,000 McLeod, Sr. Disc. Note, 0/11.00%, 3/1/2007 69,500
--------------------------------------------------------------------------------------------------
50,000 (b)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
100,000 Millicom International, Sr. Disc. Note, 0/13.50%, 6/1/2006 73,000
--------------------------------------------------------------------------------------------------
(a)NEXTEL Communications, Inc., Class A, 116 Common Shares 2,929
--------------------------------------------------------------------------------------------------
75,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 65,063
--------------------------------------------------------------------------------------------------
50,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 51,875
--------------------------------------------------------------------------------------------------
59,000 Panamsat Corp., Deb., 12.75%, 4/15/2005 72,570
--------------------------------------------------------------------------------------------------
50,000 (b)Qwest Communications, Sr. Note, 10.875%, 4/1/2007 55,750
--------------------------------------------------------------------------------------------------
50,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 54,250
--------------------------------------------------------------------------------------------------
150,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 119,438
--------------------------------------------------------------------------------------------------
125,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 130,938
-------------------------------------------------------------------------------------------------- ------------
Total 1,078,813
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 108,500
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 1,212 PIK Pfd. Shares, Series A, 11.40% 132,714
-------------------------------------------------------------------------------------------------- ------------
Total 241,214
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 6,987,726
-------------------------------------------------------------------------------------------------- ------------
INVESTMENT GRADE BONDS -- 4.8%
- --------------------------------------------------------------------------------------------------------------------
BANKING -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
500,000 Exp-Imp BK Korea, Note, 6.50%, 5/15/2000 477,421
--------------------------------------------------------------------------------------------------
250,000 National Bank of Canada, Sub. Note, 8.125%, 8/15/2004 270,573
--------------------------------------------------------------------------------------------------
500,000 Santander Finance Issuances, Bank Guarantee, 7.875%, 4/15/2005 532,515
-------------------------------------------------------------------------------------------------- ------------
Total 1,280,509
-------------------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 48,941
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 SCI Television, Sr. Secd. Note, 11.00%, 6/30/2005 520,895
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
460,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 546,779
--------------------------------------------------------------------------------------------------
250,000 TKR Cable Inc., 10.50%, 10/30/2007 278,200
-------------------------------------------------------------------------------------------------- ------------
Total 824,979
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
$500,000 (b)Bayer Corp., Deb., 6.50%, 10/1/2002 $ 504,365
-------------------------------------------------------------------------------------------------- ------------
EDUCATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Boston University, 7.625%, 7/15/2097 539,569
-------------------------------------------------------------------------------------------------- ------------
FINANCIAL INTERMEDIARIES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
450,000 DLJ, Note, 6.875%, 11/1/2005 453,335
--------------------------------------------------------------------------------------------------
450,000 Green Tree Financial Corp, Sr. Sub. Note, 10.25%, 6/1/2002 516,848
--------------------------------------------------------------------------------------------------
300,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.375%, 1/15/2007 308,892
--------------------------------------------------------------------------------------------------
150,000 Salomon, Inc., Note, 7.20%, 2/1/2004 154,011
-------------------------------------------------------------------------------------------------- ------------
Total 1,433,086
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 545,950
-------------------------------------------------------------------------------------------------- ------------
GOVERNMENT AGENCY -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
840,000 TVA 11/15/2029 773,413
-------------------------------------------------------------------------------------------------- ------------
INSURANCE -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
300,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 315,798
--------------------------------------------------------------------------------------------------
225,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 270,176
--------------------------------------------------------------------------------------------------
250,000 Sunamerica Inc, Medium Term Note, 7.34%, 8/30/2005 260,775
--------------------------------------------------------------------------------------------------
450,000 Sunamerica, Inc., Sr. Note, 9.00%, 1/15/1999 464,846
--------------------------------------------------------------------------------------------------
250,000 (b)USF&G Cap, 8.312%, 7/1/2046 267,475
-------------------------------------------------------------------------------------------------- ------------
Total 1,579,070
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Viacom, Inc., Sr. Note, 7.75%, 6/1/2005 505,660
-------------------------------------------------------------------------------------------------- ------------
METALS & MINING -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
275,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 289,944
--------------------------------------------------------------------------------------------------
250,000 Santa Fe Pacific Gold Co, Note, 8.375%, 7/1/2005 273,830
-------------------------------------------------------------------------------------------------- ------------
Total 563,774
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 News Amer Hldgs, Sr. Note, 7.50%, 3/1/2000 255,578
-------------------------------------------------------------------------------------------------- ------------
SERVICES--0.1%
- --------------------------------------------------------------------------------------------------------------------
200,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 207,618
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL
AMOUNT OR
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL INTERMEDIARIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
$250,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2009 $ 262,433
--------------------------------------------------------------------------------------------------
250,000 Republic of South Africa, Global Bond Deb., 9.625%, 12/15/1999 264,375
--------------------------------------------------------------------------------------------------
535,000 Republic of Colombia, Note, 7.25%, 2/15/2003 510,658
-------------------------------------------------------------------------------------------------- ------------
Total 1,037,466
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 576,375
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
100,000 Cajun Electric Power, 9.52%, 3/15/2019 105,828
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENT GRADE BONDS 11,303,076
-------------------------------------------------------------------------------------------------- ------------
FOREIGN BONDS -- 4.6%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
405,000 Federal National Mortgage Association, 6.50%, 7/10/2002 282,258
--------------------------------------------------------------------------------------------------
213,000 Queensland Treas Global, Local Government Guarantee, Notes, Deb., 10.50%, 5/15/2003 174,347
--------------------------------------------------------------------------------------------------
310,000 West Aust T Corp, Local Government Guarantee, 8.00%, 7/15/2003 229,903
-------------------------------------------------------------------------------------------------- ------------
Total 686,508
-------------------------------------------------------------------------------------------------- ------------
BELGIAN FRANC -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
2,570,000 Belgian Government, Bond, 6.50%, 3/31/2005 75,120
-------------------------------------------------------------------------------------------------- ------------
CANADIAN DOLLAR -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
569,000 Canada Government, Deb., 6.50%, 6/1/2004 422,662
--------------------------------------------------------------------------------------------------
400,000 Ontario Hydro, 9.00%, 6/24/2002 322,252
--------------------------------------------------------------------------------------------------
546,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 432,292
-------------------------------------------------------------------------------------------------- ------------
Total 1,177,206
-------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
1,200,000 Denmark, 8.00%, 5/15/2003 200,298
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,352,000 France O.a.t., Bond, 7.25%, 4/25/2006 258,569
--------------------------------------------------------------------------------------------------
319,000 France O.a.t., Bond, 7.50%, 4/25/2005 401,763
-------------------------------------------------------------------------------------------------- ------------
Total 660,332
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DEUTSCHE MARK -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
$727,000 DG-HYPBK 5.75%, 1/22/2007 $ 416,783
--------------------------------------------------------------------------------------------------
42,000,000 KFW International Finance, 6.00%, 11/29/1999 364,137
--------------------------------------------------------------------------------------------------
500,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 303,374
--------------------------------------------------------------------------------------------------
800,000 KFW International Finance, 7.00%, 5/12/2000 143,073
--------------------------------------------------------------------------------------------------
400,000 Tennessee Valley Authority -- Global Bond, 6.375%, 9/18/2006 237,823
--------------------------------------------------------------------------------------------------
1,050,000 Treuhandanstalt, 7.75%, 10/1/2002 663,224
-------------------------------------------------------------------------------------------------- ------------
Total 2,128,414
-------------------------------------------------------------------------------------------------- ------------
GREEK DRACHMA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
181,800,000 Hellenic Republic, FRN, 14.00%, 10/23/2003 624,947
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
265,000,000 BTPS, Bond, 10.50%, 11/1/2000 174,394
--------------------------------------------------------------------------------------------------
425,000,000 BTPS, Deb., 12.00%, 5/18/1999 267,657
--------------------------------------------------------------------------------------------------
1,225,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 860,122
-------------------------------------------------------------------------------------------------- ------------
Total 1,302,173
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
10,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 90,842
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS GUILDER -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
285,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 151,083
--------------------------------------------------------------------------------------------------
400,000 Bank Ned Gemeenten, Bond, 7.75%, 12/20/2004 227,444
--------------------------------------------------------------------------------------------------
220,000 Lkb-global Bd, Bank Guarantee, 6.00%, 1/25/2006 127,808
--------------------------------------------------------------------------------------------------
300,000 Netherlands Government, 6.00%, 1/15/2006 157,148
-------------------------------------------------------------------------------------------------- ------------
Total 663,483
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
205,000 New Zealand Government, 8.00%, 2/15/2001 130,459
--------------------------------------------------------------------------------------------------
270,000 New Zealand Government, Bond, 8.00%, 7/15/1998 167,326
-------------------------------------------------------------------------------------------------- ------------
Total 297,785
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,429,000 NGB, 9.00%, 1/31/99 208,804
--------------------------------------------------------------------------------------------------
1,620,000 Norwegian Government, Bond, 7.00%, 5/31/2001 239,574
--------------------------------------------------------------------------------------------------
1,215,000 Norwegian Government., Foreign Government Guarantee, 5.75%, 11/30/2004 172,061
-------------------------------------------------------------------------------------------------- ------------
Total 620,439
-------------------------------------------------------------------------------------------------- ------------
PORTUGAL -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
58,000,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 367,505
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SPANISH PESETA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
$40,000,000 Spanish Government, 10.00%, 2/28/2005 $ 337,804
--------------------------------------------------------------------------------------------------
30,000,000 Spanish Government, Bond, 8.80%, 4/30/2006 242,267
--------------------------------------------------------------------------------------------------
16,740,000 Spanish Government, Bond, 9.40%, 4/30/1999 119,238
--------------------------------------------------------------------------------------------------
15,030,000 Spanish Government, Deb., 10.10%, 2/28/2001 115,883
-------------------------------------------------------------------------------------------------- ------------
Total 815,192
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
1,000,000 Stadshypotekskas, Foreign Government Guarantee, Series 1551, 7.50%, 3/17/1999 132,257
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
366,000 British Gas PLC, 8.875%, 7/8/2008 686,619
--------------------------------------------------------------------------------------------------
145,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 273,742
--------------------------------------------------------------------------------------------------
180,000 U.K. Treasury, Bond, 7.50%, 12/7/2006 323,477
-------------------------------------------------------------------------------------------------- ------------
Total 1,283,838
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 11,126,339
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $107,515,372) 109,847,208
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $214,898,025) (D) $234,342,959
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
* The Fund purchases index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividends and capital
gain payments to shareholders and corporate actions while maintaining
exposure to the index and minimize trading costs. The underlying face
amount, at value of open index futures contracts is $1,727,400 at November
30, 1997, which represents 0.7% of net assets. Taking into consideration
these open index futures contracts, the Fund's effective total exposure to
stocks is 53.4%, and increasing the total exposure to small company stocks
is 12.0%.
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $1,727,711 which represents 0.7% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $215,116,152.
The net unrealized appreciation of investments on a federal tax basis
amounts to $19,226,807 which is comprised of $23,685,512 appreciation and
$4,456,705 depreciation at November 30, 1997.
Certain securities may be classified in multiple categorizations based on
purpose of individual purchases.
Note: The categories of investments are shown as a percentage of net
assets ($236,264,472) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt FRN -- Floating Rate Note GTD -- Guaranty LLC
- -- Limited Liability Corporation PIK -- Payment in Kind PLC -- Public Limited
Company PP -- Principal Payment SPA -- Standby Purchase Agreement TRANs -- Tax
and Revenue Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------
Total investments in securities, at value (identified cost $214,898,025
and tax cost $215,116,152) $ 234,342,959
- -----------------------------------------------------------------------------------------
Income receivable 1,533,045
- -----------------------------------------------------------------------------------------
Receivable for investments sold 522,985
- -----------------------------------------------------------------------------------------
Receivable for shares sold 234,112
- -----------------------------------------------------------------------------------------
Deferred organizational costs 53,077
- -----------------------------------------------------------------------------------------
Other assets 12,867
- ----------------------------------------------------------------------------------------- ----------------
Total assets 236,699,045
- -----------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------
Payable for investments purchased $ 210,169
- -------------------------------------------------------------------------
Payable for shares redeemed 69,009
- -------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 1,414
- -------------------------------------------------------------------------
Payable to bank 1,619
- -------------------------------------------------------------------------
Payable for taxes withheld 4,790
- -------------------------------------------------------------------------
Payable for daily variation margin 1,000
- -------------------------------------------------------------------------
Accrued expenses 146,572
- ------------------------------------------------------------------------- -------------
Total liabilities 434,573
- ----------------------------------------------------------------------------------------- ----------------
NET ASSETS for 18,057,133 shares outstanding $ 236,264,472
- ----------------------------------------------------------------------------------------- ----------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------
Paid in capital $ 200,110,742
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investments, translation of assets and
liabilities in foreign currency, and futures contracts 19,449,151
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investments, foreign currency transactions, and futures
contracts 16,371,228
- -----------------------------------------------------------------------------------------
Undistributed net investment income 333,351
- ----------------------------------------------------------------------------------------- ----------------
Total Net Assets $ 236,264,472
- ----------------------------------------------------------------------------------------- ----------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -----------------------------------------------------------------------------------------
$163,518,641 [DIVIDED BY] 12,486,120 shares outstanding $13.10
- ----------------------------------------------------------------------------------------- ----------------
SELECT SHARES:
- -----------------------------------------------------------------------------------------
$72,745,831 [DIVIDED BY] 5,571,013 shares outstanding $13.06
- ----------------------------------------------------------------------------------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MANAGED GROWTH FUND
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $68,871) $ 1,678,984
- -------------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $4,389) (net of foreign taxes withheld of $8,988) 7,420,819
- ------------------------------------------------------------------------------------------- ------------
Total income 9,099,803
- -------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------
Investment advisory fee $ 1,653,493
- ---------------------------------------------------------------------------
Administrative personnel and services fee 166,775
- ---------------------------------------------------------------------------
Custodian fees 104,570
- ---------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 182,213
- ---------------------------------------------------------------------------
Directors'/Trustees' fees 6,529
- ---------------------------------------------------------------------------
Auditing fees 16,794
- ---------------------------------------------------------------------------
Legal fees 3,602
- ---------------------------------------------------------------------------
Portfolio accounting fees 89,327
- ---------------------------------------------------------------------------
Distribution services fee -- Select Shares 534,330
- ---------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 373,054
- ---------------------------------------------------------------------------
Shareholder services fee -- Select Shares 178,110
- ---------------------------------------------------------------------------
Share registration costs 42,380
- ---------------------------------------------------------------------------
Printing and postage 51,807
- ---------------------------------------------------------------------------
Insurance premiums 3,351
- ---------------------------------------------------------------------------
Taxes 3,004
- ---------------------------------------------------------------------------
Miscellaneous 19,880
- --------------------------------------------------------------------------- ------------
Total expenses 3,429,219
- ---------------------------------------------------------------------------
Waivers --
- ------------------------------------------------------------
Waiver of investment advisory fee $ (129,366)
- ------------------------------------------------------------
Waiver of distribution services fee -- Select Shares (178,110)
- ------------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (298,444)
- ------------------------------------------------------------ ------------
Total waivers (605,920)
- --------------------------------------------------------------------------- ------------
Net expenses 2,823,299
- ------------------------------------------------------------------------------------------- ------------
Net investment income 6,276,504
- ------------------------------------------------------------------------------------------- ------------
Net realized gain on investments, foreign currency transactions, and futures contracts
(net of foreign taxes withheld of $373) 15,812,213
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments, translation of assets and
liabilities in foreign currency, and futures contracts 5,706,798
- ------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments, foreign currency, and futures contracts 21,519,011
- ------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 27,795,515
- ------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------------------------------
OPERATIONS --
- ----------------------------------------------------------------------------------
Net investment income $ 6,276,504 $ 5,251,886
- ----------------------------------------------------------------------------------
Net realized gain on investments, foreign currency transactions, and futures
contracts ($16,550,986 and $4,840,279, respectively, as computed for federal
tax purposes) 15,812,213 5,108,532
- ----------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments, translation
of assets and liabilities in foreign currency, and futures contracts 5,706,798 7,820,439
- ---------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 27,795,515 18,180,857
- ---------------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS --
- ----------------------------------------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------------------------------------
Institutional Shares (4,729,122) (3,611,245)
- ----------------------------------------------------------------------------------
Select Shares (1,781,932) (1,261,400)
- ----------------------------------------------------------------------------------
Distributions from net realized gains on investments, foreign currency
transactions, and futures contracts
- ----------------------------------------------------------------------------------
Institutional Shares (3,327,990) (1,417,081)
- ----------------------------------------------------------------------------------
Select Shares (1,494,754) (583,800)
- ---------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions to shareholders (11,333,798) (6,873,526)
- ---------------------------------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS --
- ----------------------------------------------------------------------------------
Proceeds from sale of shares 104,253,170 111,287,688
- ----------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 8,122,432 4,340,056
- ----------------------------------------------------------------------------------
Cost of shares redeemed (89,036,194) (26,142,343)
- ---------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share transactions 23,339,408 89,485,401
- ---------------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 39,801,125 100,792,732
- ----------------------------------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------------------------------
Beginning of period 196,463,347 95,670,615
- ---------------------------------------------------------------------------------- ---------------- ----------------
End of period (including undistributed net investment income of $333,351 and
$1,177,636, respectively) $ 236,264,472 $ 196,463,347
- ---------------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED GROWTH FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Growth Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to seek capital appreciation.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
With respect to valuation of foreign securities, trading in foreign countries
may be completed at times which vary from the closing of the New York Stock
Exchange. Therefore, foreign securities are valued at the latest closing price
on the exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
- ----------------------------------
ACCUMULATED
NET REALIZED UNDISTRIBUTED NET
GAIN INVESTMENT INCOME
- ------------ -----------------
$609,735 ($609,735)
Net investment income, net realized gains/losses, and net assets were not
affected by reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. For the period ended November 30, 1997, the Fund had
realized gains of $71,248 on futures contracts. As of November 30, 1997, the
Fund had the following outstanding futures contracts:
EXPIRATION CONTRACTS UNREALIZED
DATE TO RECEIVE POSITION APPRECIATION
- ------------- -------------- -------- ------------
December 1997 8 Russell 2000 Long $8,190
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The fund enters into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
IN
SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS UNREALIZED
CONTRACTS SOLD DATE DELIVER FOR AT VALUE DEPRECIATION
- -------------- ----------------- ------------ -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Belgian Franc December 1, 1997 1,775,310 $49,924 $48,793 $(1,131)
French Franc December 31, 1997 132,647 22,752 22,469 $(283)
-------
Total $(1,414)
-------
</TABLE>
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- ------------------------------------------------ --------------------- ----------------
<S> <C> <C>
Chilectra S.A., ADR 2/28/1996 $ 16,284
Grupo Financiero Bancomer, S.A. de C.V., Class B 11/6/1995 - 1/29/1996 33,772
Fox/Liberty Networks, LLC 8/15/1997 - 9/5/1997 63,768
Sinclair Broadcast Group, Inc. 4/2/1996 99,500
Diamond Cable Comm. PLC 2/21/1997 - 3/12/1997 96,763
Glenoit Corporation 3/26/1997 49,905
Fairchild Semiconductor 3/6/1997 50,000
Bar Technologies, Inc. 8/28/1996 2,794
Hermes Europe Reiltel 8/14/1997 51,094
Metronet Communications 7/18/1997 50,000
Qwest Communications 3/25/1997 50,000
Bayer Corp. 5/21/1996 - 7/1/1995 493,905
USF&G Cap 7/3/1997 250,000
Freeport Terminal (Malta) 5/12/1995 247,740
</TABLE>
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions include "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------
1997 1996
--------------------------- ---------------------------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 5,853,857 $ 72,401,751 6,436,864 $74,361,820
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 420,257 5,082,597 233,538 2,669,402
- ------------------------------------------------
Shares redeemed (4,927,672) (60,980,593) (1,460,401) (16,943,185)
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from
Institutional Share transactions 1,346,442 $ 16,503,755 5,210,001 $ 60,088,037
- ------------------------------------------------ ----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------------
1997 1996
--------------------------- ---------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,599,873 $ 31,851,419 3,200,775 $36,925,868
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 252,195 3,039,835 146,513 1,670,654
- ------------------------------------------------
Shares redeemed (2,215,315) (28,055,601) (792,466) (9,199,158)
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from
Select Share transactions 636,753 $ 6,835,653 2,554,822 $29,397,364
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from
share transactions 1,983,195 $ 23,339,408 7,764,823 $89,485,401
- ------------------------------------------------ ----------- ------------ ----------- ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses of up to
0.75% of Select Shares average net assets, annually, to compensate FSC. The
distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $88,474 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five year period following the Fund's effective
date. For the year ended November 30, 1997, the Fund expensed $22,899 of
organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $291,184,068
- ----------------------------------------------- ------------
SALES $278,559,873
- ----------------------------------------------- ------------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- ------------------------------------------ --------------- ------------------------------------------ ---------------
<S> <C> <C> <C>
Aerospace & Military Technology 0.2 Health Care 5.0
Agency 0.8 Industrial Components 0.1
Appliances & Household Products 0.1 Industrial Products & Equipment 0.1
Automotive 0.4 Insurance 1.0
Banking 2.2 Leisure & Entertainment 0.4
Basic Industry 2.0 Leisure & Tourism 0.2
Beverage & Tobacco 0.2 Machinery & Engineering 0.4
Broadcast Radio & T.V. 0.4 Machinery & Equipment 0.1
Broadcasting & Publishing 0.4 Merchandising 0.3
Building Materials & Components 0.1 Metals & Mining 0.1
Business Equipment & Services 0.1 Metals -- Steel 0.1
Cable Television 0.8 Miscellaneous Materials & Commodities 0.4
Chemicals 0.4 Multi-Industry 0.2
Chemicals & Plastics 0.2 Oil & Gas 0.1
Consumer Durables 1.6 Printing & Publishing 0.2
Consumer Non-Durables 3.0 Producer Manufacaturing 3.1
Consumer Products 0.2 Real Estate 0.6
Data Processing & Reproduction 0.1 Recreation, Other Consumer Goods 0.3
Ecological Services & Equipment 0.1 Retail Trade 3.0
Education 0.2 Services 3.6
Electrical & Electronics 0.5 Soverign 2.5
Electronics Components, Instruments 0.4 Soverign Government 0.9
Energy Equipment & Services 0.1 State & Provincial 0.1
Energy Minerals 3.7 Surface Transportation 0.4
Energy Sources 0.6 Technology 6.3
Finance 6.9 Telecommunications 0.7
Financial Intermediaries 0.9 Telecommunications & Cellular 0.5
Financial Services 0.4 Textiles & Apparel 0.1
Food & Drug Retailers 0.1 Transportation 0.8
Food & Household Products 0.6 Treasury Securities 18.2
Forest Products & Paper 0.4 Utilities 3.5
Government Agency 9.4 Utilities -- Electrical & Gas 0.3
Health & Personal Care 1.2
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Growth Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Growth Fund (an investment portfolio of Managed Series Trust,
a Massachusetts business trust), including the schedule of portfolio
investments, as of November 30, 1997, and the related statement of operations
for the year then ended, and the statement of changes in net assets, and the
financial highlights (see pages 2 and 20 of the prospectus) for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Growth Fund, an investment portfolio of Managed Series Trust,
as of November 30, 1997, the results of its operations for the year then ended,
and the changes in its net assets and its financial highlights for the periods
presented in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] FEDERATED INVESTORS
FEDERATED MANAGED GROWTH FUND
Institutional Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust, an Open-End
Management Investment Company
FEDERATED MANAGED
GROWTH FUND
INSTITUTIONAL SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K503
3122010A-SS (1/98)
[RECYCLE LOGO]
RECYCLED PAPER
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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Select Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 6
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Select Shares 14
Administration of the Fund 15
Brokerage Transactions 15
Net Asset Value 15
Investing in Select Shares 16
Share Purchases 16
Minimum Investement Requried 16
What Shares Cost 16
Systematic Investment Program 16
Confirmations and Account Statements 16
Dividends 17
Capital Gains 17
Redeeming Select Shares 17
Through a Financial Institution 17
Telephone Redemption 17
Written Requests 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
Shareholder Information 18
Voting Rights 18
Tax Information 18
Federal Income Tax 18
State and Local Taxes 18
Performance Information 18
Other Classes of Shares 19
Financial Highlights -- Institutional Shares 20
Financial Statements 21
Report of Independent Public Accountants 62
Appendix 63
SUMMARY OF FUND EXPENSES
SELECT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.69%
12b-1 Fee (after waiver)(2) 0.50%
Total Other Expenses 0.56%
Shareholder Services Fee 0.25%
Total Operating Expenses (after waivers)(3) 1.75%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver of a portion
of the 12b-1fee. The distributor can terminate the voluntary waiver at any
time at its sole discretion. The maximum 12b-1 fee is 0.75%.
(3) The total operating expenses would have been 2.06% absent the voluntary
waivers of portions of the management fee and the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Select Shares of the Fund will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see Investing in Select Shares and "Trust Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
EXAMPLE
- ----------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 18
3 Years $ 55
5 Years $ 95
10 Years $206
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants page 62.
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1997 1996 1995 1994(A)
-------- -------- -------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.20 $11.50 $ 9.81 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.30 0.36 0.23 0.15
- ---------------------------------------------
Net realized and unrealized gain (loss) on
investments, foreign currency,
and futures contracts 1.18 0.94 1.79 (0.24)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.48 1.30 2.02 (0.09)
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.32) (0.37) (0.33) (0.10)
- ---------------------------------------------
Distributions from net realized gain
on investments, foreign currency
transactions, and futures contracts (0.30) (0.23) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0. 62) (0.60) (0.33) (0.10)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.06 $12.20 $11.50 $ 9.81
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 12.56% 11.75% 20.95% (0.90%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.75% 1.75% 1.75% 1.70%*
- ---------------------------------------------
Net investment income 2.37% 3.06% 3.48% 3.53%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.31% 0.45% 0.76% 1.15%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $72,746 $60,208 $27,358 $2,952
- ---------------------------------------------
Average commission rate paid(d) $0.0068 $0.0020 -- --
- ---------------------------------------------
Portfolio turnover 136% 95% 106% 71%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994
(start of business) to May 24, 1994 the Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
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 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.
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 15% 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.
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
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 Portfolio 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.
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.
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, 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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested.
The Fund will invest only in CMOs which are rated AAA or Aaa by an NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's (Aaa, Aa, A, or Baa), Standard & Poor's (AAA, AA, A, or
BBB), or Fitch Investors Service, Inc. ("Fitch") (AAA, AA, A, or
BBB);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest 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 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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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 Adviser receives an annual investment advisory fee equal to 0.75% of the
Fund's average daily net assets. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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:
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 been a portfolio
manager of the Fund 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 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.
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 Masters 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.
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.
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 a Portfolio 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.
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.I.A. concentrating
in Finance 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.
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 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 separately 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 the
maintenance of shareholder accounts. Under the Shareholder Services Agreement,
Federated Shareholders 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
FEE ASSETS OF THE FEDERATED FUNDS
- -------- -----------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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.
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 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
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 quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING SELECT SHARES
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. 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 $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
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 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 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.
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants page 62.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------------------------
1997 1996 1995 1994(A)
-------- -------- -------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.23 $11.52 $ 9.82 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.38 0.41 0.40 0.20
- ---------------------------------------------
Net realized and unrealized gain (loss)
on investments, foreign currency,
and futures contracts 1.19 0.97 1.70 (0.26)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.57 1.38 2.10 (0.06)
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.40) (0.44) (0.40) (0.12)
- ---------------------------------------------
Distributions from net realized gain
on investments, foreign currency
transactions, and futures contracts (0.30) (0.23) -- --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.70) (0.67) (0.40) (0.12)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.10 $12.23 $11.52 $ 9.82
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 13.39% 12.54% 21.79% (0.59%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.05% 1.05% 1.00% 0.89%*
- ---------------------------------------------
Net investment income 3.07% 3.77% 4.29% 4.28%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.26% 0.40% 0.76% 0.90%*
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $163,519 $136,255 $68,313 $28,973
- ---------------------------------------------
Average commission rate paid(d) $0.0068 $0.0020 -- --
- ---------------------------------------------
Portfolio turnover 136% 95% 106% 71%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial
public investment) to November 30, 1994. For the period from January 27,
1994 (start of business) to May 24, 1994 the Fund had no investment
activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C> <C>
*STOCKS -- 52.7%
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- 15.5%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
24,200 Archer-Daniels-Midland Co. $517,276
--------------------------------------------------------------------------------------------------
4,300 Dow Chemical Co. 424,626
--------------------------------------------------------------------------------------------------
25,700 LTV Corporation 285,913
--------------------------------------------------------------------------------------------------
14,800 Louisiana-Pacific Corp. 298,775
-------------------------------------------------------------------------------------------------- ------------
Total 1,526,590
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
5,100 Eastman Kodak Co. 309,189
--------------------------------------------------------------------------------------------------
5,800 General Motors Corp., Class H 388,600
--------------------------------------------------------------------------------------------------
3,800 General Motors Corp. 231,800
--------------------------------------------------------------------------------------------------
14,100 Rubbermaid, Inc. 341,926
-------------------------------------------------------------------------------------------------- ------------
Total 1,271,515
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
3,300 CPC International, Inc. 341,139
--------------------------------------------------------------------------------------------------
19,000 PepsiCo, Inc. 700,626
--------------------------------------------------------------------------------------------------
5,900 Philip Morris Cos., Inc. 256,650
--------------------------------------------------------------------------------------------------
7,100 RJR Nabisco Holdings Corp. 258,706
--------------------------------------------------------------------------------------------------
17,900 Russell Corp. 547,069
--------------------------------------------------------------------------------------------------
8,900 Sara Lee Corp. 470,588
--------------------------------------------------------------------------------------------------
13,200 Unilever N.V. 766,425
-------------------------------------------------------------------------------------------------- ------------
Total 3,341,203
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.8%
- --------------------------------------------------------------------------------------------------------------------
4,200 Atlantic Richfield Co. 342,300
--------------------------------------------------------------------------------------------------
6,600 Chevron Corp. 529,239
--------------------------------------------------------------------------------------------------
8,400 Exxon Corp. 512,400
--------------------------------------------------------------------------------------------------
14,200 Occidental Petroleum Corp. 421,564
--------------------------------------------------------------------------------------------------
5,900 Royal Dutch Petroleum Co., ADR 310,857
--------------------------------------------------------------------------------------------------
16,400 Sun Co., Inc. 663,175
--------------------------------------------------------------------------------------------------
9,600 Texaco, Inc. 542,400
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
16,500 USX-Marathon Group $565,125
--------------------------------------------------------------------------------------------------
12,700 YPF Sociedad Anonima, ADR 426,244
-------------------------------------------------------------------------------------------------- ------------
Total 4,313,304
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
8,400 Allmerica Financial Corp. 407,400
--------------------------------------------------------------------------------------------------
4,600 Allstate Corp. 395,026
--------------------------------------------------------------------------------------------------
9,900 Bear Stearns Cos., Inc. 410,850
--------------------------------------------------------------------------------------------------
10,000 Block (H&R), Inc. 410,000
--------------------------------------------------------------------------------------------------
11,000 Boston Properties, Inc. 358,876
--------------------------------------------------------------------------------------------------
4,100 CIGNA Corp. 685,726
--------------------------------------------------------------------------------------------------
1,800 General RE Corp. 357,300
--------------------------------------------------------------------------------------------------
7,600 Marsh & McLennan Cos., Inc. 565,726
--------------------------------------------------------------------------------------------------
7,600 Morgan Stanley, Dean Witter, Discover & Co. 412,775
--------------------------------------------------------------------------------------------------
8,100 Travelers Group, Inc. 409,050
-------------------------------------------------------------------------------------------------- ------------
Total 4,412,729
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
7,100 Abbott Laboratories 461,500
--------------------------------------------------------------------------------------------------
24,100 (a)Beverly Enterprises, Inc. 409,700
--------------------------------------------------------------------------------------------------
8,700 Bristol-Myers Squibb Co. 814,539
--------------------------------------------------------------------------------------------------
4,100 Merck & Co., Inc. 387,707
--------------------------------------------------------------------------------------------------
11,900 (a)Perrigo Co. 169,576
--------------------------------------------------------------------------------------------------
19,900 Pharmacia & Upjohn, Inc. 671,625
--------------------------------------------------------------------------------------------------
7,000 Smithkline Beecham, ADR 347,375
--------------------------------------------------------------------------------------------------
13,800 U.S. Surgical Corp. 363,975
--------------------------------------------------------------------------------------------------
6,800 United Healthcare Corp. 354,025
-------------------------------------------------------------------------------------------------- ------------
Total 3,980,022
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
22,400 ITT Industries, Inc. 711,200
--------------------------------------------------------------------------------------------------
14,300 Ingersoll-Rand Co. 584,514
--------------------------------------------------------------------------------------------------
10,100 Johnson Controls, Inc. 462,707
--------------------------------------------------------------------------------------------------
13,800 (a)Lexmark Intl. Group, Class A 439,876
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,900 Loews Corp. $307,764
--------------------------------------------------------------------------------------------------
6,800 PACCAR, Inc. 374,000
-------------------------------------------------------------------------------------------------- ------------
Total 2,880,061
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
8,200 Dayton-Hudson Corp. 544,788
--------------------------------------------------------------------------------------------------
52,300 (a)K Mart Corp. 657,019
--------------------------------------------------------------------------------------------------
21,100 Wal-Mart Stores, Inc. 842,681
-------------------------------------------------------------------------------------------------- ------------
Total 2,044,488
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
2,900 ABB AB, ADR 359,600
--------------------------------------------------------------------------------------------------
9,500 Browning-Ferris Industries, Inc. 339,031
--------------------------------------------------------------------------------------------------
37,200 News Corp., Ltd., ADR 734,700
--------------------------------------------------------------------------------------------------
2,600 News Corp., Ltd., ADR 56,388
--------------------------------------------------------------------------------------------------
17,400 Readers Digest Association, Inc., Class A 416,513
--------------------------------------------------------------------------------------------------
7,807 (a)TCI Ventures Group, Class A 176,633
--------------------------------------------------------------------------------------------------
1,900 (a)Tricon Global Restaurants, Inc. 64,244
--------------------------------------------------------------------------------------------------
9,800 (a)Viacom, Inc., Class A 340,550
--------------------------------------------------------------------------------------------------
6,200 (a)Viacom, Inc., Class B 217,000
--------------------------------------------------------------------------------------------------
26,800 Waste Management, Inc. 659,950
-------------------------------------------------------------------------------------------------- ------------
Total 3,364,609
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
10,600 AMP, Inc. 460,438
--------------------------------------------------------------------------------------------------
9,200 (a)Cabletron Systems, Inc. 211,600
--------------------------------------------------------------------------------------------------
19,200 First Data Corp. 543,600
--------------------------------------------------------------------------------------------------
4,000 International Business Machines Corp. 438,250
--------------------------------------------------------------------------------------------------
3,000 Matsushita Electric Industrial Co., ADR 465,188
--------------------------------------------------------------------------------------------------
44,000 (a)Novell, Inc. 407,000
--------------------------------------------------------------------------------------------------
4,600 Raytheon Co. 257,313
--------------------------------------------------------------------------------------------------
14,300 (a)Seagate Technology, Inc. 324,431
--------------------------------------------------------------------------------------------------
8,900 (a)Storage Technology Corp. 574,606
-------------------------------------------------------------------------------------------------- ------------
Total 3,682,426
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
10,800 CNF Transporation, Inc. $469,800
--------------------------------------------------------------------------------------------------
10,445 KLM Royal Dutch Airlines 376,020
--------------------------------------------------------------------------------------------------
9,200 Ryder Systems, Inc. 334,075
-------------------------------------------------------------------------------------------------- ------------
Total 1,179,895
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
7,800 CMS Energy Corp. 307,125
--------------------------------------------------------------------------------------------------
5,500 Coastal Corp. 322,094
--------------------------------------------------------------------------------------------------
5,200 Columbia Gas System, Inc. 378,300
--------------------------------------------------------------------------------------------------
15,000 Entergy Corp. 390,000
--------------------------------------------------------------------------------------------------
5,500 GTE Corp. 278,094
--------------------------------------------------------------------------------------------------
15,900 Houston Industries, Inc. 376,631
--------------------------------------------------------------------------------------------------
19,200 MCI Communications Corp. 843,600
--------------------------------------------------------------------------------------------------
17,800 P G & E Corp. 502,850
--------------------------------------------------------------------------------------------------
11,200 Public Service Enterprises Group, Inc. 326,900
--------------------------------------------------------------------------------------------------
23,193 (a)Tele-Communications, Inc., Class A 531,265
--------------------------------------------------------------------------------------------------
9,500 U.S. West, Inc. 429,281
-------------------------------------------------------------------------------------------------- ------------
Total 4,686,140
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE COMPANY 36,682,982
-------------------------------------------------------------------------------------------------- ------------
LARGE COMPANY GROWTH STOCKS -- 14.8%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
6,300 (a)Lone Star Technologies, Inc. 182,700
--------------------------------------------------------------------------------------------------
5,300 Martin Marietta Materials 183,513
--------------------------------------------------------------------------------------------------
3,700 Southdown, Inc. 213,444
--------------------------------------------------------------------------------------------------
9,600 (a)Steel Dynamics, Inc. 177,600
-------------------------------------------------------------------------------------------------- ------------
Total 757,257
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
6,400 Carlisle Cos., Inc. 272,000
--------------------------------------------------------------------------------------------------
14,000 (a)Furniture Brands International, Inc. 273,875
--------------------------------------------------------------------------------------------------
1,900 Sony Corp ADR 158,650
-------------------------------------------------------------------------------------------------- ------------
Total 704,525
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
6,600 (a)Consolidated Cigar Holdings, Inc. $181,913
--------------------------------------------------------------------------------------------------
2,100 Gillette Co. 193,856
--------------------------------------------------------------------------------------------------
7,500 (a)Jones Apparel Group, Inc. 365,625
--------------------------------------------------------------------------------------------------
8,100 Philip Morris Cos., Inc. 352,350
--------------------------------------------------------------------------------------------------
6,100 Procter & Gamble Co. 465,506
--------------------------------------------------------------------------------------------------
7,300 (a)Smithfield Foods, Inc. 258,238
--------------------------------------------------------------------------------------------------
5,500 St. John Knits, Inc. 210,031
--------------------------------------------------------------------------------------------------
6,300 (a)Tommy Hilfiger Corp. 247,275
--------------------------------------------------------------------------------------------------
8,000 Universal Corp. 316,500
--------------------------------------------------------------------------------------------------
7,900 Wolverine World Wide, Inc. 180,219
--------------------------------------------------------------------------------------------------
4,600 Wrigley (Wm.), Jr. Co. 363,975
-------------------------------------------------------------------------------------------------- ------------
Total 3,135,488
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
3,200 (a)BJ Services Co. 229,800
--------------------------------------------------------------------------------------------------
5,800 Baker Hughes, Inc. 242,875
--------------------------------------------------------------------------------------------------
3,100 British Petroleum Co., PLC - ADR 257,300
--------------------------------------------------------------------------------------------------
4,300 (a)Cooper Cameron Corp. 262,031
--------------------------------------------------------------------------------------------------
4,500 Diamond Offshore Drilling, Inc. 224,438
--------------------------------------------------------------------------------------------------
7,000 ENSCO International, Inc. 250,250
--------------------------------------------------------------------------------------------------
7,700 (a)Falcon Drilling Co., Inc. 248,325
--------------------------------------------------------------------------------------------------
6,500 (a)Friede Goldman International, Inc. 193,375
--------------------------------------------------------------------------------------------------
8,100 (a)Key Energy Group, Inc. 196,931
--------------------------------------------------------------------------------------------------
6,500 (a)Nabors Industries, Inc. 227,906
--------------------------------------------------------------------------------------------------
2,200 (a)Petroleum Geo-Services, ADR 141,488
--------------------------------------------------------------------------------------------------
6,800 (a)Rowan Companies, Inc. 231,200
--------------------------------------------------------------------------------------------------
4,300 (a)Smith International, Inc. 275,200
--------------------------------------------------------------------------------------------------
5,500 Tosco Corp. 179,094
--------------------------------------------------------------------------------------------------
6,800 (a)TransCoastal Marine Services, Inc. 132,600
-------------------------------------------------------------------------------------------------- ------------
Total 3,292,813
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- 3.0%
- --------------------------------------------------------------------------------------------------------------------
7,900 Ahmanson (H.F.) & Co. $470,050
--------------------------------------------------------------------------------------------------
4,000 Allstate Corp. 343,500
--------------------------------------------------------------------------------------------------
2,600 American International Group, Inc. 262,113
--------------------------------------------------------------------------------------------------
6,300 Bank of New York Co., Inc. 338,625
--------------------------------------------------------------------------------------------------
4,700 BankAmerica Corp. 343,100
--------------------------------------------------------------------------------------------------
12,600 (a)Catellus Development Corp. 233,100
--------------------------------------------------------------------------------------------------
2,400 Citicorp 287,850
--------------------------------------------------------------------------------------------------
7,900 Conseco, Inc. 367,844
--------------------------------------------------------------------------------------------------
6,700 ETrade Group, Inc. 167,919
--------------------------------------------------------------------------------------------------
3,900 Equitable Companies Inc. 185,981
--------------------------------------------------------------------------------------------------
11,600 Frontier Insurance Group, Inc. 279,125
--------------------------------------------------------------------------------------------------
7,900 (a)Golden State Bancorp, Inc. 263,169
--------------------------------------------------------------------------------------------------
21,000 MBNA Corp. 557,813
--------------------------------------------------------------------------------------------------
2,700 MGIC Investment Corp. 157,781
--------------------------------------------------------------------------------------------------
5,700 Mellon Bank Corp. 323,119
--------------------------------------------------------------------------------------------------
5,200 Merrill Lynch & Co., Inc. 364,975
--------------------------------------------------------------------------------------------------
6,800 Morgan Stanley, Dean Witter, Discover & Co. 369,325
--------------------------------------------------------------------------------------------------
4,300 NationsBank Corp. 258,269
--------------------------------------------------------------------------------------------------
7,100 Old Republic International Corp. 256,044
--------------------------------------------------------------------------------------------------
5,400 T. Rowe Price Associates 351,000
--------------------------------------------------------------------------------------------------
6,600 Torchmark Corp. 269,363
--------------------------------------------------------------------------------------------------
11,700 Travelers Group, Inc. 590,850
-------------------------------------------------------------------------------------------------- ------------
Total 7,040,915
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 2.1%
- --------------------------------------------------------------------------------------------------------------------
9,500 (a)BioChem Pharma, Inc. 242,250
--------------------------------------------------------------------------------------------------
6,600 (a)Centocor, Inc. 287,100
--------------------------------------------------------------------------------------------------
5,000 (a)Dura Pharmaceuticals, Inc. 219,375
--------------------------------------------------------------------------------------------------
4,700 Guidant Corp. 301,975
--------------------------------------------------------------------------------------------------
9,600 HBO & Co. 430,800
--------------------------------------------------------------------------------------------------
10,600 (a)HEALTHSOUTH Corp. 278,250
--------------------------------------------------------------------------------------------------
8,900 Jones Medical Industries, Inc. 293,700
--------------------------------------------------------------------------------------------------
5,600 Lilly (Eli) & Co. 353,150
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,900 (a)MedPartners, Inc. $146,025
--------------------------------------------------------------------------------------------------
2,400 Merck & Co., Inc. 226,950
--------------------------------------------------------------------------------------------------
12,100 Omnicare, Inc. 349,388
--------------------------------------------------------------------------------------------------
2,600 Pfizer, Inc. 189,150
--------------------------------------------------------------------------------------------------
6,600 (a)Phycor, Inc. 162,525
--------------------------------------------------------------------------------------------------
3,700 (a)Quintiles Transnational Corp. 289,063
--------------------------------------------------------------------------------------------------
8,300 (a)Safeskin Corp. 395,288
--------------------------------------------------------------------------------------------------
4,800 Smithkline Beecham, ADR 238,200
--------------------------------------------------------------------------------------------------
6,300 (a)Universal Health Services, Inc., Class B 275,231
--------------------------------------------------------------------------------------------------
2,400 Warner-Lambert Co. 335,700
-------------------------------------------------------------------------------------------------- ------------
Total 5,014,120
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
5,600 (a)EVI, Inc. 288,050
--------------------------------------------------------------------------------------------------
7,800 General Electric Co. 575,250
--------------------------------------------------------------------------------------------------
7,800 (a)Halter Marine Group, Inc. 217,425
--------------------------------------------------------------------------------------------------
8,300 (a)Maverick Tube Corp. 237,069
--------------------------------------------------------------------------------------------------
4,500 Precision Castparts Corp. 267,188
--------------------------------------------------------------------------------------------------
14,200 (a)Royal Group Technologies Ltd. 341,688
--------------------------------------------------------------------------------------------------
8,400 Tyco International, Ltd. 329,700
--------------------------------------------------------------------------------------------------
15,900 (a)US Office Products Co. 316,013
-------------------------------------------------------------------------------------------------- ------------
Total 2,572,383
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
7,800 (a)CompUSA, Inc. 285,188
--------------------------------------------------------------------------------------------------
13,000 (a)General Nutrition Cos., Inc. 443,625
--------------------------------------------------------------------------------------------------
6,600 Home Depot, Inc. 369,188
--------------------------------------------------------------------------------------------------
14,750 Pier 1 Imports, Inc. 330,031
--------------------------------------------------------------------------------------------------
4,600 (a)Safeway, Inc. 279,450
--------------------------------------------------------------------------------------------------
10,400 TJX Cos., Inc. 358,800
-------------------------------------------------------------------------------------------------- ------------
Total 2,066,282
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
3,700 (a)ASE Test Limited 207,200
--------------------------------------------------------------------------------------------------
9,300 (a)Corrections Corp. America 322,013
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SERVICES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,800 (a)HFS, Inc. $260,775
--------------------------------------------------------------------------------------------------
2,800 (a)Heftel Broadcasting Corp., Class A 206,850
--------------------------------------------------------------------------------------------------
10,200 (a)Newpark Resources, Inc. 203,363
--------------------------------------------------------------------------------------------------
14,100 (a)Philip Services Corp. 222,956
--------------------------------------------------------------------------------------------------
9,800 (a)Snyder Communications, Inc. 332,588
-------------------------------------------------------------------------------------------------- ------------
Total 1,755,745
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.7%
- --------------------------------------------------------------------------------------------------------------------
1,700 (a)ASM Lithography Holding NV, ADR 106,250
--------------------------------------------------------------------------------------------------
6,200 (a)Advanced Fibre Communications 160,425
--------------------------------------------------------------------------------------------------
3,600 (a)America Online, Inc. 271,800
--------------------------------------------------------------------------------------------------
6,000 (a)Applied Materials, Inc. 198,000
--------------------------------------------------------------------------------------------------
7,000 (a)Cadence Design Systems, Inc. 176,750
--------------------------------------------------------------------------------------------------
4,500 (a)Cisco Systems, Inc. 388,125
--------------------------------------------------------------------------------------------------
5,600 Compaq Computer Corp. 349,650
--------------------------------------------------------------------------------------------------
11,200 (a)Creative Technology Ltd. 298,200
--------------------------------------------------------------------------------------------------
3,800 Dallas Semiconductor Corp. 185,725
--------------------------------------------------------------------------------------------------
2,600 (a)Dell Computer Corp. 218,888
--------------------------------------------------------------------------------------------------
6,400 (a)EMC Corp. Mass 194,000
--------------------------------------------------------------------------------------------------
5,700 (a)HNC Software 179,550
--------------------------------------------------------------------------------------------------
10,700 (a)Hyperion Software Corp. 461,103
--------------------------------------------------------------------------------------------------
3,500 Intel Corp. 271,688
--------------------------------------------------------------------------------------------------
3,700 Lucent Technologies, Inc. 296,463
--------------------------------------------------------------------------------------------------
8,900 (a)Mastech Corp. 260,325
--------------------------------------------------------------------------------------------------
1,200 (a)Metromedia Fibre Network, Inc. 20,250
--------------------------------------------------------------------------------------------------
2,900 (a)Microsoft Corp. 410,350
--------------------------------------------------------------------------------------------------
9,500 (a)Ortel Corp. 169,813
--------------------------------------------------------------------------------------------------
2,700 (a)PRI Automation, Inc. 92,138
--------------------------------------------------------------------------------------------------
2,400 (a)Peoplesoft, Inc. 157,050
--------------------------------------------------------------------------------------------------
5,100 (a)Rambus, Inc. 284,644
--------------------------------------------------------------------------------------------------
7,200 SCI Systems, Inc. 329,850
--------------------------------------------------------------------------------------------------
9,100 (a)Sandisk Corp. 222,950
--------------------------------------------------------------------------------------------------
2,500 (a)Speedfam International, Inc. 64,063
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE COMPANY GROWTH STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,300 (a)Tellabs, Inc. $275,600
--------------------------------------------------------------------------------------------------
3,800 Texas Instruments, Inc. 187,150
--------------------------------------------------------------------------------------------------
5,500 (a)World Access, Inc. 134,750
-------------------------------------------------------------------------------------------------- ------------
Total 6,365,550
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500 (a)Continental Airlines, Inc., Class B 22,781
--------------------------------------------------------------------------------------------------
9,100 Expeditors International Washington, Inc. 354,331
-------------------------------------------------------------------------------------------------- ------------
Total 377,112
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
8,100 Cincinnati Bell, Inc. 238,950
--------------------------------------------------------------------------------------------------
5,300 Coastal Corp. 310,381
--------------------------------------------------------------------------------------------------
12,300 (a)ICG Communications, Inc. 285,975
--------------------------------------------------------------------------------------------------
13,300 (a)IXC Communications, Inc. 461,344
--------------------------------------------------------------------------------------------------
5,100 Sonat, Inc. 222,169
--------------------------------------------------------------------------------------------------
5,500 (a)Teleport Communications Group, Inc., Class A 269,500
-------------------------------------------------------------------------------------------------- ------------
Total 1,788,319
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE COMPANY GROWTH STOCKS 34,870,509
-------------------------------------------------------------------------------------------------- ------------
SMALL COMPANY STOCKS -- 11.3%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
9,500 BMC Industries, Inc. 176,344
--------------------------------------------------------------------------------------------------
6,400 Cambrex Corp. 290,400
--------------------------------------------------------------------------------------------------
8,500 (a)Carbide/Graphite Group, Inc. 328,313
--------------------------------------------------------------------------------------------------
13,800 (a)Chirex, Inc. 336,375
--------------------------------------------------------------------------------------------------
7,400 Furon Co. 292,300
--------------------------------------------------------------------------------------------------
5,300 Lone Star Industries, Inc. 276,263
--------------------------------------------------------------------------------------------------
7,100 (a)Lone Star Technologies, Inc. 205,900
--------------------------------------------------------------------------------------------------
18,700 Spartech Corp. 308,550
--------------------------------------------------------------------------------------------------
5,000 Valspar Corp. 151,875
-------------------------------------------------------------------------------------------------- ------------
Total 2,366,320
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
11,700 (a)Action Performance Companies, Inc. 339,300
--------------------------------------------------------------------------------------------------
8,000 (a)American Homestar Corporation 112,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
14,800 Brilliance China Automotive Holdings Ltd. $139,675
--------------------------------------------------------------------------------------------------
4,800 Carlisle Cos., Inc. 204,000
--------------------------------------------------------------------------------------------------
1,800 (a)Dura Automotive Systems, Inc. 47,475
--------------------------------------------------------------------------------------------------
6,700 (a)Equity Marketing, Inc. 197,650
--------------------------------------------------------------------------------------------------
2,000 (a)Gentex Corp. 49,500
--------------------------------------------------------------------------------------------------
17,700 (a)Helen of Troy Ltd. 252,225
--------------------------------------------------------------------------------------------------
3,900 Oakwood Homes Corp. 117,000
--------------------------------------------------------------------------------------------------
7,500 (a)Stanley Furniture Co. Inc. 206,250
--------------------------------------------------------------------------------------------------
3,500 Wynns International, Inc. 113,531
-------------------------------------------------------------------------------------------------- ------------
Total 1,778,606
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
4,700 (a)Blyth Industries, Inc. 120,731
--------------------------------------------------------------------------------------------------
7,900 (a)North Face, Inc. 171,825
--------------------------------------------------------------------------------------------------
8,000 (a)Rayovac Corp. 134,000
--------------------------------------------------------------------------------------------------
5,100 (a)Tommy Hilfiger Corp. 200,175
-------------------------------------------------------------------------------------------------- ------------
Total 626,731
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
2,400 Camco International, Inc. 150,600
--------------------------------------------------------------------------------------------------
10,300 (a)Key Energy Group, Inc. 250,419
--------------------------------------------------------------------------------------------------
3,700 (a)Patterson Energy Inc. 135,975
--------------------------------------------------------------------------------------------------
5,000 (a)TransCoastal Marine Services, Inc. 97,500
--------------------------------------------------------------------------------------------------
7,300 (a)Tuboscope Inc. 179,763
--------------------------------------------------------------------------------------------------
11,600 Vintage Petroleum, Inc. 224,750
-------------------------------------------------------------------------------------------------- ------------
Total 1,039,007
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
8,300 (a)Amresco, Inc. 232,400
--------------------------------------------------------------------------------------------------
5,100 CMAC Investment Corp. 264,881
--------------------------------------------------------------------------------------------------
10,200 City National Corp. 331,500
--------------------------------------------------------------------------------------------------
5,400 (a)Delphi Financial Group, Inc., Class A 216,675
--------------------------------------------------------------------------------------------------
11,900 (a)Delta Financial Corp. 197,094
--------------------------------------------------------------------------------------------------
3,600 Executive Risk, Inc. 234,000
--------------------------------------------------------------------------------------------------
6,100 (a)FIRSTPLUS Financial Group, Inc. 232,563
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
8,500 (a)FirstFed Financial Corp. $310,250
--------------------------------------------------------------------------------------------------
7,100 Frontier Insurance Group, Inc. 170,844
--------------------------------------------------------------------------------------------------
6,000 GBC Bancorp 327,750
--------------------------------------------------------------------------------------------------
8,100 (a)Imperial Bancorp 378,169
--------------------------------------------------------------------------------------------------
10,200 North Fork Bancorp, Inc. 309,825
--------------------------------------------------------------------------------------------------
11,500 (a)Philadelphia Consolidated Holding Corp. 188,313
--------------------------------------------------------------------------------------------------
3,800 Sirrom Capital Corp. 167,200
--------------------------------------------------------------------------------------------------
17,700 Sovereign Bancorp, Inc. 335,194
--------------------------------------------------------------------------------------------------
9,200 Trans Financial, Inc. 316,250
--------------------------------------------------------------------------------------------------
10,000 (a)Triad Guaranty, Inc. 295,000
--------------------------------------------------------------------------------------------------
4,900 Vesta Insurance Group, Inc. 268,888
-------------------------------------------------------------------------------------------------- ------------
Total 4,776,796
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
900 (a)Ascent Pediatrics, Inc. 7,200
--------------------------------------------------------------------------------------------------
10,200 Ballard Medical Products 235,238
--------------------------------------------------------------------------------------------------
7,500 (a)Complete Management, Inc. 124,688
--------------------------------------------------------------------------------------------------
4,200 (a)Curative Technologies, Inc. 119,700
--------------------------------------------------------------------------------------------------
11,900 (a)FPA Medical Management, Inc. 307,169
--------------------------------------------------------------------------------------------------
11,900 (a)Genesis Health Ventures, Inc. 288,575
--------------------------------------------------------------------------------------------------
15,500 (a)Healthdyne Technologies, Inc. 297,406
--------------------------------------------------------------------------------------------------
6,500 (a)Hologic, Inc. 168,188
--------------------------------------------------------------------------------------------------
4,600 (a)Medicis Pharmaceutical Corp., Class A 196,650
--------------------------------------------------------------------------------------------------
10,100 Phycor, Inc. 248,713
--------------------------------------------------------------------------------------------------
16,100 (a)Prime Medical Services 213,325
--------------------------------------------------------------------------------------------------
5,900 (a)Somnus Medical Technologies, Inc. 67,850
--------------------------------------------------------------------------------------------------
5,100 (a)Universal Health Services, Inc., Class B 222,806
-------------------------------------------------------------------------------------------------- ------------
Total 2,497,508
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
11,375 (a)AFC Cable Systems, Inc. 304,281
--------------------------------------------------------------------------------------------------
12,000 (a)Ballantyne of Omaha, Inc. 220,500
--------------------------------------------------------------------------------------------------
8,100 (a)Cable Design Technologies, Class A 328,050
--------------------------------------------------------------------------------------------------
9,300 (a)Chicago Miniature Lamp, Inc. 315,038
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
4,800 (a)EVI, Inc. $246,900
--------------------------------------------------------------------------------------------------
9,000 (a)Royal Group Technologies Ltd. 216,563
--------------------------------------------------------------------------------------------------
11,900 (a)US Office Products Co. 236,513
-------------------------------------------------------------------------------------------------- ------------
Total 1,867,845
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
4,800 (a)CDW Computer Centers, Inc. 283,200
--------------------------------------------------------------------------------------------------
14,000 Claire's Stores, Inc. 316,750
--------------------------------------------------------------------------------------------------
4,800 (a)Express Scripts, Inc., Class A 283,200
--------------------------------------------------------------------------------------------------
8,100 (a)Funco, Inc. 149,850
--------------------------------------------------------------------------------------------------
10,800 (a)Microage, Inc. 217,350
--------------------------------------------------------------------------------------------------
11,700 (a)O'Reilly Automotive, Inc. 276,413
--------------------------------------------------------------------------------------------------
15,300 (a)Paul Harris Stores, Inc. 323,213
--------------------------------------------------------------------------------------------------
11,000 (a)Pomeroy Computer Resources 275,000
--------------------------------------------------------------------------------------------------
6,400 (a)Proffitts, Inc. 195,600
--------------------------------------------------------------------------------------------------
12,200 (a)Renters Choice, Inc. 274,500
--------------------------------------------------------------------------------------------------
10,700 (a)Zale Corp. 238,075
-------------------------------------------------------------------------------------------------- ------------
Total 2,833,151
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
4,300 (a)ASE Test Limited 240,800
--------------------------------------------------------------------------------------------------
7,000 (a)Allied Waste Industries, Inc. 153,125
--------------------------------------------------------------------------------------------------
12,800 (a)American Business Information, Class A 150,400
--------------------------------------------------------------------------------------------------
12,100 (a)American Business Information, Class B 133,100
--------------------------------------------------------------------------------------------------
10,950 (a)BARRA, Inc. 305,231
--------------------------------------------------------------------------------------------------
5,300 (a)Caribiner International, Inc. 224,919
--------------------------------------------------------------------------------------------------
1,400 (a)Daisytek International Corp. 54,950
--------------------------------------------------------------------------------------------------
6,800 (a)FactSet Research Systems 171,700
--------------------------------------------------------------------------------------------------
15,200 (a)Newpark Resources, Inc. 303,050
--------------------------------------------------------------------------------------------------
8,000 (a)Personnel Group of America, Inc. 292,500
--------------------------------------------------------------------------------------------------
12,000 (a)Prime Hospitality Corp. 229,500
--------------------------------------------------------------------------------------------------
15,700 (a)ProBusiness Services, Inc. 331,663
--------------------------------------------------------------------------------------------------
23,300 (a)Seattle Filmworks, Inc. 230,088
--------------------------------------------------------------------------------------------------
10,100 (a)Snyder Communications, Inc. 342,769
-------------------------------------------------------------------------------------------------- ------------
Total 3,163,795
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL COMPANY STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
8,400 ATMI, Inc. $269,850
--------------------------------------------------------------------------------------------------
15,200 (a)Alphanet Solutions, Inc. 195,700
--------------------------------------------------------------------------------------------------
10,700 (a)Apex mPC Solutions, Inc. 235,400
--------------------------------------------------------------------------------------------------
7,100 (a)Applied Science & Technology, Inc. 149,100
--------------------------------------------------------------------------------------------------
12,900 (a)Applied Voice Technology, Inc. 361,200
--------------------------------------------------------------------------------------------------
10,200 (a)Benchmark Electronics, Inc. 286,875
--------------------------------------------------------------------------------------------------
9,400 (a)Benchmarq Microelectronics, Inc. 171,550
--------------------------------------------------------------------------------------------------
11,100 (a)Cybex Computer Products Corp. 288,600
--------------------------------------------------------------------------------------------------
10,800 (a)Cymer, Inc. 207,225
--------------------------------------------------------------------------------------------------
14,800 (a)DSP Group, Inc. 484,700
--------------------------------------------------------------------------------------------------
6,900 (a)Ducommun, Inc. 223,819
--------------------------------------------------------------------------------------------------
8,000 (a)Eltron International, Inc. 250,000
--------------------------------------------------------------------------------------------------
5,800 (a)HADCO Corp. 359,600
--------------------------------------------------------------------------------------------------
9,900 (a)II-VI, Inc. 238,838
--------------------------------------------------------------------------------------------------
9,800 (a)MRV Communications, Inc. 276,850
--------------------------------------------------------------------------------------------------
7,800 (a)Mastech Corp. 228,150
--------------------------------------------------------------------------------------------------
7,000 (a)Qlogic Corp. 231,875
--------------------------------------------------------------------------------------------------
7,000 (a)Three-Five Systems, Inc. 139,563
--------------------------------------------------------------------------------------------------
6,000 (a)Tollgrade Communications, Inc. 141,750
-------------------------------------------------------------------------------------------------- ------------
Total 4,740,645
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
3,600 Airlines Express International Corp. 103,275
--------------------------------------------------------------------------------------------------
8,850 Comair Holdings, Inc. 195,806
--------------------------------------------------------------------------------------------------
2,200 Expeditors International Washington, Inc. 85,663
-------------------------------------------------------------------------------------------------- ------------
Total 384,744
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
4,200 Cincinnati Bell, Inc. 123,900
--------------------------------------------------------------------------------------------------
6,700 IXC Communications, Inc. 232,406
--------------------------------------------------------------------------------------------------
3,400 MCN Corp. 129,838
--------------------------------------------------------------------------------------------------
3,600 Sonat, Inc. 156,825
-------------------------------------------------------------------------------------------------- ------------
Total 642,969
-------------------------------------------------------------------------------------------------- ------------
TOTAL SMALL COMPANY 26,718,117
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- 11.1%
- --------------------------------------------------------------------------------------------------------------------
ARGENTINA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
9,700 (a)Banco Rio de la Plata S.A., ADR $121,856
--------------------------------------------------------------------------------------------------
8,070 Compania Naviera Perez Companc S.A., Class B 57,641
--------------------------------------------------------------------------------------------------
2,200 Telecom Argentina S.A., ADR 67,513
--------------------------------------------------------------------------------------------------
1,800 Telefonica De Argentina ADR 59,513
-------------------------------------------------------------------------------------------------- ------------
Total 306,523
-------------------------------------------------------------------------------------------------- ------------
AUSTRALIA -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
18,000 Australia & New Zealand Banking Group, Melbourne 123,405
--------------------------------------------------------------------------------------------------
61,700 Austrim Ltd 137,350
--------------------------------------------------------------------------------------------------
40,000 Coles Myer Limited 196,661
--------------------------------------------------------------------------------------------------
792,000 (a)Cue Energy Resources NL 73,010
--------------------------------------------------------------------------------------------------
31,000 (a)News Corp., Ltd. 165,537
--------------------------------------------------------------------------------------------------
50,000 Oil Search Ltd. 98,672
--------------------------------------------------------------------------------------------------
32,000 Woodside Petroleum Ltd. 229,416
-------------------------------------------------------------------------------------------------- ------------
Total 1,024,051
-------------------------------------------------------------------------------------------------- ------------
AUSTRIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
2,100 (a)Bank Austria AG, Pfd. 85,797
-------------------------------------------------------------------------------------------------- ------------
BELGIUM -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
45 UCB (groupe) 148,662
-------------------------------------------------------------------------------------------------- ------------
BRAZIL -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
324,000 Centrais Eletricas Brasileiras S.A., Preference, Series B 157,721
--------------------------------------------------------------------------------------------------
1,523,000 Companhia Energetica de Minas Gerais, Preference 73,451
--------------------------------------------------------------------------------------------------
750,000 Petroleo Brasileiro S.A., Preference 164,293
--------------------------------------------------------------------------------------------------
1,766,000 Telecomunicacoes Brasileiras S.A. 163,975
--------------------------------------------------------------------------------------------------
17,710 Telecomunicacoes de Sao Paulo S.A. 335
--------------------------------------------------------------------------------------------------
530,137 Telecomunicacoes de Sao Paulo S.A., Preference 139,552
-------------------------------------------------------------------------------------------------- ------------
Total 699,327
-------------------------------------------------------------------------------------------------- ------------
CHILE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
600 Banco de A. Edwards, ADR 10,500
--------------------------------------------------------------------------------------------------
750 (b)Chilectra S.A., ADR 18,720
--------------------------------------------------------------------------------------------------
850 Compania Telecomunicacion Chile, ADR 23,003
-------------------------------------------------------------------------------------------------- ------------
Total 52,223
-------------------------------------------------------------------------------------------------- ------------
CHINA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
42,000 (a)China Telecommunications 70,088
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
COLOMBIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,400 Banco Ganadero S.A., ADR $ 53,375
--------------------------------------------------------------------------------------------------
1,500 Banco Industrial Colombiano, ADR 21,750
-------------------------------------------------------------------------------------------------- ------------
Total 75,125
-------------------------------------------------------------------------------------------------- ------------
DENMARK -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
2,700 BG Bank AS 175,377
--------------------------------------------------------------------------------------------------
1,250 (a)Bang & Olufsen Holding B 73,558
--------------------------------------------------------------------------------------------------
1,450 Novo-Nordisk, Class B 177,567
--------------------------------------------------------------------------------------------------
2,900 (a)Sydbank AS 155,533
--------------------------------------------------------------------------------------------------
2,100 Unidanmark A 148,293
-------------------------------------------------------------------------------------------------- ------------
Total 730,328
-------------------------------------------------------------------------------------------------- ------------
FINLAND -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
8,150 Enso Oy, Class R 71,543
--------------------------------------------------------------------------------------------------
4,000 Partek Corp, 74,203
--------------------------------------------------------------------------------------------------
7,000 Rauma 120,795
-------------------------------------------------------------------------------------------------- ------------
Total 266,541
-------------------------------------------------------------------------------------------------- ------------
FRANCE -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
2,100 AXA 152,396
--------------------------------------------------------------------------------------------------
1,000 Accor S.A. 189,047
--------------------------------------------------------------------------------------------------
1,200 Bertrand Faure 81,717
--------------------------------------------------------------------------------------------------
800 (a)CLF-Dexia France 83,072
--------------------------------------------------------------------------------------------------
400 Canal Plus 69,588
--------------------------------------------------------------------------------------------------
1,800 Compagnie Financiere de Paribas, Class A 130,046
--------------------------------------------------------------------------------------------------
710 Compagnie de Saint Gobain 96,458
--------------------------------------------------------------------------------------------------
1,050 Elf Aquitaine S.A. 121,839
--------------------------------------------------------------------------------------------------
1,039 (a)France Telecommunications 38,158
--------------------------------------------------------------------------------------------------
660 (a)Generale Geophysique 71,553
--------------------------------------------------------------------------------------------------
1,600 Groupe Danon BSN S.A. 255,315
--------------------------------------------------------------------------------------------------
225 L'Oreal 86,138
--------------------------------------------------------------------------------------------------
1,500 Pechiney Ord A 58,899
--------------------------------------------------------------------------------------------------
2,120 (a)SGS-Thomson Microelectronics N.V. 149,502
--------------------------------------------------------------------------------------------------
5,248 Schneider S.A. 280,922
--------------------------------------------------------------------------------------------------
3,400 Scor S.A. 146,233
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FRANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
1,100 Synthelabo $139,752
--------------------------------------------------------------------------------------------------
5,200 Thomson-csf 150,451
--------------------------------------------------------------------------------------------------
1,600 Total S.A.-B 168,042
-------------------------------------------------------------------------------------------------- ------------
Total 2,469,128
-------------------------------------------------------------------------------------------------- ------------
GERMANY, FEDERAL REPUBLIC OF -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
5,875 Bayer AG 217,443
--------------------------------------------------------------------------------------------------
210 Bayerische Motoren Werke AG 156,830
--------------------------------------------------------------------------------------------------
10,050 Commerzbank AG, Frankfurt 349,342
--------------------------------------------------------------------------------------------------
2,230 Deutsche Bank, AG 143,018
--------------------------------------------------------------------------------------------------
6,065 Dresdner Bank AG, Frankfurt 235,240
--------------------------------------------------------------------------------------------------
550 Mannesmann AG 256,053
--------------------------------------------------------------------------------------------------
3,000 Siemens AG 176,155
--------------------------------------------------------------------------------------------------
900 (a)Singulus Technologies AG 39,807
--------------------------------------------------------------------------------------------------
13,000 Skw Trostberg 449,305
-------------------------------------------------------------------------------------------------- ------------
Total 2,023,193
-------------------------------------------------------------------------------------------------- ------------
HONG KONG -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
292,000 (a)Angang New Steel Co. Ltd. 46,083
--------------------------------------------------------------------------------------------------
26,000 (a)Cheung Kong 183,305
--------------------------------------------------------------------------------------------------
35,000 China Resources Enterprises Ltd. 75,385
--------------------------------------------------------------------------------------------------
3,751 HSBC Holdings PLC 90,496
--------------------------------------------------------------------------------------------------
17,000 Hutchison Whampoa 113,256
--------------------------------------------------------------------------------------------------
24,000 (a)New World Development Co. Ltd. 88,949
--------------------------------------------------------------------------------------------------
40,000 Peregrine Investments 39,326
-------------------------------------------------------------------------------------------------- ------------
Total 636,800
-------------------------------------------------------------------------------------------------- ------------
INDONESIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
28,000 PT Indosat 63,523
-------------------------------------------------------------------------------------------------- ------------
IRELAND -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
6,000 (a)Elan Corp. PLC, ADR 316,500
-------------------------------------------------------------------------------------------------- ------------
ITALY -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
17,150 Eni 100,117
--------------------------------------------------------------------------------------------------
16,000 Istituto Bancario San Paolo di Torino 132,534
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ITALY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
11,000 La Rinascente S.P.A. $ 83,412
--------------------------------------------------------------------------------------------------
25,000 Telecom Italia S.P.A. 155,856
-------------------------------------------------------------------------------------------------- ------------
Total 471,919
-------------------------------------------------------------------------------------------------- ------------
JAPAN -- 2.4%
- --------------------------------------------------------------------------------------------------------------------
13,200 Circle K Japan Co. Ltd. 662,974
--------------------------------------------------------------------------------------------------
30,000 Fujitsu Ltd. 336,141
--------------------------------------------------------------------------------------------------
10,000 Hitachi Maxell 224,094
--------------------------------------------------------------------------------------------------
7,000 Ito-Yokado Co., Ltd. 315,926
--------------------------------------------------------------------------------------------------
2,900 Mabuchi Motor Co. 152,016
--------------------------------------------------------------------------------------------------
125,000 (a)Mazda Motor Corp. 349,657
--------------------------------------------------------------------------------------------------
36,000 Minolta Co. 207,326
--------------------------------------------------------------------------------------------------
40,000 Mitsubishi Estate Co. Ltd. 463,859
--------------------------------------------------------------------------------------------------
4,000 Nintendo Corp. Ltd. 413,712
--------------------------------------------------------------------------------------------------
34 Nippon Telegraph & Telephone Corp. 279,726
--------------------------------------------------------------------------------------------------
17,000 Sankyo Co. Ltd. 542,135
--------------------------------------------------------------------------------------------------
1,400 Shokoh Fund & Co. 398,198
--------------------------------------------------------------------------------------------------
6,000 Sony Corp. 512,439
--------------------------------------------------------------------------------------------------
17,000 Sumitomo Bank Ltd., Osaka 215,788
--------------------------------------------------------------------------------------------------
60,000 Sumitomo Realty & Dev 401,959
--------------------------------------------------------------------------------------------------
48,000 Tokyu Land Corp. 95,530
-------------------------------------------------------------------------------------------------- ------------
Total 5,571,480
-------------------------------------------------------------------------------------------------- ------------
MEXICO -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
3,600 Empresas ICA Sociedad Controladora S.A., ADR 55,800
--------------------------------------------------------------------------------------------------
9,000 Fomento Economico Mexicano, S.A. de C.V., Class B 74,183
--------------------------------------------------------------------------------------------------
310,000 (a)(b)Grupo Financiero Bancomer, S.A. de C.V., Class B 179,278
--------------------------------------------------------------------------------------------------
3,400 Telefonos de Mexico, Class L, ADR 168,300
--------------------------------------------------------------------------------------------------
3,000 (a)Tubos de Acero de Mexico S.A., ADR 66,375
-------------------------------------------------------------------------------------------------- ------------
Total 543,936
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
7,313 ABN-Amro Holdings N.V. 139,467
--------------------------------------------------------------------------------------------------
900 (a)ASM Lithography Holding N.V., ADR 56,250
--------------------------------------------------------------------------------------------------
960 Akzo Nobel N.V. 168,880
--------------------------------------------------------------------------------------------------
3,228 ING Groep, N.V. 131,245
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,500 Koninklijke PTT Nederland N.V. $140,542
--------------------------------------------------------------------------------------------------
1,600 Philips Electronics N.V. 105,711
--------------------------------------------------------------------------------------------------
6,600 VNU - Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 158,084
--------------------------------------------------------------------------------------------------
959 Wolters Kluwer N.V. 126,963
-------------------------------------------------------------------------------------------------- ------------
Total 1,027,142
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
32,000 Air New Zealand Ltd., Class B 65,150
-------------------------------------------------------------------------------------------------- ------------
NORWAY -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
3,700 Saga Petroleum A.S., Class A 66,371
--------------------------------------------------------------------------------------------------
4,500 Schibsted 76,341
--------------------------------------------------------------------------------------------------
2,100 Smedvig ASA, Class B 53,439
-------------------------------------------------------------------------------------------------- ------------
Total 196,151
-------------------------------------------------------------------------------------------------- ------------
PHILIPPINES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50 (a)Filinvest Land, Inc. 2
-------------------------------------------------------------------------------------------------- ------------
SINGAPORE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
3,600 (a)Creative Technology Ltd. 95,850
--------------------------------------------------------------------------------------------------
52,000 Natsteel Broadway Ltd. 76,180
--------------------------------------------------------------------------------------------------
3,000 Singapore Press Holdings Ltd., Foreign Shares 41,022
--------------------------------------------------------------------------------------------------
27,000 Wing Tai Holdings, Ltd. 34,719
-------------------------------------------------------------------------------------------------- ------------
Total 247,771
-------------------------------------------------------------------------------------------------- ------------
SPAIN -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
6,000 (a)Banco Bilbao Vizcaya S.A. 181,276
--------------------------------------------------------------------------------------------------
2,200 Banco Popular Espanol 140,165
--------------------------------------------------------------------------------------------------
7,600 Endesa S.A. 142,968
--------------------------------------------------------------------------------------------------
4,050 Iberdrola S.A. 51,742
--------------------------------------------------------------------------------------------------
3,425 Repsol S.A. 148,154
--------------------------------------------------------------------------------------------------
1,300 Tabacalera 99,390
--------------------------------------------------------------------------------------------------
5,950 Telefonica de Espana 171,585
--------------------------------------------------------------------------------------------------
4,200 Vidrala S.A. 179,706
--------------------------------------------------------------------------------------------------
1,100 Zardoya-Otis S.A. 127,993
-------------------------------------------------------------------------------------------------- ------------
Total 1,242,979
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
SHARES OR IN U.S.
UNITS DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SWEDEN -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,250 Electrolux B $ 98,426
--------------------------------------------------------------------------------------------------
11,300 Munksjo AB 106,832
--------------------------------------------------------------------------------------------------
27,000 Skand Enskilda BKN, Class A 318,202
--------------------------------------------------------------------------------------------------
3,770 Skandia Forsakrings AB 198,717
--------------------------------------------------------------------------------------------------
3,800 Trygg-hansa B 118,358
--------------------------------------------------------------------------------------------------
5,600 Volvo AB, Class B 149,401
-------------------------------------------------------------------------------------------------- ------------
Total 989,936
-------------------------------------------------------------------------------------------------- ------------
SWITZERLAND -- 1.0%
- --------------------------------------------------------------------------------------------------------------------
100 (a)ABB AG 133,048
--------------------------------------------------------------------------------------------------
50 (a)Baloise Holdings-REG Registered 89,073
--------------------------------------------------------------------------------------------------
1,500 Credit Suisse Group-Registered 219,351
--------------------------------------------------------------------------------------------------
260 Holderbank Financiere Glaris AG, Class B 226,666
--------------------------------------------------------------------------------------------------
170 Nestle S.A. 250,147
--------------------------------------------------------------------------------------------------
306 Novartis AG-Registered 488,896
--------------------------------------------------------------------------------------------------
32 (a)Roche Holding AG 286,380
--------------------------------------------------------------------------------------------------
205 UBS-Union Bank of Switzerland 260,959
--------------------------------------------------------------------------------------------------
327 Zurich Versicherungsgesellschaft 137,607
-------------------------------------------------------------------------------------------------- ------------
Total 2,092,127
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM -- 2.0%
- --------------------------------------------------------------------------------------------------------------------
18,100 BBA Group PLC 115,093
--------------------------------------------------------------------------------------------------
7,369 Barclays PLC 177,722
--------------------------------------------------------------------------------------------------
10,000 Bass PLC 143,557
--------------------------------------------------------------------------------------------------
8,587 Boc Group PLC 137,049
--------------------------------------------------------------------------------------------------
6,200 Boots Co. PLC 91,099
--------------------------------------------------------------------------------------------------
7,484 British Aerospace PLC 204,258
--------------------------------------------------------------------------------------------------
14,756 British Petroleum Co. PLC 201,864
--------------------------------------------------------------------------------------------------
10,000 British Sky Broadcasting Group PLC 74,312
--------------------------------------------------------------------------------------------------
20,065 Cadbury Schweppes PLC 208,410
--------------------------------------------------------------------------------------------------
18,100 Compass Group 216,124
--------------------------------------------------------------------------------------------------
20,710 EMI Group PLC 155,998
--------------------------------------------------------------------------------------------------
14,300 Energy Group PLC 153,481
--------------------------------------------------------------------------------------------------
9,355 GKN PLC 203,342
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
SHARES UNITS VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
15,000 (a)Gallaher Group PLC $ 81,067
--------------------------------------------------------------------------------------------------
17,450 General Electric Co. PLC 113,612
--------------------------------------------------------------------------------------------------
10,886 Glaxo Wellcome PLC 239,010
--------------------------------------------------------------------------------------------------
10,652 Granada Group PLC 152,377
--------------------------------------------------------------------------------------------------
13,004 Grand Metropolitan PLC 118,378
--------------------------------------------------------------------------------------------------
13,500 Marks & Spencer PLC 138,853
--------------------------------------------------------------------------------------------------
10,000 National Westminster Bank, PLC, London 151,663
--------------------------------------------------------------------------------------------------
12,000 Next 149,974
--------------------------------------------------------------------------------------------------
9,980 Pearson 139,056
--------------------------------------------------------------------------------------------------
11,300 PowerGen PLC 145,902
--------------------------------------------------------------------------------------------------
7,282 Reckitt & Colman PLC 106,137
--------------------------------------------------------------------------------------------------
16,400 Reed International PLC 174,636
--------------------------------------------------------------------------------------------------
4,284 Rio Tinto plc 51,732
--------------------------------------------------------------------------------------------------
8,000 Royal & Sun Alliance Insurance Group PLC 72,015
--------------------------------------------------------------------------------------------------
20,000 Shell Transport & Trading Co. 136,125
--------------------------------------------------------------------------------------------------
9,568 Siebe PLC 174,037
--------------------------------------------------------------------------------------------------
49,000 Smith & Nephew PLC 141,513
--------------------------------------------------------------------------------------------------
70 Smithkline Beecham PLC 650
--------------------------------------------------------------------------------------------------
19,514 Tomkins PLC 99,201
--------------------------------------------------------------------------------------------------
30,000 Vodafone Group PLC 200,641
--------------------------------------------------------------------------------------------------
4,350 Zeneca Group 138,853
-------------------------------------------------------------------------------------------------- ------------
Total 4,807,741
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN STOCKS 26,224,143
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $107,382,653) 124,495,751
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 46.5%
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 25.0%
- --------------------------------------------------------------------------------------------------------------------
(C)REPURCHASE AGREEMENT -- 6.8%
- --------------------------------------------------------------------------------------------------------------------
$16,005,000 BT Securities Corporation, 5.73%, dated 11/28/1997, due 12/1/1997 (at amortized cost) 16,005,000
-------------------------------------------------------------------------------------------------- ------------
UNITED STATES TREASURY SECURITIES -- 18.2%
- --------------------------------------------------------------------------------------------------------------------
1,800,000 United States Treasury Bill, 12/18/1997 1,797,477
--------------------------------------------------------------------------------------------------
7,000,000 United States Treasury Bond, 8.125%, 5/15/2021 8,710,870
--------------------------------------------------------------------------------------------------
8,473,000 United States Treasury Note, 5.75%, 8/15/2003 8,427,415
--------------------------------------------------------------------------------------------------
5,860,000 United States Treasury Note, 6.125%, 8/15/2007 5,976,204
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TREASURY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$5,500,000 United States Treasury Note, 6.25%, 2/15/2003 $5,596,195
--------------------------------------------------------------------------------------------------
12,000,000 United States Treasury Note, 6.50%, 10/15/2006 12,481,680
-------------------------------------------------------------------------------------------------- ------------
Total 42,989,841
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 58,994,841
-------------------------------------------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES -- 9.1%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 9.1%
- --------------------------------------------------------------------------------------------------------------------
614,053 Federal Home Loan Mortgage Corp., 9.50%, 6/1/2021 667,205
--------------------------------------------------------------------------------------------------
311,817 Federal Home Loan Mortgage Corp., 8.00%, 5/1/2006 320,978
--------------------------------------------------------------------------------------------------
488,707 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2027 490,784
--------------------------------------------------------------------------------------------------
310,632 Federal Home Loan Mortgage Corp., 7.50%, 10/1/2025 318,205
--------------------------------------------------------------------------------------------------
946,614 Federal Home Loan Mortgage Corp., 7.00%, 2/1/2026 952,237
--------------------------------------------------------------------------------------------------
915,259 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 935,568
--------------------------------------------------------------------------------------------------
435,639 Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 445,306
--------------------------------------------------------------------------------------------------
565,493 Federal Home Loan Mortgage Corp., 8.00%, 10/1/2010 585,285
--------------------------------------------------------------------------------------------------
791,224 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2011 800,371
--------------------------------------------------------------------------------------------------
143,535 Federal Home Loan Mortgage Corp., 7.00%, 4/1/2009 145,418
--------------------------------------------------------------------------------------------------
429,105 Federal Home Loan Mortgage Corp., 6.50%, 10/1/2010 428,166
--------------------------------------------------------------------------------------------------
612,067 Federal Home Loan Mortgage Corp., 6.50%, 5/1/2011 610,537
--------------------------------------------------------------------------------------------------
966,076 Federal Home Loan Mortgage Corp., 6.00%, 7/1/2011 948,040
--------------------------------------------------------------------------------------------------
300,547 Federal National Mortgage Association, 7.00%, 5/1/2001 303,553
--------------------------------------------------------------------------------------------------
475,487 Federal National Mortgage Association, 8.50%, 3/1/2025 498,072
--------------------------------------------------------------------------------------------------
423,302 Federal National Mortgage Association, 6.00%, 2/1/2003 419,466
--------------------------------------------------------------------------------------------------
1,303,871 Federal National Mortgage Association, 7.00%, 2/1/2024 1,315,280
--------------------------------------------------------------------------------------------------
930,643 Federal National Mortgage Association, 7.50%, 11/1/2010 952,746
--------------------------------------------------------------------------------------------------
122,572 Federal National Mortgage Association, 8.50%, 2/1/2025 128,394
--------------------------------------------------------------------------------------------------
761,002 Federal National Mortgage Association, 7.50%, 7/1/2025 778,840
--------------------------------------------------------------------------------------------------
436,226 Federal National Mortgage Association, 7.00%, 8/1/2025 438,817
--------------------------------------------------------------------------------------------------
469,958 Federal National Mortgage Association, 6.50%, 10/1/2025 462,810
--------------------------------------------------------------------------------------------------
1,113,391 Federal National Mortgage Association, 6.50%, 10/1/2025 1,094,141
--------------------------------------------------------------------------------------------------
914,948 Federal National Mortgage Association, 8.00%, 5/1/2027 947,145
--------------------------------------------------------------------------------------------------
990,000 Government National Mortgage Association, 7.00%, 11/20/2027 987,218
--------------------------------------------------------------------------------------------------
897,956 Government National Mortgage Association, 8.50%, 2/15/2022 948,467
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MORTGAGE-BACKED SECURITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$570,480 Government National Mortgage Association, 7.00%, 1/15/2024 $573,869
--------------------------------------------------------------------------------------------------
471,238 Government National Mortgage Association, 6.50%, 1/15/2024 466,379
--------------------------------------------------------------------------------------------------
224,441 Government National Mortgage Association, 7.00%, 5/15/2024 225,774
--------------------------------------------------------------------------------------------------
242,605 Government National Mortgage Association, 8.00%, 11/15/2024 252,006
--------------------------------------------------------------------------------------------------
479,331 Government National Mortgage Association, 7.50%, 3/15/2026 489,368
--------------------------------------------------------------------------------------------------
454,085 Government National Mortgage Association, 8.00%, 5/15/2025 471,113
--------------------------------------------------------------------------------------------------
419,125 Government National Mortgage Association, 8.00%, 7/15/2025 434,582
--------------------------------------------------------------------------------------------------
883,459 Government National Mortgage Association, 7.50%, 2/15/2026 905,272
--------------------------------------------------------------------------------------------------
639,460 Government National Mortgage Association, 9.00%, 11/15/2017 693,814
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTAGE-BACKED SECURITIES 21,435,226
-------------------------------------------------------------------------------------------------- ------------
HIGH YIELD BONDS -- 3.0%
- --------------------------------------------------------------------------------------------------------------------
AEROSPACE & DEFENSE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 50,250
-------------------------------------------------------------------------------------------------- ------------
AUTOMOBILE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 83,625
--------------------------------------------------------------------------------------------------
100,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 113,500
-------------------------------------------------------------------------------------------------- ------------
Total 197,125
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
175,000 First Nationwide Escrow, Sr. Sub. Note, 10.625%, 10/1/2003 195,563
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 701 PIK Pfd. Shares , 11.375% 82,718
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 600 PIK Pfd. Shares, Series A, 12.25% 84,300
--------------------------------------------------------------------------------------------------
100,000 (b)Fox/Liberty Networks, LLC, Sr. Disc. Note, 9.75%, 8/15/2007 62,750
--------------------------------------------------------------------------------------------------
(b)Sinclair Broadcast Group, Inc., 500 Pfd. Shares, $11.625 55,250
--------------------------------------------------------------------------------------------------
100,000 Sinclair Broadcast Group, Inc. Sr. Sub. Note, 10.00%, 9/30/2005 106,000
--------------------------------------------------------------------------------------------------
100,000 Sullivan Broadcasting, Sr. Sub. Note, 10.25%, 12/15/2005 107,000
-------------------------------------------------------------------------------------------------- ------------
Total 498,018
-------------------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
98,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 109,760
--------------------------------------------------------------------------------------------------
50,000 Outsourcing Solutions Inc., Sr. Sub. Note, 11.00%, 11/1/2006 56,000
--------------------------------------------------------------------------------------------------
67,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 76,548
-------------------------------------------------------------------------------------------------- ------------
Total 242,308
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
$100,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 $108,750
--------------------------------------------------------------------------------------------------
50,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 11/1/2005 52,875
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
100,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 107,750
--------------------------------------------------------------------------------------------------
150,000 (b)Diamond Cable Comm. PLC, Sr. Disc. Note, 0/11.75%, 2/15/2007 99,750
--------------------------------------------------------------------------------------------------
100,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 83,500
--------------------------------------------------------------------------------------------------
25,000 International Cabletel, Sr. Defd. Cpn. Note, 0/11.50%, 2/1/2006 19,188
--------------------------------------------------------------------------------------------------
100,000 International Cabletel, Sr. Disc. Note, 0/12.75%, 4/15/2005 82,500
--------------------------------------------------------------------------------------------------
Pegasus Communications Corp., 50 PIK Pfd. Shares, Series A, 12.75% 55,250
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Inc., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 54,750
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 54,750
--------------------------------------------------------------------------------------------------
200,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 153,500
--------------------------------------------------------------------------------------------------
100,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 65,500
-------------------------------------------------------------------------------------------------- ------------
Total 993,813
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 64,500
--------------------------------------------------------------------------------------------------
(a)Sterling Chemicals Holdings, Inc., 75 Warrants, 8/15/2008 2,850
--------------------------------------------------------------------------------------------------
50,000 Uniroyal Technology Corporation, Sr. Secd. Note, 11.75%, 6/1/2003 51,750
-------------------------------------------------------------------------------------------------- ------------
Total 119,100
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Floorcoverings., Sr. Sub. Note, 10.00%, 1/15/2007 51,875
--------------------------------------------------------------------------------------------------
50,000 (b)Glenoit Corporation, Sr. Sub. Note, 11.00%, 4/15/2007 54,250
-------------------------------------------------------------------------------------------------- ------------
Total 106,125
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
50,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 52,750
--------------------------------------------------------------------------------------------------
100,000 Hosiery Corp. Of America, Sr. Sub. Note, 13.75%, 8/1/2002 108,500
--------------------------------------------------------------------------------------------------
(a)Hosiery Corp. of America, 50 Common Shares 350
--------------------------------------------------------------------------------------------------
100,000 ICON Fitness Corp., Sr. Disc. Note, 0/14.00%, 11/15/2006 58,500
--------------------------------------------------------------------------------------------------
100,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 100,750
--------------------------------------------------------------------------------------------------
50,000 Renaissance Cosmetics, Inc., Sr. Note, 11.75%, 2/15/2004 47,250
--------------------------------------------------------------------------------------------------
75,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 78,750
-------------------------------------------------------------------------------------------------- ------------
Total 446,850
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONTAINER & GLASS PRODUCTS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
$50,000 Plastic Containers, Inc., Sr. Secd. Note, 10.00%, 12/15/2006 $ 53,250
-------------------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
100,000 Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 109,500
--------------------------------------------------------------------------------------------------
(a)ICF Kaiser International, 120 Warrants, 12/31/1998 45
-------------------------------------------------------------------------------------------------- ------------
Total 109,545
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)Fairchild Semiconductor, Sr. Sub., 10.125%, 3/15/2007 53,000
-------------------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 111,500
--------------------------------------------------------------------------------------------------
75,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 84,563
-------------------------------------------------------------------------------------------------- ------------
Total 196,063
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007 52,750
--------------------------------------------------------------------------------------------------
75,000 International Home Foods, Sr. Sub. Note, 10.375%, 11/1/2006 82,125
--------------------------------------------------------------------------------------------------
100,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 111,500
-------------------------------------------------------------------------------------------------- ------------
Total 246,375
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 80,250
--------------------------------------------------------------------------------------------------
75,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 82,125
-------------------------------------------------------------------------------------------------- ------------
Total 162,375
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
125,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 139,688
--------------------------------------------------------------------------------------------------
100,000 Tenet Healthcare, Sr. Sub. Note, 10.125%, 3/1/2005 108,625
-------------------------------------------------------------------------------------------------- ------------
Total 248,313
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 112,500
--------------------------------------------------------------------------------------------------
50,000 Continental Global, Inc., Sr. Note, 11.00%, 4/1/2007 53,750
--------------------------------------------------------------------------------------------------
75,000 Euramax International Plc, Sr. Sub. Note, 11.25%, 10/1/2006 81,563
--------------------------------------------------------------------------------------------------
50,000 International Knife & Saw, Sr. Sub. Note, 11.375%, 11/15/2006 53,750
-------------------------------------------------------------------------------------------------- ------------
Total 301,563
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
100,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 78,000
--------------------------------------------------------------------------------------------------
50,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 54,250
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LEISURE & ENTERTAINMENT -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$100,000 Premier Parks, Sr. Note, 12.00%, 8/15/2003 $111,500
--------------------------------------------------------------------------------------------------
50,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 53,000
--------------------------------------------------------------------------------------------------
100,000 Viacom Inc, Sub. Deb., 8.00%, 7/7/2006 100,000
-------------------------------------------------------------------------------------------------- ------------
Total 396,750
-------------------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 106,500
--------------------------------------------------------------------------------------------------
50,000 Clark Material Handling , Sr. Note, 10.75%, 11/15/2006 53,000
--------------------------------------------------------------------------------------------------
75,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 85,125
-------------------------------------------------------------------------------------------------- ------------
Total 244,625
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
75,000 Forcenergy Inc., Sr. Sub. Note, 9.50%, 11/1/2006 79,313
--------------------------------------------------------------------------------------------------
100,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 108,500
-------------------------------------------------------------------------------------------------- ------------
Total 187,813
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 112,500
--------------------------------------------------------------------------------------------------
50,000 Hollinger International, Sr. Sub. Note, 9.25%, 3/15/2007 52,000
-------------------------------------------------------------------------------------------------- ------------
Total 164,500
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
(a)(b)Bar Technologies, Inc., 50 Warrants, 4/01/2001 3,000
--------------------------------------------------------------------------------------------------
100,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 110,500
-------------------------------------------------------------------------------------------------- ------------
Total 113,500
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 52,750
--------------------------------------------------------------------------------------------------
75,000 Statia Terminals, 1st Mtg. Note, 11.75%, 11/15/2003 79,500
--------------------------------------------------------------------------------------------------
100,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 109,375
--------------------------------------------------------------------------------------------------
100,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 99,250
-------------------------------------------------------------------------------------------------- ------------
Total 340,875
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
100,000 Brooks Fiber Properties, Inc. Sr. Disc. Note, 0/10.875%, 3/1/2006 82,750
--------------------------------------------------------------------------------------------------
150,000 Cellular Communication, Sr. Disc. Note, 13.25% accrual, 8/15/2000 117,000
--------------------------------------------------------------------------------------------------
(a)Cellular Communications International, Inc., 150 Warrants, 8/15/2003 3,000
--------------------------------------------------------------------------------------------------
50,000 (b)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL VALUE
AMOUNT IN U.S.
OR SHARES DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$100,000 Intermedia Communications, Sr. Disc. Note, 0/11.25%, 7/15/2007 $ 69,000
--------------------------------------------------------------------------------------------------
100,000 McLeod, Sr. Disc. Note, 0/11.00%, 3/1/2007 69,500
--------------------------------------------------------------------------------------------------
50,000 (b)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
100,000 Millicom International, Sr. Disc. Note, 0/13.50%, 6/1/2006 73,000
--------------------------------------------------------------------------------------------------
(a)NEXTEL Communications, Inc., Class A, 116 Common Shares 2,929
--------------------------------------------------------------------------------------------------
75,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 65,063
--------------------------------------------------------------------------------------------------
50,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 51,875
--------------------------------------------------------------------------------------------------
59,000 Panamsat Corp., Deb., 12.75%, 4/15/2005 72,570
--------------------------------------------------------------------------------------------------
50,000 (b)Qwest Communications, Sr. Note, 10.875%, 4/1/2007 55,750
--------------------------------------------------------------------------------------------------
50,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 54,250
--------------------------------------------------------------------------------------------------
150,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 119,438
--------------------------------------------------------------------------------------------------
125,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 130,938
-------------------------------------------------------------------------------------------------- ------------
Total 1,078,813
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
100,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 108,500
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 1,212 PIK Pfd. Shares, Series A, 11.40% 132,714
-------------------------------------------------------------------------------------------------- ------------
Total 241,214
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 6,987,726
-------------------------------------------------------------------------------------------------- ------------
INVESTMENT GRADE BONDS -- 4.8%
- --------------------------------------------------------------------------------------------------------------------
BANKING -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
500,000 Exp-Imp BK Korea, Note, 6.50%, 5/15/2000 477,421
--------------------------------------------------------------------------------------------------
250,000 National Bank of Canada, Sub. Note, 8.125%, 8/15/2004 270,573
--------------------------------------------------------------------------------------------------
500,000 Santander Finance Issuances, Bank Guarantee, 7.875%, 4/15/2005 532,515
-------------------------------------------------------------------------------------------------- ------------
Total 1,280,509
-------------------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 Philip Morris Cos., Inc., Deb., 6.00%, 7/15/2001 48,941
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 SCI Television, Sr. Secd. Note, 11.00%, 6/30/2005 520,895
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
460,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 546,779
--------------------------------------------------------------------------------------------------
250,000 TKR Cable Inc., 10.50%, 10/30/2007 278,200
-------------------------------------------------------------------------------------------------- ------------
Total 824,979
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
VALUE
PRINCIPAL IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CHEMICALS & PLASTICS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
$500,000 (b)Bayer Corp., Deb., 6.50%, 10/1/2002 $504,365
-------------------------------------------------------------------------------------------------- ------------
EDUCATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Boston University, 7.625%, 7/15/2097 539,569
-------------------------------------------------------------------------------------------------- ------------
FINANCIAL INTERMEDIARIES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
450,000 DLJ, Note, 6.875%, 11/1/2005 453,335
--------------------------------------------------------------------------------------------------
450,000 Green Tree Financial Corp, Sr. Sub. Note, 10.25%, 6/1/2002 516,848
--------------------------------------------------------------------------------------------------
300,000 Lehman Brothers, Inc., Sr. Sub. Note, 7.375%, 1/15/2007 308,892
--------------------------------------------------------------------------------------------------
150,000 Salomon, Inc., Note, 7.20%, 2/1/2004 154,011
-------------------------------------------------------------------------------------------------- ------------
Total 1,433,086
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Repap Wisconsin, Inc., 2nd Priority Sr. Secd. Note, 9.875%, 5/1/2006 545,950
-------------------------------------------------------------------------------------------------- ------------
GOVERNMENT AGENCY -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
840,000 TVA 11/15/2029 773,413
-------------------------------------------------------------------------------------------------- ------------
INSURANCE -- 0.8%
- --------------------------------------------------------------------------------------------------------------------
300,000 American General Corp., S.F. Deb., 9.625%, 2/1/2018 315,798
--------------------------------------------------------------------------------------------------
225,000 Conseco, Inc., Sr. Note, 10.50%, 12/15/2004 270,176
--------------------------------------------------------------------------------------------------
250,000 Sunamerica Inc, Medium Term Note, 7.34%, 8/30/2005 260,775
--------------------------------------------------------------------------------------------------
450,000 Sunamerica, Inc., Sr. Note, 9.00%, 1/15/1999 464,846
--------------------------------------------------------------------------------------------------
250,000 (b)USF&G Cap, 8.312%, 7/1/2046 267,475
-------------------------------------------------------------------------------------------------- ------------
Total 1,579,070
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Viacom, Inc., Sr. Note, 7.75%, 6/1/2005 505,660
-------------------------------------------------------------------------------------------------- ------------
METALS & MINING -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
275,000 Barrick Gold Corp., Deb., 7.50%, 5/1/2007 289,944
--------------------------------------------------------------------------------------------------
250,000 Santa Fe Pacific Gold Co, Note, 8.375%, 7/1/2005 273,830
-------------------------------------------------------------------------------------------------- ------------
Total 563,774
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
250,000 News Amer Hldgs, Sr. Note, 7.50%, 3/1/2000 255,578
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
200,000 Loewen Group Int'l, Sr. Note, 8.25%, 4/15/2003 207,618
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
PRINCIPAL
AMOUNT OR
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
INVESTMENT GRADE BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SOVEREIGN GOVERNMENT -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
$250,000 (b)Freeport Terminal (Malta), Gtd. Global Note, 7.50%, 3/29/2009 $262,433
--------------------------------------------------------------------------------------------------
250,000 Republic of South Africa, Global Bond Deb., 9.625%, 12/15/1999 264,375
--------------------------------------------------------------------------------------------------
535,000 Republic of Colombia, Note, 7.25%, 2/15/2003 510,658
-------------------------------------------------------------------------------------------------- ------------
Total 1,037,466
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
500,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 576,375
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
100,000 Cajun Electric Power, 9.52%, 3/15/2019 105,828
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENT GRADE BONDS 11,303,076
-------------------------------------------------------------------------------------------------- ------------
FOREIGN BONDS -- 4.6%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIAN DOLLAR -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
405,000 Federal National Mortgage Association, 6.50%, 7/10/2002 282,258
--------------------------------------------------------------------------------------------------
213,000 Queensland Treas Global, Local Government Guarantee, Notes, Deb., 10.50%, 5/15/2003 174,347
--------------------------------------------------------------------------------------------------
310,000 West Aust T Corp, Local Government Guarantee, 8.00%, 7/15/2003 229,903
-------------------------------------------------------------------------------------------------- ------------
Total 686,508
-------------------------------------------------------------------------------------------------- ------------
BELGIAN FRANC -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
2,570,000 Belgian Government, Bond, 6.50%, 3/31/2005 75,120
-------------------------------------------------------------------------------------------------- ------------
CANADIAN DOLLAR -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
569,000 Canada Government, Deb., 6.50%, 6/1/2004 422,662
--------------------------------------------------------------------------------------------------
400,000 Ontario Hydro, 9.00%, 6/24/2002 322,252
--------------------------------------------------------------------------------------------------
546,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 432,292
-------------------------------------------------------------------------------------------------- ------------
Total 1,177,206
-------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
1,200,000 Denmark, 8.00%, 5/15/2003 200,298
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,352,000 France O.a.t., Bond, 7.25%, 4/25/2006 258,569
--------------------------------------------------------------------------------------------------
319,000 France O.a.t., Bond, 7.50%, 4/25/2005 401,763
-------------------------------------------------------------------------------------------------- ------------
Total 660,332
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DEUTSCHE MARK -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
$727,000 DG-HYPBK 5.75%, 1/22/2007 $416,783
--------------------------------------------------------------------------------------------------
42,000,000 KFW International Finance, 6.00%, 11/29/1999 364,137
--------------------------------------------------------------------------------------------------
500,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 303,374
--------------------------------------------------------------------------------------------------
800,000 KFW International Finance, 7.00%, 5/12/2000 143,073
--------------------------------------------------------------------------------------------------
400,000 Tennessee Valley Authority - Global Bond, 6.375%, 9/18/2006 237,823
--------------------------------------------------------------------------------------------------
1,050,000 Treuhandanstalt, 7.75%, 10/1/2002 663,224
-------------------------------------------------------------------------------------------------- ------------
Total 2,128,414
-------------------------------------------------------------------------------------------------- ------------
GREEK DRACHMA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
181,800,000 Hellenic Republic, FRN, 14.00%, 10/23/2003 624,947
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
265,000,000 BTPS, Bond, 10.50%, 11/1/2000 174,394
--------------------------------------------------------------------------------------------------
425,000,000 BTPS, Deb., 12.00%, 5/18/1999 267,657
--------------------------------------------------------------------------------------------------
1,225,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 860,122
-------------------------------------------------------------------------------------------------- ------------
Total 1,302,173
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
10,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 90,842
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS GUILDER -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
285,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 151,083
--------------------------------------------------------------------------------------------------
400,000 Bank Ned Gemeenten, Bond, 7.75%, 12/20/2004 227,444
--------------------------------------------------------------------------------------------------
220,000 Lkb-global Bd, Bank Guarantee, 6.00%, 1/25/2006 127,808
--------------------------------------------------------------------------------------------------
300,000 Netherlands Government, 6.00%, 1/15/2006 157,148
-------------------------------------------------------------------------------------------------- ------------
Total 663,483
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
205,000 New Zealand Government, 8.00%, 2/15/2001 130,459
--------------------------------------------------------------------------------------------------
270,000 New Zealand Government, Bond, 8.00%, 7/15/1998 167,326
-------------------------------------------------------------------------------------------------- ------------
Total 297,785
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,429,000 NGB, 9.00%, 1/31/99 208,804
--------------------------------------------------------------------------------------------------
1,620,000 Norwegian Government, Bond, 7.00%, 5/31/2001 239,574
--------------------------------------------------------------------------------------------------
1,215,000 Norwegian Government., Foreign Government Guarantee, 5.75%, 11/30/2004 172,061
-------------------------------------------------------------------------------------------------- ------------
Total 620,439
-------------------------------------------------------------------------------------------------- ------------
PORTUGAL -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
58,000,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 367,505
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED GROWTH FUND
FOREIGN VALUE
CURRENCY PAR IN U.S.
AMOUNT DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SPANISH PESETA -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
$40,000,000 Spanish Government, 10.00%, 2/28/2005 $337,804
--------------------------------------------------------------------------------------------------
30,000,000 Spanish Government, Bond, 8.80%, 4/30/2006 242,267
--------------------------------------------------------------------------------------------------
16,740,000 Spanish Government, Bond, 9.40%, 4/30/1999 119,238
--------------------------------------------------------------------------------------------------
15,030,000 Spanish Government, Deb., 10.10%, 2/28/2001 115,883
-------------------------------------------------------------------------------------------------- ------------
Total 815,192
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
1,000,000 Stadshypotekskas, Foreign Government Guarantee, Series 1551, 7.50%, 3/17/1999 132,257
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
366,000 British Gas PLC, 8.875%, 7/8/2008 686,619
--------------------------------------------------------------------------------------------------
145,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 273,742
--------------------------------------------------------------------------------------------------
180,000 U.K. Treasury, Bond, 7.50%, 12/7/2006 323,477
-------------------------------------------------------------------------------------------------- ------------
Total 1,283,838
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 11,126,339
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $107,515,372) 109,847,208
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $214,898,025) (D) $234,342,959
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
* The Fund purchases index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividends and capital
gain payments to shareholders and corporate actions while maintaining
exposure to the Index and minimize trading costs. The underlying face
amount, at value of open index futures contracts is $1,727,400 at November
30, 1997, which represents 0.7% of net assets. Taking into consideration
these open index futures contracts, the Fund's effective total exposure to
stocks is 53.4%, and increasing the total exposure to small company stocks
is 12.0%.
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $1,727,711 which represents 0.7% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $215,116,152.
The net unrealized appreciation of investments on a federal tax basis
amounts to $19,226,807 which is comprised of $23,683,512 appreciation and
$4,456,705 depreciation at November 30, 1997.
Certain securities may be classified in multiple categorizations based on
purpose of individual purchases.
Note: The categories of investments are shown as a percentage of net
assets ($236,264,472) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depositary Receipt FRN -- Floating Rate Note GTD -- Guaranty LLC
- -- Limited Liability Corporation PIK -- Payment in Kind PLC -- Public Limited
Company PP -- Principal Payment SPA -- Standby Purchase Agreement TRANs -- Tax
and Revenue Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $214,898,025 and tax cost $215,116,152) $234,342,959
- ----------------------------------------------------------------------------------------------
Income receivable 1,533,045
- ----------------------------------------------------------------------------------------------
Receivable for investments sold 522,985
- ----------------------------------------------------------------------------------------------
Receivable for shares sold 234,112
- ----------------------------------------------------------------------------------------------
Deferred organizational costs 53,077
- ----------------------------------------------------------------------------------------------
Other assets 12,867
- ---------------------------------------------------------------------------------------------- ------------
Total assets 236,699,045
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------
Payable for investments purchased $ 210,169
- -------------------------------------------------------------------------
Payable for shares redeemed 69,009
- -------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 1,414
- -------------------------------------------------------------------------
Payable to bank 1,619
- -------------------------------------------------------------------------
Payable for taxes withheld 4,790
- -------------------------------------------------------------------------
Payable for daily variation margin 1,000
- -------------------------------------------------------------------------
Accrued expenses 146,572
- ------------------------------------------------------------------------- ------------
Total liabilities 434,573
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS for 18,057,133 shares outstanding $236,264,472
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------
Paid in capital $200,110,742
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments, translation of assets and
liabilities in foreign currency, and futures contracts 19,449,151
- ----------------------------------------------------------------------------------------------
Accumulated net realized gain on investments, foreign currency transactions, and futures
contracts 16,371,228
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 333,351
- ---------------------------------------------------------------------------------------------- ------------
Total Net Assets $236,264,472
- ---------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ----------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ----------------------------------------------------------------------------------------------
$163,518,641 [DIVIDED BY] 12,486,120 shares outstanding $13.10
- ---------------------------------------------------------------------------------------------- -----------
SELECT SHARES:
- ----------------------------------------------------------------------------------------------
$72,745,831 [DIVIDED BY] 5,571,013 shares outstanding $13.06
- ---------------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MANAGED GROWTH FUND
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $68,871) $1,678,984
- -------------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $4,389) (net of foreign taxes withheld of $8,988) 7,420,819
- ------------------------------------------------------------------------------------------- ------------
Total income 9,099,803
- --------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------------
Investment advisory fee $1,653,493
- --------------------------------------------------------------------------
Administrative personnel and services fee 166,775
- --------------------------------------------------------------------------
Custodian fees 104,570
- --------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 182,213
- --------------------------------------------------------------------------
Directors'/Trustees' fees 6,529
- --------------------------------------------------------------------------
Auditing fees 16,794
- --------------------------------------------------------------------------
Legal fees 3,602
- --------------------------------------------------------------------------
Portfolio accounting fees 89,327
- --------------------------------------------------------------------------
Distribution services fee -- Select Shares 534,330
- --------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 373,054
- --------------------------------------------------------------------------
Shareholder services fee -- Select Shares 178,110
- --------------------------------------------------------------------------
Share registration costs 42,380
- --------------------------------------------------------------------------
Printing and postage 51,807
- --------------------------------------------------------------------------
Insurance premiums 3,351
- --------------------------------------------------------------------------
Taxes 3,004
- --------------------------------------------------------------------------
Miscellaneous 19,880
- -------------------------------------------------------------------------- ------------
Total expenses 3,429,219
- --------------------------------------------------------------------------
Waivers --
- ----------------------------------------------------------
Waiver of investment advisory fee $ (129,366)
- ----------------------------------------------------------
Waiver of distribution services fee -- Select Shares (178,110)
- ----------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (298,444)
- ---------------------------------------------------------- ------------
Total waivers (605,920)
- -------------------------------------------------------------------------- ------------
Net expenses 2,823,299
- ------------------------------------------------------------------------------------------- ------------
Net investment income 6,276,504
- ------------------------------------------------------------------------------------------- ------------
Net realized gain on investments, foreign currency transactions, and futures contracts
(net of foreign taxes withheld of $373) 15,812,213
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments, translation of assets and
liabilities in foreign currency, and futures contracts 5,706,798
- ------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments, foreign currency, and futures contracts 21,519,011
- ------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $27,795,515
- ------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------
OPERATIONS --
- --------------------------------------------------------------------------
Net investment income $6,276,504 $5,251,886
- --------------------------------------------------------------------------
Net realized gain on investments , foreign currency transactions, and futures
contracts ($16,550,986 and $4,840,279, respectively,
as computed for federal tax purposes) 15,812,213 5,108,532
- --------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments,
translation of assets and liabilities in foreign currency, and futures
contracts 5,706,798 7,820,439
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 27,795,515 18,180,857
- -------------------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
- --------------------------------------------------------------------------
Distributions from net investment income
- --------------------------------------------------------------------------
Institutional Shares (4,729,122) (3,611,245)
- --------------------------------------------------------------------------
Select Shares (1,781,932) (1,261,400)
- --------------------------------------------------------------------------
Distributions from net realized gains on investments, foreign currency
transactions, and futures contracts
- --------------------------------------------------------------------------
Institutional Shares (3,327,990) (1,417,081)
- --------------------------------------------------------------------------
Select Shares (1,494,754) (583,800)
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to shareholders (11,333,798) (6,873,526)
- -------------------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS --
- --------------------------------------------------------------------------
Proceeds from sale of shares 104,253,170 111,287,688
- --------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 8,122,432 4,340,056
- --------------------------------------------------------------------------
Cost of shares redeemed (89,036,194) (26,142,343)
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 23,339,408 89,485,401
- -------------------------------------------------------------------------- ------------ ------------
Change in net assets 39,801,125 100,792,732
- --------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------
Beginning of period 196,463,347 95,670,615
- -------------------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of $333,351 and
$1,177,636, respectively) $236,264,472 $196,463,347
- -------------------------------------------------------------------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED GROWTH FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Growth Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to seek capital appreciation.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
With respect to valuation of foreign securities, trading in foreign countries
may be completed at times which vary from the closing of the New York Stock
Exchange. Therefore, foreign securities are valued at the latest closing price
on the exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions. The following reclassifications have been made to the financial
statements.
INCREASE (DECREASE)
- ------------------------------------------
ACCUMULATED
NET REALIZED UNDISTRIBUTED NET
GAIN INVESTMENT INCOME
- ---------------- ----------------------
$609,735 ($609,735)
Net investment income, net realized gains/losses, and net assets were not
affected by reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. For the period ended November 30, 1997, the Fund had
realized gains of $71,248 on futures contracts. As of November 30, 1997, the
Fund had the following outstanding futures contracts:
EXPIRATION CONTRACTS UNREALIZED
DATE TO RECEIVE POSITION APPRECIATION
- ------------- -------------- ---------- ------------
December 1997 8 Russell 2000 Long $8,190
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The fund enters into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. Risks may
arise upon entering these transactions from the potential inability of
counter-parts to meet the terms of their commitments and from unanticipated
movements in security prices or foreign exchange rates. The foreign currency
transactions are adjusted by the daily exchange rate of the underlying currency
and any gains or losses are recorded for financial statement purpose as
unrealized until the settlement date.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION
SOLD DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
- ------------- ----------------- --------------- ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Belgian Franc December 1, 1997 1,775,310 $49,924 $48,793 $(1,131)
French Franc December 31, 1997 132,647 22,769 22,469 $(283)
-------
Total $(1,414)
-------
</TABLE>
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
- ----------------------------------------------- --------------------- ------------------
<S> <C> <C>
Chilectra S.A., ADR 2/28/1996 $16,284
Grupo Financiero Bancomer, S.A. de C.V., Class B 11/6/1995 - 1/29/1996 33,772
Fox/Liberty Networks, LLC 8/15/1997 - 9/5/1997 63,768
Sinclair Broadcast Group, Inc. 4/2/1996 99,500
Diamond Cable Comm. PLC 2/21/1997 - 3/12/1997 96,763
Glenoit Corporation 3/26//1997 49,905
Fairchild Semiconductor 3/6/1997 50,000
Bar Technologies, Inc. 8/28/1996 2,794
Hermes Europe Reiltel 8/14/1997 51,094
Metronet Communications 7/18/1997 50,000
Qwest Communications 3/25/1997 50,000
Bayer Corp. 5/21/1996 - 7/1/1997 493,905
USF&G Cap 7/3/1997 250,000
Freeport Terminal (Malta) 5/12/1995 247,740
</TABLE>
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------
1997 1996
--------------------------- ---------------------------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 5,853,857 $ 72,401,751 6,436,864 $74,361,820
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 420,257 5,082,597 233,538 2,669,402
- ------------------------------------------------
Shares redeemed $(4,927,672) $(60,980,593) $(1,460,401) $(16,943,185)
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from
Institutional Share transactions 1,346,442 $16,503,755 5,210,001 $60,088,037
- ------------------------------------------------ ----------- ------------ ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------
1997 1996
--------------------------- ---------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 2,599,873 $ 31,851,419 3,200,775 $36,925,868
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions declared 252,195 3,039,835 146,513 1,670,654
- ------------------------------------------------
Shares redeemed $(2,215,315) $(28,055,601) $(792,466) $(9,199,158)
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from
Select Share transactions 636,753 $6,835,653 2,554,822 $29,397,364
- ------------------------------------------------ ----------- ------------ ----------- ------------
Net change resulting from
share transactions 1,983,195 $23,339,408 7,764,823 $89,485,401
- ------------------------------------------------ ----------- ------------ ----------- ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses of up to
0.75% of Select Shares average net assets, annually, to compensate FSC. The
distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $88,474 were borne initially by the Adviser. The Fund
has reimbursed the Adviser for these expenses. These expenses have been deferred
and are being amortized over the five year period following the Fund's effective
date. For the year ended November 30, 1997, the Fund expensed $22,899 of
organizational expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $291,184,068
- ------------------------------------------------ ------------
SALES $278,559,873
- ------------------------------------------------ ------------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- ------------------------------------------ --------------- ------------------------------------------ ---------------
<S> <C> <C> <C>
Aerospace & Military Technology 0.2 Health Care 5.0
Agency 0.8 Industrial Components 0.1
Appliances & Household Products 0.1 Industrial Products & Equipment 0.1
Automotive 0.4 Insurance 1.0
Banking 2.2 Leisure & Entertainment 0.4
Basic Industry 2.0 Leisure & Tourism 0.2
Beverage & Tobacco 0.2 Machinery & Engineering 0.4
Broadcast Radio & T.V. 0.4 Machinery & Equipment 0.1
Broadcasting & Publishing 0.4 Merchandising 0.3
Building Materials & Components 0.1 Metals & Mining 0.1
Business Equipment & Services 0.1 Metals -- Steel 0.1
Cable Television 0.8 Miscellaneous Materials & Commodities 0.4
Chemicals 0.4 Multi-Industry 0.2
Chemicals & Plastics 0.2 Oil & Gas 0.1
Consumer Durables 1.6 Printing & Publishing 0.2
Consumer Non-Durables 3.0 Producer Manufacturing 3.1
Consumer Products 0.2 Real Estate 0.6
Data Processing & Reproduction 0.1 Recreation, Other Consumer Goods 0.3
Ecological Services & Equipment 0.1 Retail Trade 3.0
Education 0.2 Services 3.6
Electrical & Electronics 0.5 Soverign 2.5
Electronics Components, Instruments 0.4 Soverign Government 0.9
Energy Equipment & Services 0.1 State & Provincial 0.1
Energy Minerals 3.7 Surface Transportation 0.4
Energy Sources 0.6 Technology 6.3
Finance 6.9 Telecommunications 0.7
Financial Intermediaries 0.9 Telecommunications & Cellular 0.5
Financial Services 0.4 Textiles & Apparel 0.1
Food & Drug Retailers 0.1 Transportation 0.8
Food & Household Products 0.6 Treasury Securities 18.2
Forest Products & Paper 0.4 Utilities 3.5
Government Agency 9.4 Utilities -- Electrical & Gas 0.3
Health & Personal Care 1.2
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Growth Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Growth Fund (an investment portfolio of Managed Series Trust,
a Massachusetts business trust), including the schedule of portfolio
investments, as of November 30, 1997, and the related statement of operations
for the year then ended, and the statement of changes in net assets, and the
financial highlights (see pages 2 and 20 of the prospectus) for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out alternative auditing
procuedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Growth Fund, an investment portfolio of Managed Series Trust,
as of November 30, 1997, the results of its operations for the year then ended,
and the changes in its net assets and its financial highlights for the periods
presented in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
APPENDIX
STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS
AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB -- Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.
B -- Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.
CCC -- Debt rated CCC has currently identifiable vulnerability to default and is
dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC -- The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.
C -- The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI -- The rating CI is reserved for income bonds on which no interest is being
paid.
D -- Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The D rating also will be used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
BAA -- Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
BA -- Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA -- Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA -- Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA -- Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A -- Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds and, therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC -- Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC -- Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C -- Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D -- Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.
NR -- NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.
[LOGO OMITTED] FEDERATED INVESTORS
FEDERATED MANAGED GROWTH FUND
Select Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust, an Open-End
Management Investment Company
FEDERATED MANAGED
GROWTH FUND
SELECT SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT
PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors
Cusip 56166K602
3122011A-SEL (1/98)
[RECYCLE LOGO]
RECYCLED PAPER
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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Institutional Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 6
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Institutional Shares 14
Administration of the Fund 14
Brokerage Transactions 15
Net Asset Value 15
Investing in Institutional Shares 15
Share Purchases 15
Minimum Investment Required 16
What Shares Cost 16
Systematic Investment Program 16
Confirmations and Account Statements 16
Dividends 16
Capital Gains 16
Redeeming Institutional Shares 17
Through a Financial Institution 17
Telephone Redemption 17
Written Requests 17
Systematic Withdrawal Program 17
Accounts with Low Balances 18
Shareholder Information 18
Voting Rights 18
Tax Information 18
Federal Income Tax 18
State and Local Taxes 18
Performance Information 18
Other Classes of Shares 19
Financial Highlights -- Select Shares 20
Financial Statements 21
Report of Independent Public Accountants 59
Appendix 60
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) None Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption proceeds, as applicable)
None Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.43%
12b-1 Fee None
Total Other Expenses 0.62%
Shareholder Services Fee (after waiver)(2) 0.05%
Total Operating Expenses(3) 1.05%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.75%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholders services fee. The shareholder
service provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 1.57% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see Investing in Institutional Shares and "Trust
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE
- --------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 11
3 Years $ 33
5 Years $ 58
10 Years $128
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 59.
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.52 $11.59 $9.82 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.30 0.33 0.35 0.17
- ---------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.43 1.24 1.77 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from investment operations 1.73 1.57 2.12 (0.08)
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from net investment income (0.31) (0.38) (0.33) (0.10)
- ---------------------------------------------
Distributions from net realized
gain on investments and
foreign currency transactions (0.36) (0.26) (0.02) --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.67) (0.64) (0.35) (0.10)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.58 $12.52 $11.59 $ 9.82
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 14.40% 14.13% 21.96% (0.87%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.05% 1.05% 1.00% 0.89%*
- ---------------------------------------------
Net investment income 2.27% 2.96% 3.42% 3.42%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.52% 0.88% 1.71% 1.72%*(d)
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) $76,271 $49,715 $25,611 $15,696
- ---------------------------------------------
Average commission rate paid(e) $0.0069 $0.0037 -- --
- ---------------------------------------------
Portfolio turnover 115% 86% 139% 77%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994, the
Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) The adviser waived $6,858 of the investment advisory fee, which represents
0.11% of average net assets, to comply with certain state expense
limitations. The remainder of the waiver/reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
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.
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 20% 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 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.
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 Portfolio 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.
ACCEPTABLE INVESTMENTS
EQUITY SECURITIES
Common stocks represent ownership interest in a corporation. Unlike bonds, which
are debt securities, common stocks have neither fixed maturity dates nor fixed
schedules of promised payments. Foreign stocks are equity securities of foreign
issuers.
FOREIGN SECURITIES
The foreign bonds in which the Fund invests are rated within the four highest
ratings for bonds by Moody's Investors Service, Inc. ("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.
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, 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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the
U.S. government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the
residual income from the underlying investments after payments are made to the
other classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested.
The Fund will invest only in CMOs which are rated AAA or Aaa by an NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed-income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's (Aaa, Aa, A, or Baa), Standard & Poor's (AAA, AA, A, or
BBB), or Fitch Investors Service, Inc. ("Fitch") (AAA, AA, A, or
BBB);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard &
Poor's or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest 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 20% 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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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 Adviser receives an annual investment advisory fee equal to 0.75% of the
Fund's average daily net assets. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approxiamtely 4,000 financial institutions nationwide.
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:
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 been a porfolio
manager of the Fund 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.
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 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 Masters 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.
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.
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 a Portfolio 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.
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.I.A. concentrating
in Finance 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 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 Michael 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.
Michael 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
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
FEE DAILY NET ASSETS
- -------- ------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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 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
Aggressive 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
Aggressive 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 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 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
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 quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL 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 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 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.
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 59.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.50 $11.59 $ 9.80 $10.00
- --------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------
Net investment income 0.18 0.28 0.17 0.13
- --------------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.46 1.19 1.89 (0.25)
- -------------------------------------------------- ------ ------ ------ ------
Total from
investment operations 1.64 1.47 2.06 (0.12)
- -------------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- --------------------------------------------------
Distributions from
net investment income (0.22) (0.30) (0.25) (0.08)
- --------------------------------------------------
Distributions from net realized gain
on investments and foreign
currency transactions (0.36) (0.26) (0.02) --
- -------------------------------------------------- ------ ------ ------ ------
Total distributions (0.58) (0.56) (0.27) (0.08)
- -------------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.56 $12.50 $11.59 $ 9.80
- -------------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 13.66% 13.22% 21.36% (1.20%)
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------
Expenses 1.75% 1.75% 1.75% 1.64%*
- --------------------------------------------------
Net investment income 1.29% 2.26% 2.65% 2.67%*
- --------------------------------------------------
Expense waiver/reimbursement(c) 0.57% 0.93% 1.71% 1.97%*(d)
- --------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets, end of period (000 omitted) $45,514 $31,390 $12,342 $1,673
- --------------------------------------------------
Average commission rate paid(e) $0.0069 $0.0037 -- --
- --------------------------------------------------
Portfolio turnover 115% 86% 139% 77%
- --------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994 the
Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) The adviser waived $6,858 of the investment advisory fee, which represents
0.11% of average net assets, to comply with certain state expense
limitations. The remainder of the waiver/reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
<S> <C> <C>
*STOCKS -- 70.0%
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- 20.8%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
16,800 Archer-Daniels-Midland Co. $ 359,100
--------------------------------------------------------------------------------------------------
2,900 Dow Chemical Co. 286,375
--------------------------------------------------------------------------------------------------
17,800 LTV Corporation 198,025
--------------------------------------------------------------------------------------------------
10,300 Louisiana-Pacific Corp. 207,931
-------------------------------------------------------------------------------------------------- ------------
Total 1,051,431
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
3,400 Eastman Kodak Co. 206,125
--------------------------------------------------------------------------------------------------
4,100 General Motors Corp., Class H 274,700
--------------------------------------------------------------------------------------------------
2,800 General Motors Corp. 170,800
--------------------------------------------------------------------------------------------------
9,700 Rubbermaid, Inc. 235,225
-------------------------------------------------------------------------------------------------- ------------
Total 886,850
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
2,300 CPC International, Inc. 237,762
--------------------------------------------------------------------------------------------------
13,100 PepsiCo, Inc. 483,063
--------------------------------------------------------------------------------------------------
4,200 Philip Morris Cos., Inc. 182,700
--------------------------------------------------------------------------------------------------
5,000 RJR Nabisco Holdings Corp. 182,188
--------------------------------------------------------------------------------------------------
12,700 Russell Corp. 388,144
--------------------------------------------------------------------------------------------------
6,100 Sara Lee Corp. 322,538
--------------------------------------------------------------------------------------------------
8,800 Unilever N.V. 510,950
-------------------------------------------------------------------------------------------------- ------------
Total 2,307,345
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
2,900 Atlantic Richfield Co. 236,350
--------------------------------------------------------------------------------------------------
4,700 Chevron Corp. 376,881
--------------------------------------------------------------------------------------------------
5,900 Exxon Corp. 359,900
--------------------------------------------------------------------------------------------------
10,000 Occidental Petroleum Corp. 296,875
--------------------------------------------------------------------------------------------------
4,000 Royal Dutch Petroleum Co., ADR 210,750
--------------------------------------------------------------------------------------------------
11,600 Sun Co., Inc. 469,075
--------------------------------------------------------------------------------------------------
6,600 Texaco, Inc. 372,900
--------------------------------------------------------------------------------------------------
11,700 USX-Marathon Group 400,725
--------------------------------------------------------------------------------------------------
8,500 YPF Sociedad Anonima, ADR 285,281
-------------------------------------------------------------------------------------------------- ------------
Total 3,008,737
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
5,600 Allmerica Financial Corp. $ 271,600
--------------------------------------------------------------------------------------------------
3,200 Allstate Corp. 274,800
--------------------------------------------------------------------------------------------------
7,000 Bear Stearns Cos., Inc. 290,500
--------------------------------------------------------------------------------------------------
6,600 Block (H&R), Inc. 270,600
--------------------------------------------------------------------------------------------------
7,300 (a)Boston Properties, Inc. 238,162
--------------------------------------------------------------------------------------------------
2,800 CIGNA Corp. 468,300
--------------------------------------------------------------------------------------------------
1,200 General RE Corp. 238,200
--------------------------------------------------------------------------------------------------
5,200 Marsh & McLennan Cos., Inc. 387,075
--------------------------------------------------------------------------------------------------
5,400 Morgan Stanley, Dean Witter, Discover & Co. 293,288
--------------------------------------------------------------------------------------------------
5,700 Travelers Group, Inc. 287,850
-------------------------------------------------------------------------------------------------- ------------
Total 3,020,375
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 2.3%
- --------------------------------------------------------------------------------------------------------------------
5,100 Abbott Laboratories 331,500
--------------------------------------------------------------------------------------------------
15,800 (a)Beverly Enterprises, Inc. 268,600
--------------------------------------------------------------------------------------------------
6,200 Bristol-Myers Squibb Co. 580,475
--------------------------------------------------------------------------------------------------
2,800 Merck & Co., Inc. 264,775
--------------------------------------------------------------------------------------------------
8,100 (a)Perrigo Co. 115,425
--------------------------------------------------------------------------------------------------
13,800 Pharmacia & Upjohn, Inc. 465,750
--------------------------------------------------------------------------------------------------
4,900 Smithkline Beecham, ADR 243,163
--------------------------------------------------------------------------------------------------
9,500 U.S. Surgical Corp. 250,563
--------------------------------------------------------------------------------------------------
4,500 United Healthcare Corp. 234,281
-------------------------------------------------------------------------------------------------- ------------
Total 2,754,532
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
15,500 ITT Industries, Inc. 492,125
--------------------------------------------------------------------------------------------------
9,900 Ingersoll-Rand Co. 404,663
--------------------------------------------------------------------------------------------------
6,900 Johnson Controls, Inc. 316,106
--------------------------------------------------------------------------------------------------
9,700 (a)Lexmark International. Group, Class A 309,188
--------------------------------------------------------------------------------------------------
2,000 Loews Corp. 212,250
--------------------------------------------------------------------------------------------------
4,800 PACCAR, Inc. 264,000
-------------------------------------------------------------------------------------------------- ------------
Total 1,998,332
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
5,700 Dayton-Hudson Corp. 378,694
--------------------------------------------------------------------------------------------------
36,100 (a)K Mart Corp. 453,506
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
14,800 Wal-Mart Stores, Inc. $ 591,075
-------------------------------------------------------------------------------------------------- ------------
Total 1,423,275
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
2,000 ABB AB, ADR 248,000
--------------------------------------------------------------------------------------------------
6,500 Browning-Ferris Industries, Inc. 231,969
--------------------------------------------------------------------------------------------------
1,900 News Corp., Ltd., ADR 41,206
--------------------------------------------------------------------------------------------------
25,700 News Corp., Ltd., ADR 507,575
--------------------------------------------------------------------------------------------------
12,300 Readers Digest Association, Inc., Class A 294,431
--------------------------------------------------------------------------------------------------
5,469 (a)TCI Ventures Group, Class A 123,736
--------------------------------------------------------------------------------------------------
1,310 (a)Tricon Global Restaurants, Inc. 44,294
--------------------------------------------------------------------------------------------------
6,600 (a)Viacom, Inc., Class A 229,350
--------------------------------------------------------------------------------------------------
4,200 (a)Viacom, Inc., Class B 147,000
--------------------------------------------------------------------------------------------------
18,500 Waste Management, Inc. 455,563
-------------------------------------------------------------------------------------------------- ------------
Total 2,323,124
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.1%
- --------------------------------------------------------------------------------------------------------------------
7,500 AMP, Inc. 325,781
--------------------------------------------------------------------------------------------------
6,500 (a)Cabletron Systems, Inc. 149,500
--------------------------------------------------------------------------------------------------
13,300 First Data Corp. 376,556
--------------------------------------------------------------------------------------------------
2,800 International Business Machines Corp. 306,775
--------------------------------------------------------------------------------------------------
2,100 Matsushita Electric Industrial Co., ADR 325,631
--------------------------------------------------------------------------------------------------
29,300 (a)Novell, Inc. 271,025
--------------------------------------------------------------------------------------------------
3,100 Raytheon Co. 173,406
--------------------------------------------------------------------------------------------------
9,400 (a)Seagate Technology, Inc. 213,263
--------------------------------------------------------------------------------------------------
6,100 (a)Storage Technology Corp. 393,831
-------------------------------------------------------------------------------------------------- ------------
Total 2,535,768
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
7,200 CNF Transporation, Inc. 313,200
--------------------------------------------------------------------------------------------------
6,883 KLM Royal Dutch Airlines 247,788
--------------------------------------------------------------------------------------------------
6,300 Ryder Systems, Inc. 228,769
-------------------------------------------------------------------------------------------------- ------------
Total 789,757
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 2.6%
- --------------------------------------------------------------------------------------------------------------------
5,400 CMS Energy Corp. 212,625
--------------------------------------------------------------------------------------------------
3,900 Coastal Corp. 228,394
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- --------------------------------------------------------------------------------------------------
- ------------ ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,700 Columbia Gas System, Inc. $ 269,175
--------------------------------------------------------------------------------------------------
10,300 Entergy Corp. 267,800
--------------------------------------------------------------------------------------------------
3,900 GTE Corp. 197,194
--------------------------------------------------------------------------------------------------
10,300 Houston Industries, Inc. 243,981
--------------------------------------------------------------------------------------------------
13,200 MCI Communications Corp. 579,975
--------------------------------------------------------------------------------------------------
12,500 P G & E Corp. 353,125
--------------------------------------------------------------------------------------------------
7,000 Public Service Enterprises Group, Inc. 204,313
--------------------------------------------------------------------------------------------------
16,031 (a)Tele-Communications, Inc., Class A 367,210
--------------------------------------------------------------------------------------------------
6,400 U.S. West, Inc. 289,200
-------------------------------------------------------------------------------------------------- ------------
Total 3,212,992
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE-CAP VALUE STOCKS 25,312,518
-------------------------------------------------------------------------------------------------- ------------
SMALL-CAP STOCKS -- 15.9%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
6,900 BMC Industries, Inc. 128,081
--------------------------------------------------------------------------------------------------
4,600 Cambrex Corp. 208,725
--------------------------------------------------------------------------------------------------
6,100 (a)Carbide/Graphite Group, Inc. 235,612
--------------------------------------------------------------------------------------------------
9,900 (a)Chirex, Inc. 241,312
--------------------------------------------------------------------------------------------------
5,400 Furon Co. 213,300
--------------------------------------------------------------------------------------------------
3,900 Lone Star Industries, Inc. 203,288
--------------------------------------------------------------------------------------------------
5,100 (a)Lone Star Technologies, Inc. 147,900
--------------------------------------------------------------------------------------------------
13,500 Spartech Corp. 222,750
--------------------------------------------------------------------------------------------------
3,600 Valspar Corp. 109,350
-------------------------------------------------------------------------------------------------- ------------
Total 1,710,318
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
8,500 (a)Action Performance Companies, Inc. 246,500
--------------------------------------------------------------------------------------------------
5,800 (a)American Homestar Corporation 81,200
--------------------------------------------------------------------------------------------------
10,700 Brilliance China Automotive Holdings Ltd. 100,981
--------------------------------------------------------------------------------------------------
3,500 Carlisle Cos., Inc. 148,750
--------------------------------------------------------------------------------------------------
7,400 (a)Dura Automotive Systems, Inc. 195,175
--------------------------------------------------------------------------------------------------
5,000 (a)Equity Marketing, Inc. 147,500
--------------------------------------------------------------------------------------------------
4,600 (a)Gentex Corp. 113,850
--------------------------------------------------------------------------------------------------
12,800 (a)Helen of Troy Ltd. 182,400
--------------------------------------------------------------------------------------------------
2,800 Oakwood Homes Corp. 84,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,400 (a)Stanley Furniture Co. Inc. $ 148,500
--------------------------------------------------------------------------------------------------
2,500 Wynns International, Inc. 81,094
-------------------------------------------------------------------------------------------------- ------------
Total 1,529,950
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,400 (a)Blyth Industries, Inc. 87,337
--------------------------------------------------------------------------------------------------
5,700 (a)North Face, Inc. 123,975
--------------------------------------------------------------------------------------------------
5,800 (a)Rayovac Corp. 97,150
--------------------------------------------------------------------------------------------------
3,700 (a)Tommy Hilfiger Corp. 145,225
-------------------------------------------------------------------------------------------------- ------------
Total 453,687
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
1,700 Camco International, Inc. 106,675
--------------------------------------------------------------------------------------------------
7,400 (a)Key Energy Group, Inc. 179,913
--------------------------------------------------------------------------------------------------
2,400 (a)Patterson Energy Inc. 88,200
--------------------------------------------------------------------------------------------------
3,600 (a)TransCoastal Marine Services, Inc. 70,200
--------------------------------------------------------------------------------------------------
5,200 (a)Tuboscope Inc. 128,050
--------------------------------------------------------------------------------------------------
8,200 Vintage Petroleum, Inc. 158,875
-------------------------------------------------------------------------------------------------- ------------
Total 731,913
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 2.8%
- --------------------------------------------------------------------------------------------------------------------
6,000 (a)Amresco, Inc. 168,000
--------------------------------------------------------------------------------------------------
3,700 CMAC Investment Corp. 192,169
--------------------------------------------------------------------------------------------------
7,400 City National Corp. 240,500
--------------------------------------------------------------------------------------------------
3,900 (a)Delphi Financial Group, Inc., Class A 156,488
--------------------------------------------------------------------------------------------------
8,600 (a)Delta Financial Corp. 142,438
--------------------------------------------------------------------------------------------------
2,600 Executive Risk, Inc. 169,000
--------------------------------------------------------------------------------------------------
4,400 (a)FIRSTPLUS Financial Group, Inc. 167,750
--------------------------------------------------------------------------------------------------
6,200 (a)FirstFed Financial Corp. 226,300
--------------------------------------------------------------------------------------------------
7,000 Frontier Insurance Group, Inc. 168,438
--------------------------------------------------------------------------------------------------
4,300 GBC Bancorp 234,888
--------------------------------------------------------------------------------------------------
4,500 (a)Imperial Bancorp 210,094
--------------------------------------------------------------------------------------------------
7,700 North Fork Bancorp, Inc. 233,888
--------------------------------------------------------------------------------------------------
8,300 (a)Philadelphia Consolidated Holding Corp. 135,913
--------------------------------------------------------------------------------------------------
2,600 Sirrom Capital Corp. 114,400
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
12,200 Sovereign Bancorp, Inc. $ 231,038
--------------------------------------------------------------------------------------------------
6,600 Trans Financial, Inc. 226,875
--------------------------------------------------------------------------------------------------
7,200 (a)Triad Guaranty, Inc. 212,400
--------------------------------------------------------------------------------------------------
3,500 Vesta Insurance Group, Inc. 192,063
-------------------------------------------------------------------------------------------------- ------------
Total 3,422,642
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.5%
- --------------------------------------------------------------------------------------------------------------------
7,400 Ballard Medical Products 170,662
--------------------------------------------------------------------------------------------------
5,400 (a)Complete Management, Inc. 89,775
--------------------------------------------------------------------------------------------------
3,000 (a)Curative Technologies, Inc. 85,500
--------------------------------------------------------------------------------------------------
9,300 (a)FPA Medical Management, Inc. 240,056
--------------------------------------------------------------------------------------------------
8,600 (a)Genesis Health Ventures, Inc. 208,550
--------------------------------------------------------------------------------------------------
11,200 (a)Healthdyne Technologies, Inc. 214,900
--------------------------------------------------------------------------------------------------
3,000 (a)Hologic, Inc. 77,625
--------------------------------------------------------------------------------------------------
3,300 (a)Medicis Pharmaceutical Corp., Class A 141,075
--------------------------------------------------------------------------------------------------
7,300 Phycor, Inc. 179,763
--------------------------------------------------------------------------------------------------
11,600 (a)Prime Medical Services 153,700
--------------------------------------------------------------------------------------------------
4,300 (a)Somnus Medical Technologies, Inc. 49,450
--------------------------------------------------------------------------------------------------
3,700 (a)Universal Health Services, Inc., Class B 161,644
-------------------------------------------------------------------------------------------------- ------------
Total 1,772,700
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
8,500 (a)AFC Cable Systems, Inc. 227,375
--------------------------------------------------------------------------------------------------
8,600 (a)Ballantyne of Omaha, Inc. 158,025
--------------------------------------------------------------------------------------------------
5,600 (a)Cable Design Technologies, Class A 226,800
--------------------------------------------------------------------------------------------------
6,700 (a)Chicago Miniature Lamp, Inc. 226,962
--------------------------------------------------------------------------------------------------
4,200 (a)EVI, Inc. 216,038
--------------------------------------------------------------------------------------------------
6,500 (a)Royal Group Technologies Ltd. 156,406
--------------------------------------------------------------------------------------------------
8,600 (a)US Office Products Co. 170,925
-------------------------------------------------------------------------------------------------- ------------
Total 1,382,531
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
3,400 (a)CDW Computer Centers, Inc. 200,600
--------------------------------------------------------------------------------------------------
10,200 Claire's Stores, Inc. 230,775
--------------------------------------------------------------------------------------------------
3,400 (a)Express Scripts, Inc., Class A 200,600
--------------------------------------------------------------------------------------------------
9,600 (a) Funco, Inc. 177,600
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
7,800 (a)Microage, Inc. $ 156,975
--------------------------------------------------------------------------------------------------
7,700 (a)O'Reilly Automotive, Inc. 181,913
--------------------------------------------------------------------------------------------------
10,900 (a)Paul Harris Stores, Inc. 230,263
--------------------------------------------------------------------------------------------------
8,000 (a)Pomeroy Computer Resources 200,000
--------------------------------------------------------------------------------------------------
4,600 (a)Proffitts, Inc. 140,588
--------------------------------------------------------------------------------------------------
8,100 (a)Renters Choice, Inc. 182,250
--------------------------------------------------------------------------------------------------
7,800 (a)Zale Corp. 173,550
-------------------------------------------------------------------------------------------------- ------------
Total 2,075,114
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
3,100 (a)ASE Test Ltd. 173,600
--------------------------------------------------------------------------------------------------
5,000 (a)Allied Waste Industries, Inc. 109,375
--------------------------------------------------------------------------------------------------
9,200 (a)American Business Information, Class A 108,100
--------------------------------------------------------------------------------------------------
8,800 (a)American Business Information, Class B 96,800
--------------------------------------------------------------------------------------------------
7,950 (a)BARRA, Inc. 221,606
--------------------------------------------------------------------------------------------------
3,800 (a)Caribiner International, Inc. 161,262
--------------------------------------------------------------------------------------------------
3,200 (a)Daisytek International Corp. 125,600
--------------------------------------------------------------------------------------------------
4,900 (a)FactSet Research Systems 123,725
--------------------------------------------------------------------------------------------------
10,800 (a)Newpark Resources, Inc. 215,325
--------------------------------------------------------------------------------------------------
5,800 (a)Personnel Group of America, Inc. 212,063
--------------------------------------------------------------------------------------------------
8,700 (a)Prime Hospitality Corp. 166,388
--------------------------------------------------------------------------------------------------
11,400 (a)ProBusiness Services, Inc. 240,825
--------------------------------------------------------------------------------------------------
16,800 (a)Seattle Filmworks, Inc. 165,900
--------------------------------------------------------------------------------------------------
7,300 (a)Snyder Communications, Inc. 247,744
-------------------------------------------------------------------------------------------------- ------------
Total 2,368,313
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.6%
- --------------------------------------------------------------------------------------------------------------------
6,000 ATMI, Inc. 192,750
--------------------------------------------------------------------------------------------------
8,200 (a)Alphanet Solutions, Inc. 105,575
--------------------------------------------------------------------------------------------------
7,700 (a)Apex mPC Solutions, Inc. 169,400
--------------------------------------------------------------------------------------------------
5,300 (a)Applied Science & Technology, Inc. 111,300
--------------------------------------------------------------------------------------------------
8,600 (a)Applied Voice Technology, Inc. 240,800
--------------------------------------------------------------------------------------------------
7,600 (a)Benchmark Electronics, Inc. 213,750
--------------------------------------------------------------------------------------------------
6,800 (a)Benchmarq Microelectronics, Inc. 124,100
--------------------------------------------------------------------------------------------------
8,200 (a)Cybex Computer Products Corp. 213,200
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
7,800 (a)Cymer, Inc. $ 149,662
--------------------------------------------------------------------------------------------------
5,700 (a)DSP Group, Inc. 186,675
--------------------------------------------------------------------------------------------------
5,000 (a)Ducommun, Inc. 162,188
--------------------------------------------------------------------------------------------------
5,800 (a)Eltron International, Inc. 181,250
--------------------------------------------------------------------------------------------------
4,200 (a)HADCO Corp. 260,400
--------------------------------------------------------------------------------------------------
6,300 (a)II-VI, Inc. 151,988
--------------------------------------------------------------------------------------------------
7,100 (a)MRV Communications, Inc. 200,575
--------------------------------------------------------------------------------------------------
5,700 (a)Mastech Corp. 166,725
--------------------------------------------------------------------------------------------------
4,700 (a)Qlogic Corp. 155,688
--------------------------------------------------------------------------------------------------
5,100 (a)Three-Five Systems, Inc. 101,681
--------------------------------------------------------------------------------------------------
4,400 (a)Tollgrade Communications, Inc. 103,950
-------------------------------------------------------------------------------------------------- ------------
Total 3,191,657
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
2,600 Airlines Express International Corp. 74,587
--------------------------------------------------------------------------------------------------
6,300 Comair Holdings, Inc. 139,387
--------------------------------------------------------------------------------------------------
1,800 Expeditors International Washington, Inc. 70,088
-------------------------------------------------------------------------------------------------- ------------
Total 284,062
-------------------------------------------------------------------------------------------------- ------------
UTILITIES-- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,100 Cincinnati Bell, Inc. 91,450
--------------------------------------------------------------------------------------------------
4,700 IXC Communications, Inc. 163,031
--------------------------------------------------------------------------------------------------
2,500 MCN Corp. 95,469
--------------------------------------------------------------------------------------------------
2,600 Sonat, Inc. 113,263
-------------------------------------------------------------------------------------------------- ------------
Total 463,213
-------------------------------------------------------------------------------------------------- ------------
TOTAL SMALL-CAP STOCKS 19,386,100
-------------------------------------------------------------------------------------------------- ------------
LARGE CAP GROWTH -- 17.9%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,900 (a)Lone Star Technologies, Inc. 113,100
--------------------------------------------------------------------------------------------------
3,300 Martin Marietta Materials 114,263
--------------------------------------------------------------------------------------------------
2,300 Southdown, Inc. 132,681
--------------------------------------------------------------------------------------------------
6,000 (a)Steel Dynamics, Inc. 111,000
-------------------------------------------------------------------------------------------------- ------------
Total 471,044
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
4,000 Carlisle Cos., Inc. $ 170,000
--------------------------------------------------------------------------------------------------
8,700 (a)Furniture Brands International, Inc. 170,194
--------------------------------------------------------------------------------------------------
1,200 Sony Corp ADR 100,200
-------------------------------------------------------------------------------------------------- ------------
Total 440,394
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
4,100 (a)Consolidated Cigar Holdings, Inc. 113,006
--------------------------------------------------------------------------------------------------
1,300 Gillette Co. 120,006
--------------------------------------------------------------------------------------------------
4,500 (a)Jones Apparel Group, Inc. 219,375
--------------------------------------------------------------------------------------------------
5,100 Philip Morris Cos., Inc. 221,850
--------------------------------------------------------------------------------------------------
3,800 Procter & Gamble Co. 289,988
--------------------------------------------------------------------------------------------------
4,500 (a)Smithfield Foods, Inc. 159,188
--------------------------------------------------------------------------------------------------
3,400 St. John Knits, Inc. 129,838
--------------------------------------------------------------------------------------------------
3,900 (a)Tommy Hilfiger Corp. 153,075
--------------------------------------------------------------------------------------------------
4,600 Universal Corp. 181,988
--------------------------------------------------------------------------------------------------
4,900 Wolverine World Wide, Inc. 111,781
--------------------------------------------------------------------------------------------------
2,900 Wrigley (Wm.), Jr. Co. 229,463
-------------------------------------------------------------------------------------------------- ------------
Total 1,929,558
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
2,000 (a)BJ Services Co. 143,625
--------------------------------------------------------------------------------------------------
3,600 Baker Hughes, Inc. 150,750
--------------------------------------------------------------------------------------------------
1,900 British Petroleum Co., PLC - ADR 157,700
--------------------------------------------------------------------------------------------------
2,600 (a)Cooper Cameron Corp. 158,437
--------------------------------------------------------------------------------------------------
2,800 Diamond Offshore Drilling, Inc. 139,650
--------------------------------------------------------------------------------------------------
4,400 ENSCO International, Inc. 157,300
--------------------------------------------------------------------------------------------------
4,800 (a)Falcon Drilling Co., Inc. 154,800
--------------------------------------------------------------------------------------------------
4,100 (a)Friede Goldman International, Inc. 121,975
--------------------------------------------------------------------------------------------------
5,000 (a)Key Energy Group, Inc. 121,563
--------------------------------------------------------------------------------------------------
4,000 (a)Nabors Industries, Inc. 140,250
--------------------------------------------------------------------------------------------------
1,400 (a)Petroleum Geo-Services, ADR 90,038
--------------------------------------------------------------------------------------------------
4,300 (a)Rowan Companies, Inc. 146,200
--------------------------------------------------------------------------------------------------
2,700 (a)Smith International, Inc. 172,800
--------------------------------------------------------------------------------------------------
3,400 Tosco Corp. 110,713
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
4,000 (a)TransCoastal Marine Services, Inc. $ 78,000
-------------------------------------------------------------------------------------------------- ------------
Total 2,043,801
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 3.6%
- --------------------------------------------------------------------------------------------------------------------
5,000 Ahmanson (H.F.) & Co. 297,500
--------------------------------------------------------------------------------------------------
2,500 Allstate Corp. 214,687
--------------------------------------------------------------------------------------------------
1,650 American International Group, Inc. 166,341
--------------------------------------------------------------------------------------------------
4,000 Bank of New York Co., Inc. 215,000
--------------------------------------------------------------------------------------------------
2,900 BankAmerica Corp. 211,700
--------------------------------------------------------------------------------------------------
7,700 (a)Catellus Development Corp. 142,450
--------------------------------------------------------------------------------------------------
1,500 Citicorp 179,906
--------------------------------------------------------------------------------------------------
5,000 Conseco, Inc. 232,812
--------------------------------------------------------------------------------------------------
4,200 (a)E Trade Group, Inc. 105,263
--------------------------------------------------------------------------------------------------
2,400 Equitable Companies Inc. 114,450
--------------------------------------------------------------------------------------------------
7,200 Frontier Insurance Group, Inc. 173,250
--------------------------------------------------------------------------------------------------
5,000 (a)Golden State Bancorp, Inc. 166,563
--------------------------------------------------------------------------------------------------
13,200 MBNA Corp. 350,625
--------------------------------------------------------------------------------------------------
1,700 MGIC Investment Corp. 99,344
--------------------------------------------------------------------------------------------------
3,600 Mellon Bank Corp. 204,075
--------------------------------------------------------------------------------------------------
3,200 Merrill Lynch & Co., Inc. 224,600
--------------------------------------------------------------------------------------------------
4,200 Morgan Stanley, Dean Witter, Discover & Co. 228,113
--------------------------------------------------------------------------------------------------
2,700 NationsBank Corp. 162,169
--------------------------------------------------------------------------------------------------
4,400 Old Republic International Corp. 158,675
--------------------------------------------------------------------------------------------------
3,400 T. Rowe Price Associates 221,000
--------------------------------------------------------------------------------------------------
4,100 Torchmark Corp. 167,331
--------------------------------------------------------------------------------------------------
7,350 Travelers Group, Inc. 371,175
-------------------------------------------------------------------------------------------------- ------------
Total 4,407,029
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
5,900 (a)BioChem Pharma, Inc. 150,450
--------------------------------------------------------------------------------------------------
4,100 (a)Centocor, Inc. 178,350
--------------------------------------------------------------------------------------------------
3,100 (a) Dura Pharmaceuticals, Inc. 136,013
--------------------------------------------------------------------------------------------------
2,900 Guidant Corp. 186,325
--------------------------------------------------------------------------------------------------
6,000 HBO & Co. 269,250
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
6,700 (a)HEALTHSOUTH Corp. $ 175,875
--------------------------------------------------------------------------------------------------
5,300 Jones Medical Industries, Inc. 174,900
--------------------------------------------------------------------------------------------------
3,600 Lilly (Eli) & Co. 227,025
--------------------------------------------------------------------------------------------------
3,700 (a)MedPartners, Inc. 91,575
--------------------------------------------------------------------------------------------------
1,500 Merck & Co., Inc. 141,844
--------------------------------------------------------------------------------------------------
7,600 Omnicare, Inc. 219,450
--------------------------------------------------------------------------------------------------
1,600 Pfizer, Inc. 116,400
--------------------------------------------------------------------------------------------------
4,100 (a)Phycor, Inc. 100,963
--------------------------------------------------------------------------------------------------
2,300 (a)Quintiles Transnational Corp. 179,688
--------------------------------------------------------------------------------------------------
5,200 (a)Safeskin Corp. 247,650
--------------------------------------------------------------------------------------------------
2,200 Smithkline Beecham, ADR 109,175
--------------------------------------------------------------------------------------------------
3,900 (a)Universal Health Services, Inc., Class B 170,381
--------------------------------------------------------------------------------------------------
1,500 Warner-Lambert Co. 209,813
-------------------------------------------------------------------------------------------------- ------------
Total 3,085,127
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
3,500 (a)EVI, Inc. 180,031
--------------------------------------------------------------------------------------------------
4,900 General Electric Co. 361,375
--------------------------------------------------------------------------------------------------
4,950 (a)Halter Marine Group, Inc. 137,981
--------------------------------------------------------------------------------------------------
5,100 (a)Maverick Tube Corp. 145,669
--------------------------------------------------------------------------------------------------
2,800 Precision Castparts Corp. 166,250
--------------------------------------------------------------------------------------------------
8,800 (a)Royal Group Technologies Ltd. 211,750
--------------------------------------------------------------------------------------------------
5,200 Tyco International, Ltd. 204,100
--------------------------------------------------------------------------------------------------
9,900 (a)US Office Products Co. 196,763
-------------------------------------------------------------------------------------------------- ------------
Total 1,603,919
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
4,900 (a)CompUSA, Inc. 179,156
--------------------------------------------------------------------------------------------------
8,100 (a)General Nutrition Cos., Inc. 276,413
--------------------------------------------------------------------------------------------------
4,050 Home Depot, Inc. 226,547
--------------------------------------------------------------------------------------------------
9,200 Pier 1 Imports, Inc. 205,850
--------------------------------------------------------------------------------------------------
2,900 (a)Safeway, Inc. 176,175
--------------------------------------------------------------------------------------------------
6,500 TJX Cos., Inc. 224,250
-------------------------------------------------------------------------------------------------- ------------
Total 1,288,391
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SERVICES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
2,300 (a)ASE Test Ltd. $ 128,800
--------------------------------------------------------------------------------------------------
5,800 (a)Corrections Corp. America 200,825
--------------------------------------------------------------------------------------------------
2,400 (a)HFS, Inc. 164,700
--------------------------------------------------------------------------------------------------
1,700 (a)Heftel Broadcasting Corp., Class A 125,588
--------------------------------------------------------------------------------------------------
6,200 (a)Newpark Resources, Inc. 123,613
--------------------------------------------------------------------------------------------------
8,800 (a)Philip Services Corp. 139,150
--------------------------------------------------------------------------------------------------
6,100 (a)Snyder Communications, Inc. 207,019
-------------------------------------------------------------------------------------------------- ------------
Total 1,089,695
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 3.2%
- --------------------------------------------------------------------------------------------------------------------
1,100 (a)ASM Lithography Holding NV, ADR 68,750
--------------------------------------------------------------------------------------------------
3,900 (a)Advanced Fibre Communications 100,912
--------------------------------------------------------------------------------------------------
2,200 (a)America Online, Inc. 166,100
--------------------------------------------------------------------------------------------------
3,700 (a)Applied Materials, Inc. 122,100
--------------------------------------------------------------------------------------------------
4,400 (a)Cadence Design Systems, Inc. 111,100
--------------------------------------------------------------------------------------------------
2,700 (a)Cisco Systems, Inc. 232,875
--------------------------------------------------------------------------------------------------
3,500 Compaq Computer Corp. 218,531
--------------------------------------------------------------------------------------------------
7,000 (a)Creative Technology Ltd. 186,375
--------------------------------------------------------------------------------------------------
2,300 Dallas Semiconductor Corp. 112,412
--------------------------------------------------------------------------------------------------
1,800 (a)Dell Computer Corp. 151,537
--------------------------------------------------------------------------------------------------
4,000 (a)EMC Corp. Mass 121,250
--------------------------------------------------------------------------------------------------
3,600 (a)HNC Software 113,400
--------------------------------------------------------------------------------------------------
6,400 (a)Hyperion Software Corp. 275,800
--------------------------------------------------------------------------------------------------
2,200 Intel Corp. 170,775
--------------------------------------------------------------------------------------------------
2,300 Lucent Technologies, Inc. 184,288
--------------------------------------------------------------------------------------------------
5,600 (a)Mastech Corp. 163,800
--------------------------------------------------------------------------------------------------
2,500 (a)Metromedia Fibre Network, Inc. 42,188
--------------------------------------------------------------------------------------------------
1,800 (a)Microsoft Corp. 254,700
--------------------------------------------------------------------------------------------------
5,800 (a)Ortel Corp. 103,675
--------------------------------------------------------------------------------------------------
1,600 (a)PRI Automation, Inc. 54,600
--------------------------------------------------------------------------------------------------
1,500 (a)Peoplesoft, Inc. 98,156
--------------------------------------------------------------------------------------------------
3,200 (a)Rambus, Inc. 178,600
--------------------------------------------------------------------------------------------------
4,500 (a)SCI Systems, Inc. 206,156
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,700 (a)Sandisk Corp. $ 139,650
--------------------------------------------------------------------------------------------------
1,500 (a)Speedfam International, Inc. 38,438
--------------------------------------------------------------------------------------------------
3,100 (a)Tellabs, Inc. 161,200
--------------------------------------------------------------------------------------------------
2,400 Texas Instruments, Inc. 118,200
--------------------------------------------------------------------------------------------------
3,400 (a)World Access, Inc. 83,300
-------------------------------------------------------------------------------------------------- ------------
Total 3,978,868
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
2,600 (a)Continental Airlines, Inc., Class B 118,462
--------------------------------------------------------------------------------------------------
5,700 Expeditors International Washington, Inc. 221,944
-------------------------------------------------------------------------------------------------- ------------
Total 340,406
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
4,900 Cincinnati Bell, Inc. 144,550
--------------------------------------------------------------------------------------------------
3,300 Coastal Corp. 193,256
--------------------------------------------------------------------------------------------------
7,700 (a)ICG Communications, Inc. 179,025
--------------------------------------------------------------------------------------------------
8,000 (a)IXC Communications, Inc. 277,500
--------------------------------------------------------------------------------------------------
3,200 Sonat, Inc. 139,400
--------------------------------------------------------------------------------------------------
3,400 (a)Teleport Communications Group, Inc., Class A 166,600
-------------------------------------------------------------------------------------------------- ------------
Total 1,100,331
-------------------------------------------------------------------------------------------------- ------------
TOTAL GROWTH 21,778,563
-------------------------------------------------------------------------------------------------- ------------
FOREIGN EQUITY -- 15.5%
- --------------------------------------------------------------------------------------------------------------------
ARGENTINA -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
6,900 (a)Banco Rio de la Plata SA, ADR 86,681
--------------------------------------------------------------------------------------------------
4,523 Compania Naviera Perez Companc SA, Class B 32,306
--------------------------------------------------------------------------------------------------
1,600 Telecom Argentina SA, ADR 49,100
--------------------------------------------------------------------------------------------------
1,300 Telefonica De Argentina ADR 42,981
-------------------------------------------------------------------------------------------------- ------------
Total 211,068
-------------------------------------------------------------------------------------------------- ------------
AUSTRALIA -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
12,000 Australia & New Zealand Banking Group, Melbourne 82,270
--------------------------------------------------------------------------------------------------
40,200 Austrim Ltd. 89,489
--------------------------------------------------------------------------------------------------
20,000 Coles Myer Ltd. 98,330
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIA -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
468,000 (a)Cue Energy Resources NL $ 43,142
--------------------------------------------------------------------------------------------------
20,000 (a)News Corp., Ltd. 106,798
--------------------------------------------------------------------------------------------------
33,000 Oil Search Ltd. 65,123
--------------------------------------------------------------------------------------------------
25,000 Woodside Petroleum Ltd. 179,231
-------------------------------------------------------------------------------------------------- ------------
Total 664,383
-------------------------------------------------------------------------------------------------- ------------
AUSTRIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,450 (a)Bank Austria AG, Pfd. 59,241
-------------------------------------------------------------------------------------------------- ------------
BELGIUM -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
30 UCB (groupe) 99,108
-------------------------------------------------------------------------------------------------- ------------
BRAZIL -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
218,000 Centrais Eletricas Brasileiras SA, Preference, Series B 106,121
--------------------------------------------------------------------------------------------------
937,000 Companhia Energetica de Minas Gerais, Preference 45,190
--------------------------------------------------------------------------------------------------
512,000 Petroleo Brasileiro SA, Preference 112,157
--------------------------------------------------------------------------------------------------
1,211,000 Telecomunicacoes Brasileiras SA 112,443
--------------------------------------------------------------------------------------------------
11,400 Telecomunicacoes de Sao Paulo SA 216
--------------------------------------------------------------------------------------------------
341,249 Telecomunicacoes de Sao Paulo SA, Preference 89,830
-------------------------------------------------------------------------------------------------- ------------
Total 465,957
-------------------------------------------------------------------------------------------------- ------------
CHILE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
400 Banco de A. Edwards, ADR 7,000
--------------------------------------------------------------------------------------------------
500 (b)Chilectra SA, ADR, 144A 12,480
--------------------------------------------------------------------------------------------------
425 Compania Telecomunicacion Chile, ADR 11,502
-------------------------------------------------------------------------------------------------- ------------
Total 30,982
-------------------------------------------------------------------------------------------------- ------------
CHINA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
30,000 (a)China Telecommunications 50,063
-------------------------------------------------------------------------------------------------- ------------
COLOMBIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
800 Banco Ganadero SA, ADR 30,500
--------------------------------------------------------------------------------------------------
900 Banco Industrial Colombiano, ADR 13,050
-------------------------------------------------------------------------------------------------- ------------
Total 43,550
-------------------------------------------------------------------------------------------------- ------------
DENMARK -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,800 BG Bank AS 116,918
--------------------------------------------------------------------------------------------------
800 (a)Bang & Olufsen Holding B 47,077
--------------------------------------------------------------------------------------------------
1,000 Novo-Nordisk, Class B 122,460
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DENMARK -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,050 (a)Sydbank AS $ 109,946
--------------------------------------------------------------------------------------------------
1,450 Unidanmark A 102,393
-------------------------------------------------------------------------------------------------- ------------
Total 498,794
-------------------------------------------------------------------------------------------------- ------------
FINLAND -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
5,600 Enso Oy, Class R 49,158
--------------------------------------------------------------------------------------------------
2,750 Partek Corp. 51,014
--------------------------------------------------------------------------------------------------
5,000 Rauma 86,282
-------------------------------------------------------------------------------------------------- ------------
Total 186,454
-------------------------------------------------------------------------------------------------- ------------
FRANCE -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
1,528 AXA 110,886
--------------------------------------------------------------------------------------------------
700 Accor SA 132,333
--------------------------------------------------------------------------------------------------
2,500 Banque Nationale de Paris 121,966
--------------------------------------------------------------------------------------------------
850 Bertrand Faure 57,883
--------------------------------------------------------------------------------------------------
600 (a)CLF-Dexia France 62,304
--------------------------------------------------------------------------------------------------
265 Canal Plus 46,102
--------------------------------------------------------------------------------------------------
1,200 Compagnie Financiere de Paribas, Class A 86,697
--------------------------------------------------------------------------------------------------
450 Compagnie de Saint Gobain 61,135
--------------------------------------------------------------------------------------------------
720 Elf Aquitaine SA 83,546
--------------------------------------------------------------------------------------------------
734 (a)France Telecommunications 26,956
--------------------------------------------------------------------------------------------------
450 (a)Generale Geophysique 48,786
--------------------------------------------------------------------------------------------------
1,000 Groupe Danon BSN SA 159,572
--------------------------------------------------------------------------------------------------
160 L'Oreal 61,254
--------------------------------------------------------------------------------------------------
1,100 Pechiney Ord A 43,193
--------------------------------------------------------------------------------------------------
1,510 (a)SGS-Thomson Microelectronics N.V. 106,485
--------------------------------------------------------------------------------------------------
3,300 Schneider SA 176,647
--------------------------------------------------------------------------------------------------
4,670 Scor SA 200,856
--------------------------------------------------------------------------------------------------
800 Synthelabo 101,638
--------------------------------------------------------------------------------------------------
3,500 Thomson-csf 101,265
--------------------------------------------------------------------------------------------------
1,061 Total SA-B 111,433
--------------------------------------------------------------------------------------------------
6,500 Usinor Sacilor 102,180
-------------------------------------------------------------------------------------------------- ------------
Total 2,003,117
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GERMANY, FEDERAL REPUBLIC OF -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
4,025 Bayer AG $ 148,972
--------------------------------------------------------------------------------------------------
150 Bayerische Motoren Werke AG 112,022
--------------------------------------------------------------------------------------------------
6,600 Commerzbank AG, Frankfurt 229,419
--------------------------------------------------------------------------------------------------
1,380 Deutsche Bank, AG 88,505
--------------------------------------------------------------------------------------------------
4,150 Dresdner Bank AG, Frankfurt 160,964
--------------------------------------------------------------------------------------------------
359 Mannesmann AG 167,133
--------------------------------------------------------------------------------------------------
315 Muenchener Rueckversicherungs-Gesellschaft AG 98,421
--------------------------------------------------------------------------------------------------
330 SAP AG-Vorzug 101,610
--------------------------------------------------------------------------------------------------
1,950 Siemens AG 114,501
--------------------------------------------------------------------------------------------------
700 (a)Singulus Technologies AG 30,961
--------------------------------------------------------------------------------------------------
9,050 Skw Trostberg 312,786
-------------------------------------------------------------------------------------------------- ------------
Total 1,565,294
-------------------------------------------------------------------------------------------------- ------------
HONG KONG -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
259,000 (a)Angang New Steel Co. Ltd. 40,875
--------------------------------------------------------------------------------------------------
18,000 (a)Cheung Kong 126,903
--------------------------------------------------------------------------------------------------
23,000 China Resources Enterprises Ltd. 49,539
--------------------------------------------------------------------------------------------------
2,429 HSBC Holdings PLC 58,602
--------------------------------------------------------------------------------------------------
11,000 Hutchison Whampoa 73,283
--------------------------------------------------------------------------------------------------
16,000 (a)New World Development Co. Ltd. 59,299
--------------------------------------------------------------------------------------------------
24,000 Peregrine Investments 23,595
-------------------------------------------------------------------------------------------------- ------------
Total 432,096
-------------------------------------------------------------------------------------------------- ------------
INDONESIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
14,000 PT Indosat 31,761
-------------------------------------------------------------------------------------------------- ------------
IRELAND -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
4,150 (a)Elan Corp. PLC, ADR 218,913
-------------------------------------------------------------------------------------------------- ------------
ITALY -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
10,300 Eni 60,128
--------------------------------------------------------------------------------------------------
11,500 Istituto Bancario San Paolo di Torino 95,259
--------------------------------------------------------------------------------------------------
7,500 La Rinascente S.P.A. 56,872
--------------------------------------------------------------------------------------------------
18,000 Telecom Italia S.P.A. 112,216
-------------------------------------------------------------------------------------------------- ------------
Total 324,475
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
JAPAN -- 2.9%
- --------------------------------------------------------------------------------------------------------------------
6,600 Circle K Japan Co. Ltd. $ 331,487
--------------------------------------------------------------------------------------------------
20,000 Fujitsu Ltd. 224,094
--------------------------------------------------------------------------------------------------
8,000 Hitachi Maxell 179,275
--------------------------------------------------------------------------------------------------
5,000 Ito-Yokado Co., Ltd. 225,661
--------------------------------------------------------------------------------------------------
2,000 Mabuchi Motor Co. 104,838
--------------------------------------------------------------------------------------------------
82,000 (a)Mazda Motor Corp. 229,375
--------------------------------------------------------------------------------------------------
30,000 Minolta Co. 172,772
--------------------------------------------------------------------------------------------------
24,000 Mitsubishi Estate Co. Ltd. 278,315
--------------------------------------------------------------------------------------------------
2,000 Nintendo Corp. Ltd. 206,856
--------------------------------------------------------------------------------------------------
30 Nippon Telegraph & Telephone Corp. 246,817
--------------------------------------------------------------------------------------------------
12,000 Sankyo Co. Ltd. 382,684
--------------------------------------------------------------------------------------------------
1,000 Shokoh Fund & Co. 284,427
--------------------------------------------------------------------------------------------------
3,000 Sony Corp. 256,219
--------------------------------------------------------------------------------------------------
12,000 Sumitomo Bank Ltd., Osaka 152,321
--------------------------------------------------------------------------------------------------
35,000 Sumitomo Realty & Development 234,476
--------------------------------------------------------------------------------------------------
33,000 Tokyu Land Corp. 65,677
-------------------------------------------------------------------------------------------------- ------------
Total 3,575,294
-------------------------------------------------------------------------------------------------- ------------
MALAYSIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,000 Malayan United Industries Bhd 280
-------------------------------------------------------------------------------------------------- ------------
MEXICO -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
2,000 Empresas ICA Sociedad Controladora SA, ADR 31,000
--------------------------------------------------------------------------------------------------
13,000 Fomento Economico Mexicano, SA de C.V., Class B 107,153
--------------------------------------------------------------------------------------------------
215,000 (a)(b)Grupo Financiero Bancomer, SA de C.V., Class B 124,338
--------------------------------------------------------------------------------------------------
2,300 Telefonos de Mexico, Class L, ADR 113,850
--------------------------------------------------------------------------------------------------
1,800 (a)Tubos de Acero de Mexico SA, ADR 39,825
-------------------------------------------------------------------------------------------------- ------------
Total 416,166
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
4,597 ABN-Amro Holdings NV 87,670
--------------------------------------------------------------------------------------------------
800 (a)ASM Lithography Holding NV, ADR 50,000
--------------------------------------------------------------------------------------------------
610 Akzo Nobel NV 107,309
--------------------------------------------------------------------------------------------------
1,935 ING Groep, NV 78,674
--------------------------------------------------------------------------------------------------
2,500 Koninklijke PTT Nederland NV 100,387
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
1,200 Philips Electronics NV $ 79,283
--------------------------------------------------------------------------------------------------
4,500 VNU -- Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 107,784
--------------------------------------------------------------------------------------------------
505 Wolters Kluwer NV 66,857
-------------------------------------------------------------------------------------------------- ------------
Total 677,964
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
22,000 Air New Zealand Ltd., Class B 44,791
-------------------------------------------------------------------------------------------------- ------------
NORWAY -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
2,500 Saga Petroleum A.S., Class A 44,845
--------------------------------------------------------------------------------------------------
3,100 Schibsted 52,591
--------------------------------------------------------------------------------------------------
1,300 Smedvig ASA, Class B 33,081
-------------------------------------------------------------------------------------------------- ------------
Total 130,517
-------------------------------------------------------------------------------------------------- ------------
SINGAPORE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
2,500 (a)Creative Technology Ltd. 66,563
--------------------------------------------------------------------------------------------------
37,000 Natsteel Broadway Ltd. 54,205
--------------------------------------------------------------------------------------------------
2,000 Singapore Press Holdings Ltd., Foreign Shares 27,348
--------------------------------------------------------------------------------------------------
17,000 Wing Tai Holdings, Ltd. 21,860
-------------------------------------------------------------------------------------------------- ------------
Total 169,976
-------------------------------------------------------------------------------------------------- ------------
SPAIN -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
4,200 (a)Banco Bilbao Vizcaya SA 126,893
--------------------------------------------------------------------------------------------------
1,600 Banco Popular Espanol 101,938
--------------------------------------------------------------------------------------------------
4,800 Endesa SA 90,296
--------------------------------------------------------------------------------------------------
2,860 Iberdrola SA 36,539
--------------------------------------------------------------------------------------------------
2,350 Repsol SA 101,653
--------------------------------------------------------------------------------------------------
900 Tabacalera 68,808
--------------------------------------------------------------------------------------------------
3,750 Telefonica de Espana 108,142
--------------------------------------------------------------------------------------------------
2,600 Vidrala SA 111,247
--------------------------------------------------------------------------------------------------
693 Zardoya-Otis SA 80,635
-------------------------------------------------------------------------------------------------- ------------
Total 826,151
-------------------------------------------------------------------------------------------------- ------------
SWEDEN -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
900 Electrolux B 70,867
--------------------------------------------------------------------------------------------------
7,100 Munksjo AB 67,124
--------------------------------------------------------------------------------------------------
19,000 Skand Enskilda BKN, Class A 223,920
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SWEDEN -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,550 Skandia Forsakrings AB $ 134,410
--------------------------------------------------------------------------------------------------
2,600 Trygg-hansa B 80,982
--------------------------------------------------------------------------------------------------
3,900 Volvo AB, Class B 104,047
-------------------------------------------------------------------------------------------------- ------------
Total 681,350
-------------------------------------------------------------------------------------------------- ------------
SWITZERLAND -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
60 (a)ABB AG 79,829
--------------------------------------------------------------------------------------------------
35 (a)Baloise Holdings-REG 62,351
--------------------------------------------------------------------------------------------------
800 Credit Suisse Group-Registered 116,987
--------------------------------------------------------------------------------------------------
180 Holderbank Financiere Glaris AG, Class B 156,922
--------------------------------------------------------------------------------------------------
240 Nestle SA 353,149
--------------------------------------------------------------------------------------------------
113 Novartis AG - REG 180,540
--------------------------------------------------------------------------------------------------
24 (a)Roche Holding AG 214,785
--------------------------------------------------------------------------------------------------
143 UBS -- Union Bank of Switzerland 182,035
--------------------------------------------------------------------------------------------------
220 Zurich Versicherungsgesellschaft 92,580
-------------------------------------------------------------------------------------------------- ------------
Total 1,439,178
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM -- 3.3%
- --------------------------------------------------------------------------------------------------------------------
12,067 BBA Group PLC 76,731
--------------------------------------------------------------------------------------------------
9,015 Barclays PLC 217,419
--------------------------------------------------------------------------------------------------
6,700 Bass PLC 96,183
--------------------------------------------------------------------------------------------------
6,477 Boc Group PLC 103,374
--------------------------------------------------------------------------------------------------
3,800 Boots Co. PLC 55,835
--------------------------------------------------------------------------------------------------
5,065 British Aerospace PLC 138,237
--------------------------------------------------------------------------------------------------
20,000 British Airways 181,388
--------------------------------------------------------------------------------------------------
9,283 British Petroleum Co. PLC 126,992
--------------------------------------------------------------------------------------------------
7,000 British Sky Broadcasting Group PLC 52,018
--------------------------------------------------------------------------------------------------
13,687 Cadbury Schweppes PLC 142,163
--------------------------------------------------------------------------------------------------
3,900 Commercial Union PLC 53,682
--------------------------------------------------------------------------------------------------
11,400 Compass Group 136,122
--------------------------------------------------------------------------------------------------
15,263 EMI Group PLC 114,969
--------------------------------------------------------------------------------------------------
10,000 Energy Group PLC 107,330
--------------------------------------------------------------------------------------------------
6,406 GKN PLC 139,242
--------------------------------------------------------------------------------------------------
10,000 (a)Gallaher Group PLC 54,045
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES OR
UNITS OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
10,890 General Electric Co. PLC $ 70,902
--------------------------------------------------------------------------------------------------
7,552 Glaxo Wellcome PLC 165,810
--------------------------------------------------------------------------------------------------
7,436 Granada Group PLC 106,372
--------------------------------------------------------------------------------------------------
8,458 Grand Metropolitan PLC 76,995
--------------------------------------------------------------------------------------------------
10,000 Imperial Tobacco Group PLC 66,712
--------------------------------------------------------------------------------------------------
16,000 Lloyds TSB Group PLC 182,401
--------------------------------------------------------------------------------------------------
8,500 Marks & Spencer PLC 87,426
--------------------------------------------------------------------------------------------------
18,000 National Westminster Bank, PLC, London 272,994
--------------------------------------------------------------------------------------------------
9,000 Next 112,481
--------------------------------------------------------------------------------------------------
4,600 Pearson 64,094
--------------------------------------------------------------------------------------------------
8,000 PowerGen PLC 103,293
--------------------------------------------------------------------------------------------------
4,758 Reckitt & Colman PLC 69,349
--------------------------------------------------------------------------------------------------
10,200 Reed International PLC 108,615
--------------------------------------------------------------------------------------------------
2,653 Rio Tinto PLC 32,037
--------------------------------------------------------------------------------------------------
5,600 Royal & Sun Alliance Insurance Group PLC 50,410
--------------------------------------------------------------------------------------------------
15,000 Shell Transport & Trading Co. 102,094
--------------------------------------------------------------------------------------------------
5,942 Siebe PLC 108,082
--------------------------------------------------------------------------------------------------
33,000 Smith & Nephew PLC 95,305
--------------------------------------------------------------------------------------------------
43 Smithkline Beecham PLC 399
--------------------------------------------------------------------------------------------------
565 Tarmac 1,097
--------------------------------------------------------------------------------------------------
12,841 Tomkins PLC 65,278
--------------------------------------------------------------------------------------------------
22,000 Vodafone Group PLC 147,137
--------------------------------------------------------------------------------------------------
2,720 Zeneca Group 86,823
-------------------------------------------------------------------------------------------------- ------------
Total 3,971,836
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN EQUITY 18,818,759
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $75,565,264) 85,295,940
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 29.4%
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 20.4%
- --------------------------------------------------------------------------------------------------------------------
(C)REPURCHASE AGREEMENT -- 8.9%
- --------------------------------------------------------------------------------------------------------------------
$10,825,000 BT Securities Corp., 10,825,000 shares, 5.730%, dated 11/28/1997, due 12/1/1997
(AT AMORTIZED COST) 10,825,000
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TREASURY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY SECURITIES -- 11.5%
- --------------------------------------------------------------------------------------------------------------------
$3,100,000 United States Treasury Bond, 8.125%, 5/15/2021 $ 3,857,671
--------------------------------------------------------------------------------------------------
3,000,000 United States Treasury Note, 6.250%, 2/15/2003 3,052,470
--------------------------------------------------------------------------------------------------
1,605,000 United States Treasury Note, 6.375%, 8/15/2002 1,639,010
--------------------------------------------------------------------------------------------------
3,475,000 United States Treasury Note, 6.500%, 10/15/2006 3,614,487
--------------------------------------------------------------------------------------------------
1,800,000 United States Treasury Bill, 12/18/97 1,797,476
-------------------------------------------------------------------------------------------------- ------------
Total 13,961,114
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 24,786,114
-------------------------------------------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
489,419 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2027 491,499
--------------------------------------------------------------------------------------------------
188,567 Federal National Mortgage Association, 8.00%, 7/1/2023 196,110
--------------------------------------------------------------------------------------------------
418,504 Federal National Mortgage Association, 7.00%, 8/1/2011 423,213
--------------------------------------------------------------------------------------------------
505,075 Federal National Mortgage Association, 6.50%, 7/1/2026 496,342
--------------------------------------------------------------------------------------------------
477,998 Federal National Mortgage Association, 7.50%, 8/1/2026 488,155
--------------------------------------------------------------------------------------------------
182,845 Government National Mortgage Association, 9.00%, 10/15/2019 197,586
--------------------------------------------------------------------------------------------------
385,839 Government National Mortgage Association, 8.50%, 10/15/2022 407,542
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES 2,700,447
-------------------------------------------------------------------------------------------------- ------------
HIGH YIELD BONDS -- 2.7%
- --------------------------------------------------------------------------------------------------------------------
AUTOMOBILE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 28,375
--------------------------------------------------------------------------------------------------
50,000 Lear Corporation, Sub. Note, 9.50%, 7/15/2006 54,688
-------------------------------------------------------------------------------------------------- ------------
Total 83,063
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 First Nationwide Escrow , Sr. Sub. Note, 10.625%, 10/1/2003 55,875
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 325 PIK Pfd. Shares, 11.375% 38,350
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 304 Exchangeable Pfd. Shares, $12.00 36,073
--------------------------------------------------------------------------------------------------
50,000 (b)Fox/Liberty Networks, LLC, Sr. Disc. Note, 8/15/2007 31,375
--------------------------------------------------------------------------------------------------
(b)Sinclair Broadcast Group, Inc., 500 Pfd. Shares, Series A, $11.625 55,250
-------------------------------------------------------------------------------------------------- ------------
Total 161,048
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$33,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 $ 36,960
--------------------------------------------------------------------------------------------------
17,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 19,423
-------------------------------------------------------------------------------------------------- ------------
Total 56,383
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
14 (a)(b)CS Wireless Systems, Inc. 0
--------------------------------------------------------------------------------------------------
25,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 27,187
--------------------------------------------------------------------------------------------------
25,000 Cablevision Systems, Sr. Sub. Note, 9.25%, 11/1/2005 26,437
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
50,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 53,875
--------------------------------------------------------------------------------------------------
75,000 (b)Diamond Cable Comm. PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007 49,875
--------------------------------------------------------------------------------------------------
50,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 41,750
--------------------------------------------------------------------------------------------------
25,000 International Cabletel, Sr. Defd. Cpn. Note, 2/1/2006 19,188
--------------------------------------------------------------------------------------------------
100,000 International Cabletel, Sr. Disc. Note, 0/12.75%, 4/15/2005 82,500
--------------------------------------------------------------------------------------------------
25,000 Pegasus Media , Note, 12.50%, 7/1/2005 28,625
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Inc., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 54,750
--------------------------------------------------------------------------------------------------
75,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 57,563
--------------------------------------------------------------------------------------------------
25,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 16,375
-------------------------------------------------------------------------------------------------- ------------
Total 513,875
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 21,500
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Floorcoverings., Sr. Sub. Note, 10.00%, 1/15/2007 51,875
--------------------------------------------------------------------------------------------------
50,000 (b)Glenoit Corporation, Sr. Sub. Note, 11.00%, 4/15/2007 54,250
-------------------------------------------------------------------------------------------------- ------------
Total 106,125
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
50,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 54,500
--------------------------------------------------------------------------------------------------
50,000 ICON Fitness Corp., Sr. Disc. Note, 11/15/2006 29,250
--------------------------------------------------------------------------------------------------
50,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 50,375
--------------------------------------------------------------------------------------------------
50,000 Renaissance Cosmetics, Inc., Sr. Note, 11.75%, 2/15/2004 47,250
--------------------------------------------------------------------------------------------------
25,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 26,250
-------------------------------------------------------------------------------------------------- ------------
Total 207,625
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$50,000 (b)Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 $ 54,750
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)Fairchild Semiconductor, Sr. Sub., 10.125%, 3/15/2007 53,000
-------------------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 27,875
--------------------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 56,375
-------------------------------------------------------------------------------------------------- ------------
Total 84,250
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007 52,750
--------------------------------------------------------------------------------------------------
50,000 International Home Foods, Sr. Sub. Note, 10.375%, 11/1/2006 54,750
--------------------------------------------------------------------------------------------------
25,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 27,875
-------------------------------------------------------------------------------------------------- ------------
Total 135,375
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 26,750
--------------------------------------------------------------------------------------------------
50,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 54,750
-------------------------------------------------------------------------------------------------- ------------
Total 81,500
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 55,875
--------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 10.125%, 3/1/2005 54,313
-------------------------------------------------------------------------------------------------- ------------
Total 110,188
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
25,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 28,125
--------------------------------------------------------------------------------------------------
50,000 Continental Global, Inc., Sr. Note, 11.00%, 4/1/2007 53,750
--------------------------------------------------------------------------------------------------
50,000 Euramax International Plc, Sr. Sub. Note, 11.25%, 10/1/2006 54,375
--------------------------------------------------------------------------------------------------
50,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 51,750
-------------------------------------------------------------------------------------------------- ------------
Total 188,000
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 39,000
--------------------------------------------------------------------------------------------------
25,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 27,125
--------------------------------------------------------------------------------------------------
50,000 Premier Parks, Sr. Note, 9.75%, 1/15/2007 53,500
--------------------------------------------------------------------------------------------------
50,000 Viacom Inc, Sub. Deb., 8.00%, 7/7/2006 50,000
-------------------------------------------------------------------------------------------------- ------------
Total 169,625
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$50,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 $ 53,250
--------------------------------------------------------------------------------------------------
50,000 Clark Material Handling , Sr. Note, 10.75%, 11/15/2006 53,000
--------------------------------------------------------------------------------------------------
25,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 28,375
-------------------------------------------------------------------------------------------------- ------------
Total 134,625
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 54,437
--------------------------------------------------------------------------------------------------
50,000 Falcon Drilling Company, Sr. Note, 9.75%, 1/15/2001 52,500
--------------------------------------------------------------------------------------------------
50,000 Forcenergy Inc., Sr. Sub. Note, 9.50%, 11/1/2006 52,875
-------------------------------------------------------------------------------------------------- ------------
Total 159,812
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 56,250
--------------------------------------------------------------------------------------------------
50,000 Hollinger International, Sr. Sub. Note, 9.25%, 3/15/2007 52,000
--------------------------------------------------------------------------------------------------
Primedia, Inc., 500 Pfd. Shares, Series D, $10.00 51,875
-------------------------------------------------------------------------------------------------- ------------
Total 160,125
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 55,250
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 26,375
--------------------------------------------------------------------------------------------------
50,000 Statia Terminals, 1st Mtg. Note, 11.75%, 11/15/2003 53,000
--------------------------------------------------------------------------------------------------
25,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 27,344
-------------------------------------------------------------------------------------------------- ------------
Total 106,719
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,000 Brooks Fiber Properties, Inc. Sr. Disc. Note, 0/10.875%, 3/1/2006 41,375
--------------------------------------------------------------------------------------------------
50,000 (b)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
50,000 Intermedia Communications, Sr. Disc. Note, 0/12.50%, 5/15/2006 39,000
--------------------------------------------------------------------------------------------------
50,000 (b)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
77 (a)NEXTEL Communications, Inc., Class A 1,944
--------------------------------------------------------------------------------------------------
50,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 43,375
--------------------------------------------------------------------------------------------------
25,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 25,938
--------------------------------------------------------------------------------------------------
50,000 (b) Qwest Communications, Inc., Sr. Disc. Note, 10/15/2007 32,500
--------------------------------------------------------------------------------------------------
25,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 27,125
--------------------------------------------------------------------------------------------------
50,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 39,813
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL
AMOUNT OR
FOREIGN
CURRENCY
PAR VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR --CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$50,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 $ 52,375
-------------------------------------------------------------------------------------------------- ------------
Total 415,195
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 54,250
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 605 PIK Pfd. Shares, Series A, 11.40% 66,248
-------------------------------------------------------------------------------------------------- ------------
Total 120,498
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 3,234,406
-------------------------------------------------------------------------------------------------- ------------
FOREIGN BONDS -- 4.1%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIA DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
115,000 Federal National Mortgage Association, 6.500%, 7/10/2002 80,147
--------------------------------------------------------------------------------------------------
85,000 Qtc-global Notes, Deb., 10.5%, 5/15/2003 69,575
--------------------------------------------------------------------------------------------------
260,000 West Aust T Corp, Local Government Guarantee, 8%, 7/15/2003 192,822
-------------------------------------------------------------------------------------------------- ------------
Total 342,544
-------------------------------------------------------------------------------------------------- ------------
BELGIUM FRANC -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
514,000 Belgian Govt., Bond, 6.50%, 3/31/2005 15,024
-------------------------------------------------------------------------------------------------- ------------
CANADA DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
204,000 Canada Government, Deb., 6.50%, 6/1/2004 151,534
--------------------------------------------------------------------------------------------------
155,000 Ontario Hydro, 9.00%, 6/24/2002 124,873
--------------------------------------------------------------------------------------------------
68,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 53,839
-------------------------------------------------------------------------------------------------- ------------
Total 330,246
-------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,927,000 Denmark - Bullet, Bond, 8.00%, 3/15/2006 327,903
--------------------------------------------------------------------------------------------------
500,000 Denmark, 8.00%, 5/15/2003 83,457
-------------------------------------------------------------------------------------------------- ------------
Total 411,360
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
324,000 France O.A.T., Bond, 7.25%, 4/25/2006 61,965
--------------------------------------------------------------------------------------------------
187,500 France O.A.T., Bond, 7.50%, 4/25/2005 236,146
-------------------------------------------------------------------------------------------------- ------------
Total 298,111
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FOREIGN
CURRENCY
PAR VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DEUTCHE MARK -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
91,000 DG-HYPBK 5.75%, 1/22/2007 $ 52,170
--------------------------------------------------------------------------------------------------
20,000,000 KFW International Finance, 600%, 11/29/1999 173,399
--------------------------------------------------------------------------------------------------
150,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 91,012
--------------------------------------------------------------------------------------------------
600,000 KFW International Finance, 7.00%, 5/12/2000 107,304
--------------------------------------------------------------------------------------------------
120,000 Tennesee Valley Authority - Global Bond, 6.375%, 9/18/2006 71,347
--------------------------------------------------------------------------------------------------
435,000 Treuhandanstalt, 7.75%, 10/1/2002 274,764
-------------------------------------------------------------------------------------------------- ------------
Total 769,996
-------------------------------------------------------------------------------------------------- ------------
GREEK DRACHMA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
22,800,000 Hellenic Republic, FRN 10/23/2003 78,376
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
150,000,000 Btps, Bond, 10.50%, 11/1/2000 98,714
--------------------------------------------------------------------------------------------------
215,000,000 Btps, Deb., 12.00%, 5/18/1999 135,403
--------------------------------------------------------------------------------------------------
380,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 266,813
-------------------------------------------------------------------------------------------------- ------------
Total 500,930
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
11,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 99,927
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS GUILDER -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
255,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 135,180
--------------------------------------------------------------------------------------------------
340,000 Bank Ned Gemeenten, Bond, 7.75%, 12/20/2004 193,328
--------------------------------------------------------------------------------------------------
130,000 Lkb-global Bd, Bank Guarantee, 6.00%, 1/25/2006 75,523
--------------------------------------------------------------------------------------------------
90,000 Netherlands Government, 6.00%, 1/15/2006 47,144
-------------------------------------------------------------------------------------------------- ------------
Total 451,175
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
61,000 New Zealand Government, 8.00%, 2/15/2001 38,819
--------------------------------------------------------------------------------------------------
55,000 New Zealand Government, Bond, 8.00%, 7/15/1998 34,085
-------------------------------------------------------------------------------------------------- ------------
Total 72,904
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
641,000 NGB, Bond, 9.00%, 1/31/1999 93,662
--------------------------------------------------------------------------------------------------
330,000 Norwegian Government, Bond, 7.00%, 5/31/2001 48,802
--------------------------------------------------------------------------------------------------
247,000 Norwegian Government, Foreign Government Guarantee, 5.75%, 11/30/2004 34,979
-------------------------------------------------------------------------------------------------- ------------
Total 177,443
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FOREIGN
CURRENCY
PAR VALUE IN
AMOUNT U.S. DOLLARS
- --------------- -------------------------------------------------------------------------------------------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PORTUGUESE ESCUDO -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,250,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 $ 318,399
-------------------------------------------------------------------------------------------------- ------------
SPANISH PESETA -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
16,000,000 Spanish Government, 10.00%, 2/28/2005 135,122
--------------------------------------------------------------------------------------------------
29,000,000 Spanish Government, Bond, 8.80%, 4/30/2006 234,192
--------------------------------------------------------------------------------------------------
3,410,000 Spanish Government, Bond, 9.40%, 4/30/1999 24,289
--------------------------------------------------------------------------------------------------
8,540,000 Spanish Government, Deb., 10.10%, 2/28/2001 65,844
-------------------------------------------------------------------------------------------------- ------------
Total 459,447
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
800,000 Sweden, 6.00%, 2/9/2005 102,464
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
187,000 British Gas PLC, 8.875%, 7/8/2008 350,834
--------------------------------------------------------------------------------------------------
38,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 71,739
--------------------------------------------------------------------------------------------------
92,000 United Kingdom Treasury, Bond, 7.50%, 12/7/2006 165,333
-------------------------------------------------------------------------------------------------- ------------
Total 587,906
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $33,430,306) 35,737,219
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $108,995,570)(D) $121,033,159
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
* The Fund purchases index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividends and capital
gain payments to shareholders and corporate actions while maintaining
exposure to the index and minimize trading costs. The underlying face
amount, at value of open index futures contracts is $1,943,325 at November
30, 1997, which represents 1.6% of net assets. Taking into consideration
these open index futures contracts, the Fund's effective total exposure to
stocks is 71.6%, and increasing the total exposure to small company stocks
is 17.5%.
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $565,818 which represents 0.5% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $109,120,200.
The net unrealized appreciation of investments on a federal tax basis
amounts to $11,912,959 which is comprised of $14,778,325 appreciation and
$2,865,366 depreciation at November 30, 1997.
Certain securites maybe classified in multiple categorizations based on
purpose of individual purchases.
Note: The categories of investments are shown as a percentage of net
assets ($121,785,040) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt FRN -- Floating Rate Note LLC -- Limited
Liability Corporation PIK -- Payment in Kind PLC -- Public Limited Company PP --
Principal Payment SPA -- Standby Purchase Agreement TRANs -- Tax and Revenue
Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $108,995,570, and tax cost $109,120,200) $121,033,159
- -----------------------------------------------------------------------------------------
Income receivable 510,615
- -----------------------------------------------------------------------------------------
Receivable for investments sold 285,431
- -----------------------------------------------------------------------------------------
Receivable for shares sold 215,146
- -----------------------------------------------------------------------------------------
Deferred organizational costs 53,030
- -----------------------------------------------------------------------------------------
Other assets 10,830
- ----------------------------------------------------------------------------------------- ------------
Total assets 122,108,211
- -----------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------
Payable for investments purchased $ 158,619
- -------------------------------------------------------------------------
Payable for shares redeemed 63,420
- -------------------------------------------------------------------------
Payable to Bank 16,170
- -------------------------------------------------------------------------
Payable for taxes withheld 4,130
- -------------------------------------------------------------------------
Payable for daily variation margin 1,125
- -------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 754
- -------------------------------------------------------------------------
Accrued expenses 78,953
- ------------------------------------------------------------------------- ------------
Total liabilities 323,171
- ----------------------------------------------------------------------------------------- ------------
NET ASSETS for 8,972,539 shares outstanding $121,785,040
- ----------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------
Paid in capital $103,516,000
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 12,044,513
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 6,376,159
- -----------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income (151,632)
- ----------------------------------------------------------------------------------------- ------------
Total Net Assets $121,785,040
- ----------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -----------------------------------------------------------------------------------------
$76,271,005 [DIVIDED BY] 5,616,365 shares outstanding $13.58
- ----------------------------------------------------------------------------------------- ------------
SELECT SHARES:
- -----------------------------------------------------------------------------------------
$45,514,035 [DIVIDED BY] 3,356,174 shares outstanding $13.56
- ----------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $45,886) $ 901,795
- ------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $5,657) 2,361,762
- ------------------------------------------------------------------------------------------ ------------
Total income 3,263,557
- ------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------
Investment advisory fee $ 762,135
- ---------------------------------------------------------------------------
Administrative personnel and services fee 154,893
- ---------------------------------------------------------------------------
Custodian fees 82,950
- ---------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 135,742
- ---------------------------------------------------------------------------
Directors'/Trustees' fees 4,040
- ---------------------------------------------------------------------------
Auditing fees 16,542
- ---------------------------------------------------------------------------
Legal fees 4,044
- ---------------------------------------------------------------------------
Portfolio accounting fees 74,016
- ---------------------------------------------------------------------------
Distribution services fee -- Select Shares 301,711
- ---------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 153,479
- ---------------------------------------------------------------------------
Shareholder services fee -- Select Shares 100,570
- ---------------------------------------------------------------------------
Share registration costs 43,433
- ---------------------------------------------------------------------------
Printing and postage 40,047
- ---------------------------------------------------------------------------
Insurance premiums 3,596
- ---------------------------------------------------------------------------
Taxes 2,968
- ---------------------------------------------------------------------------
Miscellaneous 22,904
- --------------------------------------------------------------------------- ------------
Total expenses 1,903,070
- ---------------------------------------------------------------------------
Waivers --
- ------------------------------------------------------------
Waiver of investment advisory fee $ (326,658)
- ------------------------------------------------------------
Waiver of distribution services fee -- Select Shares (100,570)
- ------------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (122,783)
- ------------------------------------------------------------ ------------
Total waivers (550,011)
- --------------------------------------------------------------------------- ------------
Net expenses 1,353,059
- ------------------------------------------------------------------------------------------ ------------
Net investment income 1,910,498
- ------------------------------------------------------------------------------------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- ------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions
(net of foreign taxes withheld of $237) 6,131,980
- ------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 5,658,166
- ------------------------------------------------------------------------------------------ ------------
Net realized and unrealized gain on investments and foreign currency 11,790,146
- ------------------------------------------------------------------------------------------ ------------
Change in net assets resulting from operations $ 13,700,644
- ------------------------------------------------------------------------------------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------------------
OPERATIONS --
- -------------------------------------------------------------------------------------
Net investment income $ 1,910,498 $ 1,560,986
- -------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions
($6,480,249 and $2,395,283, respectively, as computed for federal tax purposes) 6,131,980 2,610,405
- -------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments and translation of
assets and liabilities in foreign currency 5,658,166 3,708,316
- ------------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from operations 13,700,644 7,879,707
- ------------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS --
- -------------------------------------------------------------------------------------
Distributions from net investment income
- -------------------------------------------------------------------------------------
Institutional Shares (1,427,543) (1,071,156)
- -------------------------------------------------------------------------------------
Select Shares (678,606) (489,212)
- -------------------------------------------------------------------------------------
Distributions from net realized gains on investments and
foreign currency transactions
- -------------------------------------------------------------------------------------
Institutional Shares (1,462,069) (600,532)
- -------------------------------------------------------------------------------------
Select Shares (920,615) (289,253)
- ------------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from distributions to shareholders (4,488,833) (2,450,153)
- ------------------------------------------------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS --
- -------------------------------------------------------------------------------------
Proceeds from sale of shares 65,432,150 51,526,045
- -------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared 3,820,798 2,029,232
- -------------------------------------------------------------------------------------
Cost of shares redeemed (37,784,914) (15,833,126)
- ------------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from share transactions 31,468,034 37,722,151
- ------------------------------------------------------------------------------------- --------------- ---------------
Change in net assets 40,679,845 43,151,705
- -------------------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------------------
Beginning of period 81,105,195 37,953,490
- ------------------------------------------------------------------------------------- --------------- ---------------
End of period (including undistributed net investment income of
$0 and $285,713, respectively) $ 121,785,040 $ 81,105,195
- ------------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Aggressive Growth Fund (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to seek capital appreciation.
The Fund offers two classes of shares: Institutional Shares and Select
Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
With respect to valuation of foreign securities, trading in foreign cities may
be completed at times which vary from the closing of the New York Stock
Exchange. Therefore, foreign securities are valued at the latest closing price
on the exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions and passive foreign investment company transactions.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principals.
These differences are primarily due to differing treatments for foreign currency
transactions and passive foreign investment company transactions. The following
reclassifications have been made to the financial statements.
INCREASE (DECREASE)
- --------------------------------------------------------
ACCUMULATED
ACCUMULATED DISTRIBUTIONS IN
NET REALIZED EXCESS OF NET PAID-IN
GAIN/LOSS INVESTMENT INCOME CAPITAL
- ------------ ------------------ ---------------
$240,093 ($241,694) $1,601
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. For the year ended November 30, 1997, the Fund had
realized gains of $26,181 on future contracts.
At November 30, 1997, the Fund had outstanding futures contracts as set forth
below:
<TABLE>
<CAPTION>
CONTRACTS TO UNREALIZED
EXPIRATION DATE RECEIVE POSITION APPRECIATION
- -------------------- -------------------------- ---------- -------------
<S> <C> <C> <C>
December 1997 9 Russell 200 Index Future Long $9,215
</TABLE>
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency contracts for the delayed delivery of
securities or foreign currency exchange transactions. These contracts are used
to hedge the Fund's securities against currency fluctuations. Risks may arise
upon entering these transactions from the potential inability of counter-parties
to meet the terms of their commitments and from unanticipated movements in
security prices or foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purpose as unrealized until the
settlement date.
At November 30, 1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
CONTRACTS SETTLEMENT FOREIGN CURRENCY IN EXCHANGE CONTRACTS AT UNREALIZED
PURCHASED DATE UNITS TO RECEIVE FOR VALUE (DEPRECIATION)
- ------------- ---------- ------------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Belgian Franc 12/1/97 1,183,540 $33,283 $32,529 (754)
</TABLE>
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- --------------------------------------------- --------------------- ---------------------
<S> <C> <C>
Allied Waste N.A., Inc. 10/23/1997-12/3/1997 $222,585
Chilectra SA, ADR, 144A 33,661 10,856
CS Wireless Systems, Inc. 33,649 --
Diamond Cable Comm. 34,020 44,586
Fairchild Semiconductor, Sr. Sub. 34,033 50,000
Fox/Liberty Networks 34,195 31,146
Glenoit Corporation, Sr. Sub. Note 34,053 49,905
Grupo Financiero Bancomer SA de C.V., Class B 5/22/1997-5/23/1997 84,942
Hermes Europe Railtel B.V., Sr. Note 34,194 51,094
Metronet Communications 34,167 50,000
Qwest Communications, Inc. 34,263 32,938
Sinclair Broadcast Group, Inc. 34,032 50,000
</TABLE>
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are therefore treated as short-term financing arrangements which
will not exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 3,204,660 $ 41,207,438 2,592,730 $30,626,600
- ---------------------------------------------------
Shares issued to shareholders
in payment of distributions
declared 189,433 2,352,593 115,076 1,330,109
- ---------------------------------------------------
Shares redeemed (1,748,701) (22,354,908) (946,450) (11,216,939)
- --------------------------------------------------- ---------- ------------ ---------- ------------
Net change resulting from
Institutional Share transactions 1,645,392 $ 21,205,123 1,761,356 $20,739,770
- --------------------------------------------------- ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Shares sold 1,899,443 $ 24,224,712 1,775,082 $20,899,445
- ---------------------------------------------------
Shares issued to shareholders
in payment of distributions
declared 118,629 1,468,205 60,465 699,123
- ---------------------------------------------------
Shares redeemed (1,173,146) (15,430,006) (389,611) (4,616,187)
- --------------------------------------------------- ---------- ------------ -------- ------------
Net change resulting from
Select Share transactions 844,926 $ 10,262,911 1,445,936 $16,982,381
- --------------------------------------------------- ---------- ------------ ---------- ------------
Net change resulting from
share transactions 2,490,318 $ 31,468,034 3,207,292 $37,722,151
- --------------------------------------------------- ---------- ------------ ---------- ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee and/or reimburse certain operating expenses of the Fund. The
Adviser can modify or terminate this voluntary waiver and/or reimbursement at
any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses up to
0.75% of average daily net assets of Select Shares annually, to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $88,333 were borne initially by the Adviser. The Fund
has agreed to reimburse the Adviser for the organizational expenses during the
five year period following the effective date. For the period ended November 30,
1997, the Fund paid $12,659 pursuant to this agreement.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $129,880,285
- ------------------------------------------------ ------------
SALES $105,260,650
- ------------------------------------------------ ------------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- -------------------------------------- ---------- ------------------------------------- -----------
<S> <C> <C> <C>
Aerospace & Military Technology 0.2% Industrial Components 0.2%
Agency 0.5 Insurance 0.7
Appliances & Household Durables 0.1 Leisure & Tourism 0.3
Automobile 0.4 Machinery & Engineering 0.5
Banking 2.7 Merchandising 0.3
Beverage & Tobacco 0.3 Metals - Non Ferrous 0.1
Broadcasting & Publishing 0.5 Metals - Steel 0.2
Building Materials & Components 0.1 Mining 0.0
Business & Public Services 0.1 Miscellaneous Materials & Commodities 0.4
Chemicals 0.6 Multi-Industry 0.2
Conglomerate 0.0 Producer Manufacturing 0.3
Construction & Housing 0.0 Real Estate 0.7
Consumer Durables 0.2 Recreation, Other Consumer Goods 0.3
Consumer Non-Durables 0.4 Services 1.0
Data Processing & Reproduction 0.2 Sovereign 2.4
Electrical & Electronics 0.6 Sovereign Government 0.4
Electronic Components, Instruments 0.5 State/Provincial 0.1
Energy - Oil and Gas 0.1 Supranational 0.1
Energy Equipment & Services 0.0 Technology 0.6
Energy Minerals 0.6 Telecommunications 1.0
Energy Sources 0.8 Telecommunications & Cellular 0.0
Financial Intermediaries 0.1 Textiles & Apparel 0.1
Financial Services 0.5 Tobacco 0.1
Food & Household Products 0.7 Transportation 0.2
Forest Products & Paper 0.1 Transportation - Airlines 0.2
Health & Personal Care 1.5 Utilities 0.3
Health Care 0.4 Utilities - Electrical & Gas 0.4
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Aggressive Growth Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Aggressive Growth Fund (an investment portfolio of Managed
Series Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of November 30, 1997, and the related statement of
operations for the year then ended, and the statement of changes in net assets,
and the financial highlights (see pages 2 and 20 of the prospectus) for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Aggressive Growth Fund, an investment portfolio of Managed
Series Trust, as of November 30, 1997, the results of its operations for the
year then ended, and the changes in its net assets and its financial highlights
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] Federated Investors
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
Institutional Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust, an Open-End
Management Investment Company
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
INSTITUTIONAL SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank
and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K 701
3122009A-SS (1/98)
[RECYCLE LOGO OMITTED]
RECYCLED
PAPER
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(A Portfolio of Managed Series Trust)
Select Shares
PROSPECTUS
The Select Shares of Federated Managed Aggressive Growth Fund (the Fund) offered
by this prospectus represent interests in the Fund, which is a diversified
investment portfolio of Managed Series Trust (the "Trust"). The Trust is an
open-end management investment company (a mutual fund).
The investment objective of the Fund is to seek capital
appreciation. The Fund invests in both bonds and stocks. Select
Shares are sold at net asset value.
THE SELECT SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
ANY BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SELECT SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in Select Shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a 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
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights -- Select Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 6
Investment Limitations 11
Trust Information 11
Management of the Trust 11
Distribution of Select Shares 14
Administration of the Fund 15
Brokerage Transactions 15
Net Asset Value 16
Investing in Select Shares 16
Share Purchases 16
Minimum Investment Required 16
What Shares Cost 16
Systematic Investment Program 16
Confirmations and Account Statements 17
Dividends 17
Capital Gains 17
Redeeming Select Shares 17
Through a Financial Institution 17
Telephone Redemption 17
Written Requests 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
Shareholder Information 18
Voting Rights 18
Tax Information 18
Federal Income Tax 18
State and Local Taxes 18
Performance Information 18
Other Classes of Shares 19
Financial Highlights -- Institutional Shares 20
Financial Statements 21
Report of Independent Public Accountants 59
Appendix 60
SUMMARY OF FUND EXPENSES
SELECT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.43%
12b-1 Fee (after waiver)(2) 0.50%
Total Other Expenses 0.82%
Shareholder Services Fee 0.25%
Total Operating Expenses(3) 1.75%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver of a portion
of the 12b-1fee. The distributor can terminate the voluntary waiver at any
time at its sole discretion. The maximum 12b-1 fee is 0.75%.
(3) The total operating expenses would have been 2.32% absent the voluntary
waivers of portions of the management fee and the 12b-1 fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Select Shares of the Fund will bear,
either directly or indirectly. For more complete descriptions of the various
costs and expenses, see Investing in Select Shares and "Trust Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE MAXIMUM
FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL ASSOCIATION OF
SECURITIES DEALERS, INC.
<TABLE>
EXAMPLE
- -----------------------------------------------------------------------------------------------------------------
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $18
3 Years $55
5 Years $95
10 Years $206
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
</TABLE>
FINANCIAL HIGHLIGHTS -- SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 59.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.50 $11.59 $ 9.80 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.18 0.28 0.17 0.13
- ---------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.46 1.19 1.89 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from
investment operations 1.64 1.47 2.06 (0.12)
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from
net investment income* (0.22) (0.30) (0.25) (0.08)
- ---------------------------------------------
Distributions from net realized gain
on investments and foreign
currency transactions (0.36) (0.26) (0.02) --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.58) (0.56) (0.27) (0.08)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.56 $12.50 $11.59 $ 9.80
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 13.66% 13.22% 21.36% (1.20%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.75% 1.75% 1.75% 1.64%*
- ---------------------------------------------
Net investment income 1.29% 2.26% 2.65% 2.67%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.57% 0.93% 1.71% 1.97%*(d)
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets,
end of period (000 omitted) $45,514 $31,390 $12,342 $1,673
- ---------------------------------------------
Average commission rate paid(e) $0.0069 $0.0037 -- --
- ---------------------------------------------
Portfolio turnover 115% 86% 139% 77%
- ---------------------------------------------
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994, the
Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) The adviser waived $6,858 of the investment advisory fee, which represents
0.11% of average net assets, to comply with certain state expense
limitations. The remainder of the waiver/reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
</TABLE>
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 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.
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 20% 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 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.
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 Portfolio 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.
ACCEPTABLE INVESTMENTS
EQUITY SECURITIES
Common stocks represent ownership interest in a corporation. Unlike bonds, which
are debt securities, common stocks have neither fixed maturity dates nor fixed
schedules of promised payments. Foreign stocks are equity securities of foreign
issuers.
FOREIGN SECURITIES
The foreign bonds in which the Fund invests are rated within the four highest
ratings for bonds by Moody's Investors Service, Inc. ("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.
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, 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:
* direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes, and bonds;
* 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;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding;
and
* 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:
* issued by an agency of the U.S. government, typically GNMA, FNMA
or FHLMC;
* privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of
principal and interest by an agency or instrumentality of the U.S.
government;
* privately issued securities which are collateralized by pools of
mortgages in which payment of principal and interest are guaranteed
by the issuer and such guarantee is collateralized by U.S.
government securities; and
* other privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and interest
are supported by the credit of an agency or instrumentality of the U.S.
government.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries or
trusts of financial institutions, government agencies, investment bankers, or
companies related to the construction industry. Most of the CMOs in which the
Fund would invest use the same basic structure:
* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities. The
first three (A, B, and C bonds) pay interest at their stated rates beginning
with the issue date; the final class (or Z bond) typically receives the residual
income from the underlying investments after payments are made to the other
classes.
* The cash flows from the underlying mortgages are applied first to pay interest
and then to retire securities.
* The classes of securities are retired sequentially. All principal payments are
directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed to
the next-shortest maturity security (or B bond). This process continues until
all of the classes have been paid off.
Because the cash flow is distributed sequentially instead of pro rata as with
pass-through securities, the cash flows and average lives of CMOs are more
predictable, and there is a period of time during which the investors in the
longer-maturity classes receive no principal paydowns. The interest portion of
these payments is distributed by the Fund as income and the capital portion is
reinvested.
The Fund will invest only in CMOs which are rated AAA or Aaa by an NRSRO.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the Internal
Revenue Code. Issuers of REMICs may take several forms, such as trusts,
partnerships, corporations, associations or a segregated pool of mortgages. Once
REMIC status is elected and obtained, the entity is not subject to federal
income taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC interest must
consist of one or more classes of "regular interests," some of which may offer
adjustable rates, and a single class of residual interests. To qualify as a
REMIC, substantially all of the assets of the entity must be in assets directly
or indirectly secured principally by real property.
CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES
Mortgage-backed securities have yield and maturity characteristics corresponding
to the underlying mortgages. Distributions to holders of mortgage-backed
securities include both interest and principal payments. Principal payments
represent the amortization of the principal of the underlying mortgages and any
prepayments of principal due to prepayment, refinancing, or foreclosure of the
underlying mortgages. Although maturities of the underlying mortgage loans may
range up to 30 years, amortization and prepayments substantially shorten the
effective maturities of mortgage-backed securities. Due to these features,
mortgage-backed securities are less effective as a means of "locking in"
attractive long-term interest rates than fixed-income securities which pay only
a stated amount of interest until maturity, when the entire principal amount is
returned. This is caused by the need to reinvest at lower interest rates both
distributions of principal generally and significant prepayments which become
more likely as mortgage interest rates decline. Since comparatively high
interest rates cannot be effectively "locked in," mortgage-backed securities may
have less potential for capital appreciation during periods of declining
interest rates than other non-callable, fixed-income government securities of
comparable stated maturities. However, mortgage-backed securities may experience
less pronounced declines in value during periods of rising interest rates.
In addition, some of the CMOs purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs"). Due
to the possibility of prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment in interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed-income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
the Fund's investment objective.
CORPORATE BONDS
The investment-grade corporate bonds in which the Fund invests are:
* rated within the four highest ratings for corporate bonds by
Moody's (Aaa, Aa, A, or Baa), Standard & Poor's (AAA, AA, A, or BBB,
or Fitch Investors Service, Inc. ("Fitch") (AAA, AA, A, or BBB);
* unrated if other long-term debt securities of that issuer are rated, at the
time of purchase, Baa or better by Moody's or BBB or better by Standard & Poor's
or Fitch; or
* unrated if determined to be of equivalent quality to one of the foregoing
rating categories by the Fund's adviser.
Securities which are rated BBB by Standard & Poor's or Fitch or Baa by Moody's
have speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make principal and
interest payments than higher rated bonds. If a security's rating is reduced
below the required minimum after the Fund has purchased it, the Fund is not
required to sell the security, but may consider doing so.
The high yield corporate bonds in which the Fund invests are rated Ba or lower
by Moody's or BB or lower by Standard & Poor's or Fitch (commonly known as junk
bonds). A description of the rating categories is contained in the Appendix to
this prospectus.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest 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 20% 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, here 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:
* 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;
* lend any securities except for portfolio securities; or
* underwrite any issue of securities, except as it may be deemed to be an
underwriter under the Securities Act of 1933 in connection with the sale of
restricted securities which the Fund may purchase pursuant to its investment
objective, policies and limitations.
The above investment limitations cannot be changed without shareholder approval.
TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. The Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER
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 Adviser receives an annual investment advisory fee equal to 0.75% of the
Fund's average daily net assets. 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.
Federated Management, Federated Global Research Corp. and other subsidiaries of
Federated Investors serve as investment advisers to a number of investment
companies and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $120
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1997, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through approximately 4,000 financial institutions nationwide.
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:
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 been a portfolio
manager of the Fund 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 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.
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 Masters 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
investment 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.
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.
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 a Portfolio 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.
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.I.A. concentrating
in Finance 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 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 Michael 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.
Michael 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 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 separately 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 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
FEE ASSETS OF THE FEDERATED FUNDS
- ---------- ---------------------------------------
0.150% on the first $250 million
0.125% on the next $250 million
0.100% 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.
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 of the Fund 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
Aggressive Growth Fund -- Select Shares; Fund Number (this number can be found
on the account statement or by contacting the Fund); Group Number or Wire Order
Number; Nominee or Institution Name; and ABA Number 011000028. 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
Aggressive 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 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 will receive
periodic 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
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
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 $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
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 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 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.
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Independent Public Accountants on page 59.
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
---------------------------------------------------
1997 1996 1995 1994(A)
------ ------ ------ --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.52 $11.59 $9.82 $10.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.30 0.33 0.35 0.17
- ---------------------------------------------
Net realized and unrealized
gain (loss) on investments and
foreign currency 1.43 1.24 1.77 (0.25)
- --------------------------------------------- ------ ------ ------ ------
Total from
investment operations 1.73 1.57
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Distributions from
net investment income* (0.31) (0.38) (0.33) (0.10)
- ---------------------------------------------
Distributions from net realized gain
on investments and
foreign currency transactions (0.36) (0.26) (0.02) --
- --------------------------------------------- ------ ------ ------ ------
Total distributions (0.67) (0.64) (0.35) (0.10)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $13.58 $12.52 $11.59 $ 9.82
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN(B) 14.40% 14.13% 21.96% (0.87%)
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 1.06% 1.05% 1.00% 0.89%*
- ---------------------------------------------
Net investment income 2.27% 2.96% 3.42% 3.42%*
- ---------------------------------------------
Expense waiver/reimbursement(c) 0.52% 0.88% 1.71% 1.72%*(d)
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets,
end of period (000 omitted) $76,271 $49,715 $25,611 $15,696
- ---------------------------------------------
Average commission rate paid(e) $0.0069 $0.0037 -- --
- ---------------------------------------------
Portfolio turnover 115% 86% 139% 77%
- ---------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 25, 1994 (date of initial public
investment) to November 30, 1994. For the period from January 27, 1994, the
Fund had no investment activity.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) The adviser waived $6,858 of the investment advisory fee, which represents
0.11% of average net assets, to comply with certain state expense
limitations. The remainder of the waiver/reimbursement was voluntary. This
expense decrease is reflected in both the expense and net investment income
ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
FURTHER INFORMATION ABOUT THE FUND'S PERFORMANCE IS CONTAINED IN THE
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997,
WHICH CAN BE OBTAINED FREE OF CHARGE.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
<S> <C> <C>
*STOCKS -- 70.0%
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- 20.8%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
16,800 Archer-Daniels-Midland Co. $359,100
--------------------------------------------------------------------------------------------------
2,900 Dow Chemical Co. 286,375
--------------------------------------------------------------------------------------------------
17,800 LTV Corporation 198,025
--------------------------------------------------------------------------------------------------
10,300 Louisiana-Pacific Corp. 207,931
-------------------------------------------------------------------------------------------------- ------------
Total 1,051,431
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
3,400 Eastman Kodak Co. 206,125
--------------------------------------------------------------------------------------------------
4,100 General Motors Corp., Class H 274,700
--------------------------------------------------------------------------------------------------
2,800 General Motors Corp. 170,800
--------------------------------------------------------------------------------------------------
9,700 Rubbermaid, Inc. 235,225
-------------------------------------------------------------------------------------------------- ------------
Total 886,850
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
2,300 CPC International, Inc. 237,762
--------------------------------------------------------------------------------------------------
13,100 PepsiCo, Inc. 483,063
--------------------------------------------------------------------------------------------------
4,200 Philip Morris Cos., Inc. 182,700
--------------------------------------------------------------------------------------------------
5,000 RJR Nabisco Holdings Corp. 182,188
--------------------------------------------------------------------------------------------------
12,700 Russell Corp. 388,144
--------------------------------------------------------------------------------------------------
6,100 Sara Lee Corp. 322,538
--------------------------------------------------------------------------------------------------
8,800 Unilever N.V. 510,950
-------------------------------------------------------------------------------------------------- ------------
Total 2,307,345
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
2,900 Atlantic Richfield Co. 236,350
--------------------------------------------------------------------------------------------------
4,700 Chevron Corp. 376,881
--------------------------------------------------------------------------------------------------
5,900 Exxon Corp. 359,900
--------------------------------------------------------------------------------------------------
10,000 Occidental Petroleum Corp. 296,875
--------------------------------------------------------------------------------------------------
4,000 Royal Dutch Petroleum Co., ADR 210,750
--------------------------------------------------------------------------------------------------
11,600 Sun Co., Inc. 469,075
--------------------------------------------------------------------------------------------------
6,600 Texaco, Inc. 372,900
--------------------------------------------------------------------------------------------------
11,700 USX-Marathon Group 400,725
--------------------------------------------------------------------------------------------------
8,500 YPF Sociedad Anonima, ADR 285,281
-------------------------------------------------------------------------------------------------- ------------
Total 3,008,737
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
5,600 Allmerica Financial Corp. $271,600
--------------------------------------------------------------------------------------------------
3,200 Allstate Corp. 274,800
--------------------------------------------------------------------------------------------------
7,000 Bear Stearns Cos., Inc. 290,500
--------------------------------------------------------------------------------------------------
6,600 Block (H&R), Inc. 270,600
--------------------------------------------------------------------------------------------------
7,300 (a)Boston Properties, Inc. 238,162
--------------------------------------------------------------------------------------------------
2,800 CIGNA Corp. 468,300
--------------------------------------------------------------------------------------------------
1,200 General RE Corp. 238,200
--------------------------------------------------------------------------------------------------
5,200 Marsh & McLennan Cos., Inc. 387,075
--------------------------------------------------------------------------------------------------
5,400 Morgan Stanley, Dean Witter, Discover & Co. 293,288
--------------------------------------------------------------------------------------------------
5,700 Travelers Group, Inc. 287,850
-------------------------------------------------------------------------------------------------- ------------
Total 3,020,375
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 2.3%
- --------------------------------------------------------------------------------------------------------------------
5,100 Abbott Laboratories 331,500
--------------------------------------------------------------------------------------------------
15,800 (a)Beverly Enterprises, Inc. 268,600
--------------------------------------------------------------------------------------------------
6,200 Bristol-Myers Squibb Co. 580,475
--------------------------------------------------------------------------------------------------
2,800 Merck & Co., Inc. 264,775
--------------------------------------------------------------------------------------------------
8,100 (a)Perrigo Co. 115,425
--------------------------------------------------------------------------------------------------
13,800 Pharmacia & Upjohn, Inc. 465,750
--------------------------------------------------------------------------------------------------
4,900 Smithkline Beecham, ADR 243,163
--------------------------------------------------------------------------------------------------
9,500 U.S. Surgical Corp. 250,563
--------------------------------------------------------------------------------------------------
4,500 United Healthcare Corp. 234,281
-------------------------------------------------------------------------------------------------- ------------
Total 2,754,532
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
15,500 ITT Industries, Inc. 492,125
--------------------------------------------------------------------------------------------------
9,900 Ingersoll-Rand Co. 404,663
--------------------------------------------------------------------------------------------------
6,900 Johnson Controls, Inc. 316,106
--------------------------------------------------------------------------------------------------
9,700 (a)Lexmark International. Group, Class A 309,188
--------------------------------------------------------------------------------------------------
2,000 Loews Corp. 212,250
--------------------------------------------------------------------------------------------------
4,800 PACCAR, Inc. 264,000
-------------------------------------------------------------------------------------------------- ------------
Total 1,998,332
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
5,700 Dayton-Hudson Corp. 378,694
--------------------------------------------------------------------------------------------------
36,100 (a)K Mart Corp. 453,506
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
14,800 Wal-Mart Stores, Inc. $591,075
-------------------------------------------------------------------------------------------------- ------------
Total 1,423,275
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
2,000 ABB AB, ADR 248,000
--------------------------------------------------------------------------------------------------
6,500 Browning-Ferris Industries, Inc. 231,969
--------------------------------------------------------------------------------------------------
1,900 News Corp., Ltd., ADR 41,206
--------------------------------------------------------------------------------------------------
25,700 News Corp., Ltd., ADR 507,575
--------------------------------------------------------------------------------------------------
12,300 Readers Digest Association, Inc., Class A 294,431
--------------------------------------------------------------------------------------------------
5,469 (a)TCI Ventures Group, Class A 123,736
--------------------------------------------------------------------------------------------------
1,310 (a)Tricon Global Restaurants, Inc. 44,294
--------------------------------------------------------------------------------------------------
6,600 (a)Viacom, Inc., Class A 229,350
--------------------------------------------------------------------------------------------------
4,200 (a)Viacom, Inc., Class B 147,000
--------------------------------------------------------------------------------------------------
18,500 Waste Management, Inc. 455,563
-------------------------------------------------------------------------------------------------- ------------
Total 2,323,124
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.1%
- --------------------------------------------------------------------------------------------------------------------
7,500 AMP, Inc. 325,781
--------------------------------------------------------------------------------------------------
6,500 (a)Cabletron Systems, Inc. 149,500
--------------------------------------------------------------------------------------------------
13,300 First Data Corp. 376,556
--------------------------------------------------------------------------------------------------
2,800 International Business Machines Corp. 306,775
--------------------------------------------------------------------------------------------------
2,100 Matsushita Electric Industrial Co., ADR 325,631
--------------------------------------------------------------------------------------------------
29,300 (a)Novell, Inc. 271,025
--------------------------------------------------------------------------------------------------
3,100 Raytheon Co. 173,406
--------------------------------------------------------------------------------------------------
9,400 (a)Seagate Technology, Inc. 213,263
--------------------------------------------------------------------------------------------------
6,100 (a)Storage Technology Corp. 393,831
-------------------------------------------------------------------------------------------------- ------------
Total 2,535,768
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
7,200 CNF Transporation, Inc. 313,200
--------------------------------------------------------------------------------------------------
6,883 KLM Royal Dutch Airlines 247,788
--------------------------------------------------------------------------------------------------
6,300 Ryder Systems, Inc. 228,769
-------------------------------------------------------------------------------------------------- ------------
Total 789,757
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 2.6%
- --------------------------------------------------------------------------------------------------------------------
5,400 CMS Energy Corp. 212,625
--------------------------------------------------------------------------------------------------
3,900 Coastal Corp. 228,394
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
LARGE-CAP VALUE STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UTILITIES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
3,700 Columbia Gas System, Inc. $269,175
--------------------------------------------------------------------------------------------------
10,300 Entergy Corp. 267,800
--------------------------------------------------------------------------------------------------
3,900 GTE Corp. 197,194
--------------------------------------------------------------------------------------------------
10,300 Houston Industries, Inc. 243,981
--------------------------------------------------------------------------------------------------
13,200 MCI Communications Corp. 579,975
--------------------------------------------------------------------------------------------------
12,500 P G & E Corp. 353,125
--------------------------------------------------------------------------------------------------
7,000 Public Service Enterprises Group, Inc. 204,313
--------------------------------------------------------------------------------------------------
16,031 (a)Tele-Communications, Inc., Class A 367,210
--------------------------------------------------------------------------------------------------
6,400 U.S. West, Inc. 289,200
-------------------------------------------------------------------------------------------------- ------------
Total 3,212,992
-------------------------------------------------------------------------------------------------- ------------
TOTAL LARGE-CAP VALUE STOCKS 25,312,518
-------------------------------------------------------------------------------------------------- ------------
SMALL-CAP STOCKS -- 15.9%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 1.4%
- --------------------------------------------------------------------------------------------------------------------
6,900 BMC Industries, Inc. 128,081
--------------------------------------------------------------------------------------------------
4,600 Cambrex Corp. 208,725
--------------------------------------------------------------------------------------------------
6,100 (a)Carbide/Graphite Group, Inc. 235,612
--------------------------------------------------------------------------------------------------
9,900 (a)Chirex, Inc. 241,312
--------------------------------------------------------------------------------------------------
5,400 Furon Co. 213,300
--------------------------------------------------------------------------------------------------
3,900 Lone Star Industries, Inc. 203,288
--------------------------------------------------------------------------------------------------
5,100 (a)Lone Star Technologies, Inc. 147,900
--------------------------------------------------------------------------------------------------
13,500 Spartech Corp. 222,750
--------------------------------------------------------------------------------------------------
3,600 Valspar Corp. 109,350
-------------------------------------------------------------------------------------------------- ------------
Total 1,710,318
-------------------------------------------------------------------------------------------------- ------------
CONSUMER DURABLES -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
8,500 (a)Action Performance Companies, Inc. 246,500
--------------------------------------------------------------------------------------------------
5,800 (a)American Homestar Corporation 81,200
--------------------------------------------------------------------------------------------------
10,700 Brilliance China Automotive Holdings Ltd. 100,981
--------------------------------------------------------------------------------------------------
3,500 Carlisle Cos., Inc. 148,750
--------------------------------------------------------------------------------------------------
7,400 (a)Dura Automotive Systems, Inc. 195,175
--------------------------------------------------------------------------------------------------
5,000 (a)Equity Marketing, Inc. 147,500
--------------------------------------------------------------------------------------------------
4,600 (a)Gentex Corp. 113,850
--------------------------------------------------------------------------------------------------
12,800 (a)Helen of Troy Ltd. 182,400
--------------------------------------------------------------------------------------------------
2,800 Oakwood Homes Corp. 84,000
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,400 (a)Stanley Furniture Co. Inc. $ 148,500
--------------------------------------------------------------------------------------------------
2,500 Wynns International, Inc. 81,094
-------------------------------------------------------------------------------------------------- ------------
Total 1,529,950
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,400 (a)Blyth Industries, Inc. 87,337
--------------------------------------------------------------------------------------------------
5,700 (a)North Face, Inc. 123,975
--------------------------------------------------------------------------------------------------
5,800 (a)Rayovac Corp. 97,150
--------------------------------------------------------------------------------------------------
3,700 (a)Tommy Hilfiger Corp. 145,225
-------------------------------------------------------------------------------------------------- ------------
Total 453,687
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
1,700 Camco International, Inc. 106,675
--------------------------------------------------------------------------------------------------
7,400 (a)Key Energy Group, Inc. 179,913
--------------------------------------------------------------------------------------------------
2,400 (a)Patterson Energy Inc. 88,200
--------------------------------------------------------------------------------------------------
3,600 (a)TransCoastal Marine Services, Inc. 70,200
--------------------------------------------------------------------------------------------------
5,200 (a)Tuboscope Inc. 128,050
--------------------------------------------------------------------------------------------------
8,200 Vintage Petroleum, Inc. 158,875
-------------------------------------------------------------------------------------------------- ------------
Total 731,913
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 2.8%
- --------------------------------------------------------------------------------------------------------------------
6,000 (a)Amresco, Inc. 168,000
--------------------------------------------------------------------------------------------------
3,700 CMAC Investment Corp. 192,169
--------------------------------------------------------------------------------------------------
7,400 City National Corp. 240,500
--------------------------------------------------------------------------------------------------
3,900 (a)Delphi Financial Group, Inc., Class A 156,488
--------------------------------------------------------------------------------------------------
8,600 (a)Delta Financial Corp. 142,438
--------------------------------------------------------------------------------------------------
2,600 Executive Risk, Inc. 169,000
--------------------------------------------------------------------------------------------------
4,400 (a)FIRSTPLUS Financial Group, Inc. 167,750
--------------------------------------------------------------------------------------------------
6,200 (a)FirstFed Financial Corp. 226,300
--------------------------------------------------------------------------------------------------
7,000 Frontier Insurance Group, Inc. 168,438
--------------------------------------------------------------------------------------------------
4,300 GBC Bancorp 234,888
--------------------------------------------------------------------------------------------------
4,500 (a)Imperial Bancorp 210,094
--------------------------------------------------------------------------------------------------
7,700 North Fork Bancorp, Inc. 233,888
--------------------------------------------------------------------------------------------------
8,300 (a)Philadelphia Consolidated Holding Corp. 135,913
--------------------------------------------------------------------------------------------------
2,600 Sirrom Capital Corp. 114,400
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FINANCE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
12,200 Sovereign Bancorp, Inc. $231,038
--------------------------------------------------------------------------------------------------
6,600 Trans Financial, Inc. 226,875
--------------------------------------------------------------------------------------------------
7,200 (a)Triad Guaranty, Inc. 212,400
--------------------------------------------------------------------------------------------------
3,500 Vesta Insurance Group, Inc. 192,063
-------------------------------------------------------------------------------------------------- ------------
Total 3,422,642
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 1.5%
- --------------------------------------------------------------------------------------------------------------------
7,400 Ballard Medical Products 170,662
--------------------------------------------------------------------------------------------------
5,400 (a)Complete Management, Inc. 89,775
--------------------------------------------------------------------------------------------------
3,000 (a)Curative Technologies, Inc. 85,500
--------------------------------------------------------------------------------------------------
9,300 (a)FPA Medical Management, Inc. 240,056
--------------------------------------------------------------------------------------------------
8,600 (a)Genesis Health Ventures, Inc. 208,550
--------------------------------------------------------------------------------------------------
11,200 (a)Healthdyne Technologies, Inc. 214,900
--------------------------------------------------------------------------------------------------
3,000 (a)Hologic, Inc. 77,625
--------------------------------------------------------------------------------------------------
3,300 (a)Medicis Pharmaceutical Corp., Class A 141,075
--------------------------------------------------------------------------------------------------
7,300 Phycor, Inc. 179,763
--------------------------------------------------------------------------------------------------
11,600 (a)Prime Medical Services 153,700
--------------------------------------------------------------------------------------------------
4,300 (a)Somnus Medical Technologies, Inc. 49,450
--------------------------------------------------------------------------------------------------
3,700 (a)Universal Health Services, Inc., Class B 161,644
-------------------------------------------------------------------------------------------------- ------------
Total 1,772,700
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
8,500 (a)AFC Cable Systems, Inc. 227,375
--------------------------------------------------------------------------------------------------
8,600 (a)Ballantyne of Omaha, Inc. 158,025
--------------------------------------------------------------------------------------------------
5,600 (a)Cable Design Technologies, Class A 226,800
--------------------------------------------------------------------------------------------------
6,700 (a)Chicago Miniature Lamp, Inc. 226,962
--------------------------------------------------------------------------------------------------
4,200 (a)EVI, Inc. 216,038
--------------------------------------------------------------------------------------------------
6,500 (a)Royal Group Technologies Ltd. 156,406
--------------------------------------------------------------------------------------------------
8,600 (a)US Office Products Co. 170,925
-------------------------------------------------------------------------------------------------- ------------
Total 1,382,531
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
3,400 (a)CDW Computer Centers, Inc. 200,600
--------------------------------------------------------------------------------------------------
10,200 Claire's Stores, Inc. 230,775
--------------------------------------------------------------------------------------------------
3,400 (a)Express Scripts, Inc., Class A 200,600
--------------------------------------------------------------------------------------------------
9,600 (a) Funco, Inc. 177,600
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
RETAIL TRADE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
7,800 (a)Microage, Inc. $156,975
--------------------------------------------------------------------------------------------------
7,700 (a)O'Reilly Automotive, Inc. 181,913
--------------------------------------------------------------------------------------------------
10,900 (a)Paul Harris Stores, Inc. 230,263
--------------------------------------------------------------------------------------------------
8,000 (a)Pomeroy Computer Resources 200,000
--------------------------------------------------------------------------------------------------
4,600 (a)Proffitts, Inc. 140,588
--------------------------------------------------------------------------------------------------
8,100 (a)Renters Choice, Inc. 182,250
--------------------------------------------------------------------------------------------------
7,800 (a)Zale Corp. 173,550
-------------------------------------------------------------------------------------------------- ------------
Total 2,075,114
-------------------------------------------------------------------------------------------------- ------------
SERVICES -- 1.9%
- --------------------------------------------------------------------------------------------------------------------
3,100 (a)ASE Test Ltd. 173,600
--------------------------------------------------------------------------------------------------
5,000 (a)Allied Waste Industries, Inc. 109,375
--------------------------------------------------------------------------------------------------
9,200 (a)American Business Information, Class A 108,100
--------------------------------------------------------------------------------------------------
8,800 (a)American Business Information, Class B 96,800
--------------------------------------------------------------------------------------------------
7,950 (a)BARRA, Inc. 221,606
--------------------------------------------------------------------------------------------------
3,800 (a)Caribiner International, Inc. 161,262
--------------------------------------------------------------------------------------------------
3,200 (a)Daisytek International Corp. 125,600
--------------------------------------------------------------------------------------------------
4,900 (a)FactSet Research Systems 123,725
--------------------------------------------------------------------------------------------------
10,800 (a)Newpark Resources, Inc. 215,325
--------------------------------------------------------------------------------------------------
5,800 (a)Personnel Group of America, Inc. 212,063
--------------------------------------------------------------------------------------------------
8,700 (a)Prime Hospitality Corp. 166,388
--------------------------------------------------------------------------------------------------
11,400 (a)ProBusiness Services, Inc. 240,825
--------------------------------------------------------------------------------------------------
16,800 (a)Seattle Filmworks, Inc. 165,900
--------------------------------------------------------------------------------------------------
7,300 (a)Snyder Communications, Inc. 247,744
-------------------------------------------------------------------------------------------------- ------------
Total 2,368,313
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 2.6%
- --------------------------------------------------------------------------------------------------------------------
6,000 ATMI, Inc. 192,750
--------------------------------------------------------------------------------------------------
8,200 (a)Alphanet Solutions, Inc. 105,575
--------------------------------------------------------------------------------------------------
7,700 (a)Apex mPC Solutions, Inc. 169,400
--------------------------------------------------------------------------------------------------
5,300 (a)Applied Science & Technology, Inc. 111,300
--------------------------------------------------------------------------------------------------
8,600 (a)Applied Voice Technology, Inc. 240,800
--------------------------------------------------------------------------------------------------
7,600 (a)Benchmark Electronics, Inc. 213,750
--------------------------------------------------------------------------------------------------
6,800 (a)Benchmarq Microelectronics, Inc. 124,100
--------------------------------------------------------------------------------------------------
8,200 (a)Cybex Computer Products Corp. 213,200
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SMALL-CAP STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
7,800 (a)Cymer, Inc. $149,662
--------------------------------------------------------------------------------------------------
5,700 (a)DSP Group, Inc. 186,675
--------------------------------------------------------------------------------------------------
5,000 (a)Ducommun, Inc. 162,188
--------------------------------------------------------------------------------------------------
5,800 (a)Eltron International, Inc. 181,250
--------------------------------------------------------------------------------------------------
4,200 (a)HADCO Corp. 260,400
--------------------------------------------------------------------------------------------------
6,300 (a)II-VI, Inc. 151,988
--------------------------------------------------------------------------------------------------
7,100 (a)MRV Communications, Inc. 200,575
--------------------------------------------------------------------------------------------------
5,700 (a)Mastech Corp. 166,725
--------------------------------------------------------------------------------------------------
4,700 (a)Qlogic Corp. 155,688
--------------------------------------------------------------------------------------------------
5,100 (a)Three-Five Systems, Inc. 101,681
--------------------------------------------------------------------------------------------------
4,400 (a)Tollgrade Communications, Inc. 103,950
-------------------------------------------------------------------------------------------------- ------------
Total 3,191,657
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
2,600 Airlines Express International Corp. 74,587
--------------------------------------------------------------------------------------------------
6,300 Comair Holdings, Inc. 139,387
--------------------------------------------------------------------------------------------------
1,800 Expeditors International Washington, Inc. 70,088
-------------------------------------------------------------------------------------------------- ------------
Total 284,062
-------------------------------------------------------------------------------------------------- ------------
UTILITIES-- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,100 Cincinnati Bell, Inc. 91,450
--------------------------------------------------------------------------------------------------
4,700 IXC Communications, Inc. 163,031
--------------------------------------------------------------------------------------------------
2,500 MCN Corp. 95,469
--------------------------------------------------------------------------------------------------
2,600 Sonat, Inc. 113,263
-------------------------------------------------------------------------------------------------- ------------
Total 463,213
-------------------------------------------------------------------------------------------------- ------------
TOTAL SMALL-CAP STOCKS 19,386,100
-------------------------------------------------------------------------------------------------- ------------
LARGE CAP GROWTH -- 17.9%
- --------------------------------------------------------------------------------------------------------------------
BASIC INDUSTRY -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
3,900 (a)Lone Star Technologies, Inc. 113,100
--------------------------------------------------------------------------------------------------
3,300 Martin Marietta Materials 114,263
--------------------------------------------------------------------------------------------------
2,300 Southdown, Inc. 132,681
--------------------------------------------------------------------------------------------------
6,000 (a)Steel Dynamics, Inc. 111,000
-------------------------------------------------------------------------------------------------- ------------
Total 471,044
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
4,000 Carlisle Cos., Inc. $170,000
--------------------------------------------------------------------------------------------------
8,700 (a)Furniture Brands International, Inc. 170,194
--------------------------------------------------------------------------------------------------
1,200 Sony Corp ADR 100,200
-------------------------------------------------------------------------------------------------- ------------
Total 440,394
-------------------------------------------------------------------------------------------------- ------------
CONSUMER NON-DURABLES -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
4,100 (a)Consolidated Cigar Holdings, Inc. 113,006
--------------------------------------------------------------------------------------------------
1,300 Gillette Co. 120,006
--------------------------------------------------------------------------------------------------
4,500 (a)Jones Apparel Group, Inc. 219,375
--------------------------------------------------------------------------------------------------
5,100 Philip Morris Cos., Inc. 221,850
--------------------------------------------------------------------------------------------------
3,800 Procter & Gamble Co. 289,988
--------------------------------------------------------------------------------------------------
4,500 (a)Smithfield Foods, Inc. 159,188
--------------------------------------------------------------------------------------------------
3,400 St. John Knits, Inc. 129,838
--------------------------------------------------------------------------------------------------
3,900 (a)Tommy Hilfiger Corp. 153,075
--------------------------------------------------------------------------------------------------
4,600 Universal Corp. 181,988
--------------------------------------------------------------------------------------------------
4,900 Wolverine World Wide, Inc. 111,781
--------------------------------------------------------------------------------------------------
2,900 Wrigley (Wm.), Jr. Co. 229,463
-------------------------------------------------------------------------------------------------- ------------
Total 1,929,558
-------------------------------------------------------------------------------------------------- ------------
ENERGY MINERALS -- 1.7%
- --------------------------------------------------------------------------------------------------------------------
2,000 (a)BJ Services Co. 143,625
--------------------------------------------------------------------------------------------------
3,600 Baker Hughes, Inc. 150,750
--------------------------------------------------------------------------------------------------
1,900 British Petroleum Co., PLC - ADR 157,700
--------------------------------------------------------------------------------------------------
2,600 (a)Cooper Cameron Corp. 158,437
--------------------------------------------------------------------------------------------------
2,800 Diamond Offshore Drilling, Inc. 139,650
--------------------------------------------------------------------------------------------------
4,400 ENSCO International, Inc. 157,300
--------------------------------------------------------------------------------------------------
4,800 (a)Falcon Drilling Co., Inc. 154,800
--------------------------------------------------------------------------------------------------
4,100 (a)Friede Goldman International, Inc. 121,975
--------------------------------------------------------------------------------------------------
5,000 (a)Key Energy Group, Inc. 121,563
--------------------------------------------------------------------------------------------------
4,000 (a)Nabors Industries, Inc. 140,250
--------------------------------------------------------------------------------------------------
1,400 (a)Petroleum Geo-Services, ADR 90,038
--------------------------------------------------------------------------------------------------
4,300 (a)Rowan Companies, Inc. 146,200
--------------------------------------------------------------------------------------------------
2,700 (a)Smith International, Inc. 172,800
--------------------------------------------------------------------------------------------------
3,400 Tosco Corp. 110,713
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ENERGY MINERALS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
4,000 (a)TransCoastal Marine Services, Inc. $ 78,000
-------------------------------------------------------------------------------------------------- ------------
Total 2,043,801
-------------------------------------------------------------------------------------------------- ------------
FINANCE -- 3.6%
- --------------------------------------------------------------------------------------------------------------------
5,000 Ahmanson (H.F.) & Co. 297,500
--------------------------------------------------------------------------------------------------
2,500 Allstate Corp. 214,687
--------------------------------------------------------------------------------------------------
1,650 American International Group, Inc. 166,341
--------------------------------------------------------------------------------------------------
4,000 Bank of New York Co., Inc. 215,000
--------------------------------------------------------------------------------------------------
2,900 BankAmerica Corp. 211,700
--------------------------------------------------------------------------------------------------
7,700 (a)Catellus Development Corp. 142,450
--------------------------------------------------------------------------------------------------
1,500 Citicorp 179,906
--------------------------------------------------------------------------------------------------
5,000 Conseco, Inc. 232,812
--------------------------------------------------------------------------------------------------
4,200 (a)E Trade Group, Inc. 105,263
--------------------------------------------------------------------------------------------------
2,400 Equitable Companies Inc. 114,450
--------------------------------------------------------------------------------------------------
7,200 Frontier Insurance Group, Inc. 173,250
--------------------------------------------------------------------------------------------------
5,000 (a)Golden State Bancorp, Inc. 166,563
--------------------------------------------------------------------------------------------------
13,200 MBNA Corp. 350,625
--------------------------------------------------------------------------------------------------
1,700 MGIC Investment Corp. 99,344
--------------------------------------------------------------------------------------------------
3,600 Mellon Bank Corp. 204,075
--------------------------------------------------------------------------------------------------
3,200 Merrill Lynch & Co., Inc. 224,600
--------------------------------------------------------------------------------------------------
4,200 Morgan Stanley, Dean Witter, Discover & Co. 228,113
--------------------------------------------------------------------------------------------------
2,700 NationsBank Corp. 162,169
--------------------------------------------------------------------------------------------------
4,400 Old Republic International Corp. 158,675
--------------------------------------------------------------------------------------------------
3,400 T. Rowe Price Associates 221,000
--------------------------------------------------------------------------------------------------
4,100 Torchmark Corp. 167,331
--------------------------------------------------------------------------------------------------
7,350 Travelers Group, Inc. 371,175
-------------------------------------------------------------------------------------------------- ------------
Total 4,407,029
-------------------------------------------------------------------------------------------------- ------------
HEALTH CARE -- 2.5%
- --------------------------------------------------------------------------------------------------------------------
5,900 (a)BioChem Pharma, Inc. 150,450
--------------------------------------------------------------------------------------------------
4,100 (a)Centocor, Inc. 178,350
--------------------------------------------------------------------------------------------------
3,100 (a) Dura Pharmaceuticals, Inc. 136,013
--------------------------------------------------------------------------------------------------
2,900 Guidant Corp. 186,325
--------------------------------------------------------------------------------------------------
6,000 HBO & Co. 269,250
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HEALTH CARE -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
6,700 (a)HEALTHSOUTH Corp. $175,875
--------------------------------------------------------------------------------------------------
5,300 Jones Medical Industries, Inc. 174,900
--------------------------------------------------------------------------------------------------
3,600 Lilly (Eli) & Co. 227,025
--------------------------------------------------------------------------------------------------
3,700 (a)MedPartners, Inc. 91,575
--------------------------------------------------------------------------------------------------
1,500 Merck & Co., Inc. 141,844
--------------------------------------------------------------------------------------------------
7,600 Omnicare, Inc. 219,450
--------------------------------------------------------------------------------------------------
1,600 Pfizer, Inc. 116,400
--------------------------------------------------------------------------------------------------
4,100 (a)Phycor, Inc. 100,963
--------------------------------------------------------------------------------------------------
2,300 (a)Quintiles Transnational Corp. 179,688
--------------------------------------------------------------------------------------------------
5,200 (a)Safeskin Corp. 247,650
--------------------------------------------------------------------------------------------------
2,200 Smithkline Beecham, ADR 109,175
--------------------------------------------------------------------------------------------------
3,900 (a)Universal Health Services, Inc., Class B 170,381
--------------------------------------------------------------------------------------------------
1,500 Warner-Lambert Co. 209,813
-------------------------------------------------------------------------------------------------- ------------
Total 3,085,127
-------------------------------------------------------------------------------------------------- ------------
PRODUCER MANUFACTURING -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
3,500 (a)EVI, Inc. 180,031
--------------------------------------------------------------------------------------------------
4,900 General Electric Co. 361,375
--------------------------------------------------------------------------------------------------
4,950 (a)Halter Marine Group, Inc. 137,981
--------------------------------------------------------------------------------------------------
5,100 (a)Maverick Tube Corp. 145,669
--------------------------------------------------------------------------------------------------
2,800 Precision Castparts Corp. 166,250
--------------------------------------------------------------------------------------------------
8,800 (a)Royal Group Technologies Ltd. 211,750
--------------------------------------------------------------------------------------------------
5,200 Tyco International, Ltd. 204,100
--------------------------------------------------------------------------------------------------
9,900 (a)US Office Products Co. 196,763
-------------------------------------------------------------------------------------------------- ------------
Total 1,603,919
-------------------------------------------------------------------------------------------------- ------------
RETAIL TRADE -- 1.1%
- --------------------------------------------------------------------------------------------------------------------
4,900 (a)CompUSA, Inc. 179,156
--------------------------------------------------------------------------------------------------
8,100 (a)General Nutrition Cos., Inc. 276,413
--------------------------------------------------------------------------------------------------
4,050 Home Depot, Inc. 226,547
--------------------------------------------------------------------------------------------------
9,200 Pier 1 Imports, Inc. 205,850
--------------------------------------------------------------------------------------------------
2,900 (a)Safeway, Inc. 176,175
--------------------------------------------------------------------------------------------------
6,500 TJX Cos., Inc. 224,250
-------------------------------------------------------------------------------------------------- ------------
Total 1,288,391
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SERVICES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
2,300 (a)ASE Test Ltd. $128,800
--------------------------------------------------------------------------------------------------
5,800 (a)Corrections Corp. America 200,825
--------------------------------------------------------------------------------------------------
2,400 (a)HFS, Inc. 164,700
--------------------------------------------------------------------------------------------------
1,700 (a)Heftel Broadcasting Corp., Class A 125,588
--------------------------------------------------------------------------------------------------
6,200 (a)Newpark Resources, Inc. 123,613
--------------------------------------------------------------------------------------------------
8,800 (a)Philip Services Corp. 139,150
--------------------------------------------------------------------------------------------------
6,100 (a)Snyder Communications, Inc. 207,019
-------------------------------------------------------------------------------------------------- ------------
Total 1,089,695
-------------------------------------------------------------------------------------------------- ------------
TECHNOLOGY -- 3.2%
- --------------------------------------------------------------------------------------------------------------------
1,100 (a)ASM Lithography Holding NV, ADR 68,750
--------------------------------------------------------------------------------------------------
3,900 (a)Advanced Fibre Communications 100,912
--------------------------------------------------------------------------------------------------
2,200 (a)America Online, Inc. 166,100
--------------------------------------------------------------------------------------------------
3,700 (a)Applied Materials, Inc. 122,100
--------------------------------------------------------------------------------------------------
4,400 (a)Cadence Design Systems, Inc. 111,100
--------------------------------------------------------------------------------------------------
2,700 (a)Cisco Systems, Inc. 232,875
--------------------------------------------------------------------------------------------------
3,500 Compaq Computer Corp. 218,531
--------------------------------------------------------------------------------------------------
7,000 (a)Creative Technology Ltd. 186,375
--------------------------------------------------------------------------------------------------
2,300 Dallas Semiconductor Corp. 112,412
--------------------------------------------------------------------------------------------------
1,800 (a)Dell Computer Corp. 151,537
--------------------------------------------------------------------------------------------------
4,000 (a)EMC Corp. Mass 121,250
--------------------------------------------------------------------------------------------------
3,600 (a)HNC Software 113,400
--------------------------------------------------------------------------------------------------
6,400 (a)Hyperion Software Corp. 275,800
--------------------------------------------------------------------------------------------------
2,200 Intel Corp. 170,775
--------------------------------------------------------------------------------------------------
2,300 Lucent Technologies, Inc. 184,288
--------------------------------------------------------------------------------------------------
5,600 (a)Mastech Corp. 163,800
--------------------------------------------------------------------------------------------------
2,500 (a)Metromedia Fibre Network, Inc. 42,188
--------------------------------------------------------------------------------------------------
1,800 (a)Microsoft Corp. 254,700
--------------------------------------------------------------------------------------------------
5,800 (a)Ortel Corp. 103,675
--------------------------------------------------------------------------------------------------
1,600 (a)PRI Automation, Inc. 54,600
--------------------------------------------------------------------------------------------------
1,500 (a)Peoplesoft, Inc. 98,156
--------------------------------------------------------------------------------------------------
3,200 (a)Rambus, Inc. 178,600
--------------------------------------------------------------------------------------------------
4,500 (a)SCI Systems, Inc. 206,156
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GROWTH -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TECHNOLOGY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
5,700 (a)Sandisk Corp. $139,650
--------------------------------------------------------------------------------------------------
1,500 (a)Speedfam International, Inc. 38,438
--------------------------------------------------------------------------------------------------
3,100 (a)Tellabs, Inc. 161,200
--------------------------------------------------------------------------------------------------
2,400 Texas Instruments, Inc. 118,200
--------------------------------------------------------------------------------------------------
3,400 (a)World Access, Inc. 83,300
-------------------------------------------------------------------------------------------------- ------------
Total 3,978,868
-------------------------------------------------------------------------------------------------- ------------
TRANSPORTATION -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
2,600 (a)Continental Airlines, Inc., Class B 118,462
--------------------------------------------------------------------------------------------------
5,700 Expeditors International Washington, Inc. 221,944
-------------------------------------------------------------------------------------------------- ------------
Total 340,406
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.9%
- --------------------------------------------------------------------------------------------------------------------
4,900 Cincinnati Bell, Inc. 144,550
--------------------------------------------------------------------------------------------------
3,300 Coastal Corp. 193,256
--------------------------------------------------------------------------------------------------
7,700 (a)ICG Communications, Inc. 179,025
--------------------------------------------------------------------------------------------------
8,000 (a)IXC Communications, Inc. 277,500
--------------------------------------------------------------------------------------------------
3,200 Sonat, Inc. 139,400
--------------------------------------------------------------------------------------------------
3,400 (a)Teleport Communications Group, Inc., Class A 166,600
-------------------------------------------------------------------------------------------------- ------------
Total 1,100,331
-------------------------------------------------------------------------------------------------- ------------
TOTAL GROWTH 21,778,563
-------------------------------------------------------------------------------------------------- ------------
FOREIGN EQUITY -- 15.5%
- --------------------------------------------------------------------------------------------------------------------
ARGENTINA -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
6,900 (a)Banco Rio de la Plata SA, ADR 86,681
--------------------------------------------------------------------------------------------------
4,523 Compania Naviera Perez Companc SA, Class B 32,306
--------------------------------------------------------------------------------------------------
1,600 Telecom Argentina SA, ADR 49,100
--------------------------------------------------------------------------------------------------
1,300 Telefonica De Argentina ADR 42,981
-------------------------------------------------------------------------------------------------- ------------
Total 211,068
-------------------------------------------------------------------------------------------------- ------------
AUSTRALIA -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
12,000 Australia & New Zealand Banking Group, Melbourne 82,270
--------------------------------------------------------------------------------------------------
40,200 Austrim Ltd. 89,489
--------------------------------------------------------------------------------------------------
20,000 Coles Myer Ltd. 98,330
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIA -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
468,000 (a)Cue Energy Resources NL $43,142
--------------------------------------------------------------------------------------------------
20,000 (a)News Corp., Ltd. 106,798
--------------------------------------------------------------------------------------------------
33,000 Oil Search Ltd. 65,123
--------------------------------------------------------------------------------------------------
25,000 Woodside Petroleum Ltd. 179,231
-------------------------------------------------------------------------------------------------- ------------
Total 664,383
-------------------------------------------------------------------------------------------------- ------------
AUSTRIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,450 (a)Bank Austria AG, Pfd. 59,241
-------------------------------------------------------------------------------------------------- ------------
BELGIUM -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
30 UCB (groupe) 99,108
-------------------------------------------------------------------------------------------------- ------------
BRAZIL -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
218,000 Centrais Eletricas Brasileiras SA, Preference, Series B 106,121
--------------------------------------------------------------------------------------------------
937,000 Companhia Energetica de Minas Gerais, Preference 45,190
--------------------------------------------------------------------------------------------------
512,000 Petroleo Brasileiro SA, Preference 112,157
--------------------------------------------------------------------------------------------------
1,211,000 Telecomunicacoes Brasileiras SA 112,443
--------------------------------------------------------------------------------------------------
11,400 Telecomunicacoes de Sao Paulo SA 216
--------------------------------------------------------------------------------------------------
341,249 Telecomunicacoes de Sao Paulo SA, Preference 89,830
-------------------------------------------------------------------------------------------------- ------------
Total 465,957
-------------------------------------------------------------------------------------------------- ------------
CHILE -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
400 Banco de A. Edwards, ADR 7,000
--------------------------------------------------------------------------------------------------
500 (b)Chilectra SA, ADR, 144A 12,480
--------------------------------------------------------------------------------------------------
425 Compania Telecomunicacion Chile, ADR 11,502
-------------------------------------------------------------------------------------------------- ------------
Total 30,982
-------------------------------------------------------------------------------------------------- ------------
CHINA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
30,000 (a)China Telecommunications 50,063
-------------------------------------------------------------------------------------------------- ------------
COLOMBIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
800 Banco Ganadero SA, ADR 30,500
--------------------------------------------------------------------------------------------------
900 Banco Industrial Colombiano, ADR 13,050
-------------------------------------------------------------------------------------------------- ------------
Total 43,550
-------------------------------------------------------------------------------------------------- ------------
DENMARK -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
1,800 BG Bank AS 116,918
--------------------------------------------------------------------------------------------------
800 (a)Bang & Olufsen Holding B 47,077
--------------------------------------------------------------------------------------------------
1,000 Novo-Nordisk, Class B 122,460
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DENMARK -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,050 (a)Sydbank AS $109,946
--------------------------------------------------------------------------------------------------
1,450 Unidanmark A 102,393
-------------------------------------------------------------------------------------------------- ------------
Total 498,794
-------------------------------------------------------------------------------------------------- ------------
FINLAND -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
5,600 Enso Oy, Class R 49,158
--------------------------------------------------------------------------------------------------
2,750 Partek Corp. 51,014
--------------------------------------------------------------------------------------------------
5,000 Rauma 86,282
-------------------------------------------------------------------------------------------------- ------------
Total 186,454
-------------------------------------------------------------------------------------------------- ------------
FRANCE -- 1.6%
- --------------------------------------------------------------------------------------------------------------------
1,528 AXA 110,886
--------------------------------------------------------------------------------------------------
700 Accor SA 132,333
--------------------------------------------------------------------------------------------------
2,500 Banque Nationale de Paris 121,966
--------------------------------------------------------------------------------------------------
850 Bertrand Faure 57,883
--------------------------------------------------------------------------------------------------
600 (a)CLF-Dexia France 62,304
--------------------------------------------------------------------------------------------------
265 Canal Plus 46,102
--------------------------------------------------------------------------------------------------
1,200 Compagnie Financiere de Paribas, Class A 86,697
--------------------------------------------------------------------------------------------------
450 Compagnie de Saint Gobain 61,135
--------------------------------------------------------------------------------------------------
720 Elf Aquitaine SA 83,546
--------------------------------------------------------------------------------------------------
734 (a)France Telecommunications 26,956
--------------------------------------------------------------------------------------------------
450 (a)Generale Geophysique 48,786
--------------------------------------------------------------------------------------------------
1,000 Groupe Danon BSN SA 159,572
--------------------------------------------------------------------------------------------------
160 L'Oreal 61,254
--------------------------------------------------------------------------------------------------
1,100 Pechiney Ord A 43,193
--------------------------------------------------------------------------------------------------
1,510 (a)SGS-Thomson Microelectronics N.V. 106,485
--------------------------------------------------------------------------------------------------
3,300 Schneider SA 176,647
--------------------------------------------------------------------------------------------------
4,670 Scor SA 200,856
--------------------------------------------------------------------------------------------------
800 Synthelabo 101,638
--------------------------------------------------------------------------------------------------
3,500 Thomson-csf 101,265
--------------------------------------------------------------------------------------------------
1,061 Total SA-B 111,433
--------------------------------------------------------------------------------------------------
6,500 Usinor Sacilor 102,180
-------------------------------------------------------------------------------------------------- ------------
Total 2,003,117
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
GERMANY, FEDERAL REPUBLIC OF -- 1.3%
- --------------------------------------------------------------------------------------------------------------------
4,025 Bayer AG $148,972
--------------------------------------------------------------------------------------------------
150 Bayerische Motoren Werke AG 112,022
--------------------------------------------------------------------------------------------------
6,600 Commerzbank AG, Frankfurt 229,419
--------------------------------------------------------------------------------------------------
1,380 Deutsche Bank, AG 88,505
--------------------------------------------------------------------------------------------------
4,150 Dresdner Bank AG, Frankfurt 160,964
--------------------------------------------------------------------------------------------------
359 Mannesmann AG 167,133
--------------------------------------------------------------------------------------------------
315 Muenchener Rueckversicherungs-Gesellschaft AG 98,421
--------------------------------------------------------------------------------------------------
330 SAP AG-Vorzug 101,610
--------------------------------------------------------------------------------------------------
1,950 Siemens AG 114,501
--------------------------------------------------------------------------------------------------
700 (a)Singulus Technologies AG 30,961
--------------------------------------------------------------------------------------------------
9,050 Skw Trostberg 312,786
-------------------------------------------------------------------------------------------------- ------------
Total 1,565,294
-------------------------------------------------------------------------------------------------- ------------
HONG KONG -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
259,000 (a)Angang New Steel Co. Ltd. 40,875
--------------------------------------------------------------------------------------------------
18,000 (a)Cheung Kong 126,903
--------------------------------------------------------------------------------------------------
23,000 China Resources Enterprises Ltd. 49,539
--------------------------------------------------------------------------------------------------
2,429 HSBC Holdings PLC 58,602
--------------------------------------------------------------------------------------------------
11,000 Hutchison Whampoa 73,283
--------------------------------------------------------------------------------------------------
16,000 (a)New World Development Co. Ltd. 59,299
--------------------------------------------------------------------------------------------------
24,000 Peregrine Investments 23,595
-------------------------------------------------------------------------------------------------- ------------
Total 432,096
-------------------------------------------------------------------------------------------------- ------------
INDONESIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
14,000 PT Indosat 31,761
-------------------------------------------------------------------------------------------------- ------------
IRELAND -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
4,150 (a)Elan Corp. PLC, ADR 218,913
-------------------------------------------------------------------------------------------------- ------------
ITALY -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
10,300 Eni 60,128
--------------------------------------------------------------------------------------------------
11,500 Istituto Bancario San Paolo di Torino 95,259
--------------------------------------------------------------------------------------------------
7,500 La Rinascente S.P.A. 56,872
--------------------------------------------------------------------------------------------------
18,000 Telecom Italia S.P.A. 112,216
-------------------------------------------------------------------------------------------------- ------------
Total 324,475
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
JAPAN -- 2.9%
- --------------------------------------------------------------------------------------------------------------------
6,600 Circle K Japan Co. Ltd. $331,487
--------------------------------------------------------------------------------------------------
20,000 Fujitsu Ltd. 224,094
--------------------------------------------------------------------------------------------------
8,000 Hitachi Maxell 179,275
--------------------------------------------------------------------------------------------------
5,000 Ito-Yokado Co., Ltd. 225,661
--------------------------------------------------------------------------------------------------
2,000 Mabuchi Motor Co. 104,838
--------------------------------------------------------------------------------------------------
82,000 (a)Mazda Motor Corp. 229,375
--------------------------------------------------------------------------------------------------
30,000 Minolta Co. 172,772
--------------------------------------------------------------------------------------------------
24,000 Mitsubishi Estate Co. Ltd. 278,315
--------------------------------------------------------------------------------------------------
2,000 Nintendo Corp. Ltd. 206,856
--------------------------------------------------------------------------------------------------
30 Nippon Telegraph & Telephone Corp. 246,817
--------------------------------------------------------------------------------------------------
12,000 Sankyo Co. Ltd. 382,684
--------------------------------------------------------------------------------------------------
1,000 Shokoh Fund & Co. 284,427
--------------------------------------------------------------------------------------------------
3,000 Sony Corp. 256,219
--------------------------------------------------------------------------------------------------
12,000 Sumitomo Bank Ltd., Osaka 152,321
--------------------------------------------------------------------------------------------------
35,000 Sumitomo Realty & Development 234,476
--------------------------------------------------------------------------------------------------
33,000 Tokyu Land Corp. 65,677
-------------------------------------------------------------------------------------------------- ------------
Total 3,575,294
-------------------------------------------------------------------------------------------------- ------------
MALAYSIA -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
1,000 Malayan United Industries Bhd 280
-------------------------------------------------------------------------------------------------- ------------
MEXICO -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
2,000 Empresas ICA Sociedad Controladora SA, ADR 31,000
--------------------------------------------------------------------------------------------------
13,000 Fomento Economico Mexicano, SA de C.V., Class B 107,153
--------------------------------------------------------------------------------------------------
215,000 (a)(b)Grupo Financiero Bancomer, SA de C.V., Class B 124,338
--------------------------------------------------------------------------------------------------
2,300 Telefonos de Mexico, Class L, ADR 113,850
--------------------------------------------------------------------------------------------------
1,800 (a)Tubos de Acero de Mexico SA, ADR 39,825
-------------------------------------------------------------------------------------------------- ------------
Total 416,166
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
4,597 ABN-Amro Holdings NV 87,670
--------------------------------------------------------------------------------------------------
800 (a)ASM Lithography Holding NV, ADR 50,000
--------------------------------------------------------------------------------------------------
610 Akzo Nobel NV 107,309
--------------------------------------------------------------------------------------------------
1,935 ING Groep, NV 78,674
--------------------------------------------------------------------------------------------------
2,500 Koninklijke PTT Nederland NV 100,387
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
NETHERLANDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
1,200 Philips Electronics NV $79,283
--------------------------------------------------------------------------------------------------
4,500 VNU -- Verenigde Nederlandse Uitgeversbedrijven Verenigd Bezit 107,784
--------------------------------------------------------------------------------------------------
505 Wolters Kluwer NV 66,857
-------------------------------------------------------------------------------------------------- ------------
Total 677,964
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
22,000 Air New Zealand Ltd., Class B 44,791
-------------------------------------------------------------------------------------------------- ------------
NORWAY -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
2,500 Saga Petroleum A.S., Class A 44,845
--------------------------------------------------------------------------------------------------
3,100 Schibsted 52,591
--------------------------------------------------------------------------------------------------
1,300 Smedvig ASA, Class B 33,081
-------------------------------------------------------------------------------------------------- ------------
Total 130,517
-------------------------------------------------------------------------------------------------- ------------
SINGAPORE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
2,500 (a)Creative Technology Ltd. 66,563
--------------------------------------------------------------------------------------------------
37,000 Natsteel Broadway Ltd. 54,205
--------------------------------------------------------------------------------------------------
2,000 Singapore Press Holdings Ltd., Foreign Shares 27,348
--------------------------------------------------------------------------------------------------
17,000 Wing Tai Holdings, Ltd. 21,860
-------------------------------------------------------------------------------------------------- ------------
Total 169,976
-------------------------------------------------------------------------------------------------- ------------
SPAIN -- 0.7%
- --------------------------------------------------------------------------------------------------------------------
4,200 (a)Banco Bilbao Vizcaya SA 126,893
--------------------------------------------------------------------------------------------------
1,600 Banco Popular Espanol 101,938
--------------------------------------------------------------------------------------------------
4,800 Endesa SA 90,296
--------------------------------------------------------------------------------------------------
2,860 Iberdrola SA 36,539
--------------------------------------------------------------------------------------------------
2,350 Repsol SA 101,653
--------------------------------------------------------------------------------------------------
900 Tabacalera 68,808
--------------------------------------------------------------------------------------------------
3,750 Telefonica de Espana 108,142
--------------------------------------------------------------------------------------------------
2,600 Vidrala SA 111,247
--------------------------------------------------------------------------------------------------
693 Zardoya-Otis SA 80,635
-------------------------------------------------------------------------------------------------- ------------
Total 826,151
-------------------------------------------------------------------------------------------------- ------------
SWEDEN -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
900 Electrolux B 70,867
--------------------------------------------------------------------------------------------------
7,100 Munksjo AB 67,124
--------------------------------------------------------------------------------------------------
19,000 Skand Enskilda BKN, Class A 223,920
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES VALUE IN
OR UNITS U.S. DOLLARS
- --------------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
SWEDEN -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
2,550 Skandia Forsakrings AB $134,410
--------------------------------------------------------------------------------------------------
2,600 Trygg-hansa B 80,982
--------------------------------------------------------------------------------------------------
3,900 Volvo AB, Class B 104,047
-------------------------------------------------------------------------------------------------- ------------
Total 681,350
-------------------------------------------------------------------------------------------------- ------------
SWITZERLAND -- 1.2%
- --------------------------------------------------------------------------------------------------------------------
60 (a)ABB AG 79,829
--------------------------------------------------------------------------------------------------
35 (a)Baloise Holdings-REG 62,351
--------------------------------------------------------------------------------------------------
800 Credit Suisse Group-Registered 116,987
--------------------------------------------------------------------------------------------------
180 Holderbank Financiere Glaris AG, Class B 156,922
--------------------------------------------------------------------------------------------------
240 Nestle SA 353,149
--------------------------------------------------------------------------------------------------
113 Novartis AG - REG 180,540
--------------------------------------------------------------------------------------------------
24 (a)Roche Holding AG 214,785
--------------------------------------------------------------------------------------------------
143 UBS -- Union Bank of Switzerland 182,035
--------------------------------------------------------------------------------------------------
220 Zurich Versicherungsgesellschaft 92,580
-------------------------------------------------------------------------------------------------- ------------
Total 1,439,178
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM -- 3.3%
- --------------------------------------------------------------------------------------------------------------------
12,067 BBA Group PLC 76,731
--------------------------------------------------------------------------------------------------
9,015 Barclays PLC 217,419
--------------------------------------------------------------------------------------------------
6,700 Bass PLC 96,183
--------------------------------------------------------------------------------------------------
6,477 Boc Group PLC 103,374
--------------------------------------------------------------------------------------------------
3,800 Boots Co. PLC 55,835
--------------------------------------------------------------------------------------------------
5,065 British Aerospace PLC 138,237
--------------------------------------------------------------------------------------------------
20,000 British Airways 181,388
--------------------------------------------------------------------------------------------------
9,283 British Petroleum Co. PLC 126,992
--------------------------------------------------------------------------------------------------
7,000 British Sky Broadcasting Group PLC 52,018
--------------------------------------------------------------------------------------------------
13,687 Cadbury Schweppes PLC 142,163
--------------------------------------------------------------------------------------------------
3,900 Commercial Union PLC 53,682
--------------------------------------------------------------------------------------------------
11,400 Compass Group 136,122
--------------------------------------------------------------------------------------------------
15,263 EMI Group PLC 114,969
--------------------------------------------------------------------------------------------------
10,000 Energy Group PLC 107,330
--------------------------------------------------------------------------------------------------
6,406 GKN PLC 139,242
--------------------------------------------------------------------------------------------------
10,000 (a)Gallaher Group PLC 54,045
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
SHARES OR
UNITS OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ----------- ------------
*STOCKS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN EQUITY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
10,890 General Electric Co. PLC $70,902
--------------------------------------------------------------------------------------------------
7,552 Glaxo Wellcome PLC 165,810
--------------------------------------------------------------------------------------------------
7,436 Granada Group PLC 106,372
--------------------------------------------------------------------------------------------------
8,458 Grand Metropolitan PLC 76,995
--------------------------------------------------------------------------------------------------
10,000 Imperial Tobacco Group PLC 66,712
--------------------------------------------------------------------------------------------------
16,000 Lloyds TSB Group PLC 182,401
--------------------------------------------------------------------------------------------------
8,500 Marks & Spencer PLC 87,426
--------------------------------------------------------------------------------------------------
18,000 National Westminster Bank, PLC, London 272,994
--------------------------------------------------------------------------------------------------
9,000 Next 112,481
--------------------------------------------------------------------------------------------------
4,600 Pearson 64,094
--------------------------------------------------------------------------------------------------
8,000 PowerGen PLC 103,293
--------------------------------------------------------------------------------------------------
4,758 Reckitt & Colman PLC 69,349
--------------------------------------------------------------------------------------------------
10,200 Reed International PLC 108,615
--------------------------------------------------------------------------------------------------
2,653 Rio Tinto PLC 32,037
--------------------------------------------------------------------------------------------------
5,600 Royal & Sun Alliance Insurance Group PLC 50,410
--------------------------------------------------------------------------------------------------
15,000 Shell Transport & Trading Co. 102,094
--------------------------------------------------------------------------------------------------
5,942 Siebe PLC 108,082
--------------------------------------------------------------------------------------------------
33,000 Smith & Nephew PLC 95,305
--------------------------------------------------------------------------------------------------
43 Smithkline Beecham PLC 399
--------------------------------------------------------------------------------------------------
565 Tarmac 1,097
--------------------------------------------------------------------------------------------------
12,841 Tomkins PLC 65,278
--------------------------------------------------------------------------------------------------
22,000 Vodafone Group PLC 147,137
--------------------------------------------------------------------------------------------------
2,720 Zeneca Group 86,823
-------------------------------------------------------------------------------------------------- ------------
Total 3,971,836
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN EQUITY 18,818,759
-------------------------------------------------------------------------------------------------- ------------
TOTAL STOCKS (IDENTIFIED COST $75,565,264) 85,295,940
-------------------------------------------------------------------------------------------------- ------------
BONDS -- 29.4%
- --------------------------------------------------------------------------------------------------------------------
TREASURY AND GOVERNMENT SECURITIES -- 20.4%
- --------------------------------------------------------------------------------------------------------------------
(C)REPURCHASE AGREEMENT -- 8.9%
- --------------------------------------------------------------------------------------------------------------------
$10,825,000 BT Securities Corp., 10,825,000 shares, 5.730%, dated 11/28/1997, due 12/1/1997
(AT AMORTIZED COST) 10,825,000
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TREASURY -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
UNITED STATES TREASURY SECURITIES -- 11.5%
- --------------------------------------------------------------------------------------------------------------------
$3,100,000 United States Treasury Bond, 8.125%, 5/15/2021 $3,857,671
--------------------------------------------------------------------------------------------------
3,000,000 United States Treasury Note, 6.250%, 2/15/2003 3,052,470
--------------------------------------------------------------------------------------------------
1,605,000 United States Treasury Note, 6.375%, 8/15/2002 1,639,010
--------------------------------------------------------------------------------------------------
3,475,000 United States Treasury Note, 6.500%, 10/15/2006 3,614,487
--------------------------------------------------------------------------------------------------
1,800,000 United States Treasury Bill, 12/18/97 1,797,476
-------------------------------------------------------------------------------------------------- ------------
Total 13,961,114
-------------------------------------------------------------------------------------------------- ------------
TOTAL TREASURY AND GOVERNMENT SECURITIES 24,786,114
-------------------------------------------------------------------------------------------------- ------------
MORTGAGE-BACKED SECURITIES -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
GOVERNMENT AGENCY -- 2.2%
- --------------------------------------------------------------------------------------------------------------------
489,419 Federal Home Loan Mortgage Corp., 7.00%, 1/1/2027 491,499
--------------------------------------------------------------------------------------------------
188,567 Federal National Mortgage Association, 8.00%, 7/1/2023 196,110
--------------------------------------------------------------------------------------------------
418,504 Federal National Mortgage Association, 7.00%, 8/1/2011 423,213
--------------------------------------------------------------------------------------------------
505,075 Federal National Mortgage Association, 6.50%, 7/1/2026 496,342
--------------------------------------------------------------------------------------------------
477,998 Federal National Mortgage Association, 7.50%, 8/1/2026 488,155
--------------------------------------------------------------------------------------------------
182,845 Government National Mortgage Association, 9.00%, 10/15/2019 197,586
--------------------------------------------------------------------------------------------------
385,839 Government National Mortgage Association, 8.50%, 10/15/2022 407,542
-------------------------------------------------------------------------------------------------- ------------
TOTAL MORTGAGE-BACKED SECURITIES 2,700,447
-------------------------------------------------------------------------------------------------- ------------
HIGH YIELD BONDS -- 2.7%
- --------------------------------------------------------------------------------------------------------------------
AUTOMOBILE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Collins & Aikman Products, Sr. Sub. Note, 11.50%, 4/15/2006 28,375
--------------------------------------------------------------------------------------------------
50,000 Lear Corporation, Sub. Note, 9.50%, 7/15/2006 54,688
-------------------------------------------------------------------------------------------------- ------------
Total 83,063
-------------------------------------------------------------------------------------------------- ------------
BANKING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 First Nationwide Escrow , Sr. Sub. Note, 10.625%, 10/1/2003 55,875
-------------------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
American Radio Systems Corp., 325 PIK Pfd. Shares, 11.375% 38,350
--------------------------------------------------------------------------------------------------
Chancellor Media Corp., 304 Exchangeable Pfd. Shares, $12.00 36,073
--------------------------------------------------------------------------------------------------
50,000 (b)Fox/Liberty Networks, LLC, Sr. Disc. Note, 8/15/2007 31,375
--------------------------------------------------------------------------------------------------
(b)Sinclair Broadcast Group, Inc., 500 Pfd. Shares, Series A, $11.625 55,250
-------------------------------------------------------------------------------------------------- ------------
Total 161,048
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
BUSINESS EQUIPMENT & SERVICES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$33,000 Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 $36,960
--------------------------------------------------------------------------------------------------
17,000 United Stationers Supply, Sr. Sub. Note, 12.75%, 5/1/2005 19,423
-------------------------------------------------------------------------------------------------- ------------
Total 56,383
-------------------------------------------------------------------------------------------------- ------------
CABLE TELEVISION -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
14 (a)(b)CS Wireless Systems, Inc. 0
--------------------------------------------------------------------------------------------------
25,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 27,187
--------------------------------------------------------------------------------------------------
25,000 Cablevision Systems, Sr. Sub. Note, 9.25%, 11/1/2005 26,437
--------------------------------------------------------------------------------------------------
50,000 Charter Communication Southeast, Sr. Note, 11.25%, 3/15/2006 55,750
--------------------------------------------------------------------------------------------------
50,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 53,875
--------------------------------------------------------------------------------------------------
75,000 (b)Diamond Cable Comm. PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007 49,875
--------------------------------------------------------------------------------------------------
50,000 Echostar Satellite Broadcasting Corp. Sr. Disc. Note, 0/13.125%, 3/15/2004 41,750
--------------------------------------------------------------------------------------------------
25,000 International Cabletel, Sr. Defd. Cpn. Note, 2/1/2006 19,188
--------------------------------------------------------------------------------------------------
100,000 International Cabletel, Sr. Disc. Note, 0/12.75%, 4/15/2005 82,500
--------------------------------------------------------------------------------------------------
25,000 Pegasus Media , Note, 12.50%, 7/1/2005 28,625
--------------------------------------------------------------------------------------------------
50,000 Rogers Cablesystems Inc., Sr. Secd. 2nd Priority Note, 10.00%, 12/1/2007 54,750
--------------------------------------------------------------------------------------------------
75,000 Telewest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 57,563
--------------------------------------------------------------------------------------------------
25,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 16,375
-------------------------------------------------------------------------------------------------- ------------
Total 513,875
-------------------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
25,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 10/15/2005 21,500
-------------------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Collins & Aikman Floorcoverings., Sr. Sub. Note, 10.00%, 1/15/2007 51,875
--------------------------------------------------------------------------------------------------
50,000 (b)Glenoit Corporation, Sr. Sub. Note, 11.00%, 4/15/2007 54,250
-------------------------------------------------------------------------------------------------- ------------
Total 106,125
-------------------------------------------------------------------------------------------------- ------------
CONSUMER PRODUCTS -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
50,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 54,500
--------------------------------------------------------------------------------------------------
50,000 ICON Fitness Corp., Sr. Disc. Note, 11/15/2006 29,250
--------------------------------------------------------------------------------------------------
50,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 50,375
--------------------------------------------------------------------------------------------------
50,000 Renaissance Cosmetics, Inc., Sr. Note, 11.75%, 2/15/2004 47,250
--------------------------------------------------------------------------------------------------
25,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 26,250
-------------------------------------------------------------------------------------------------- ------------
Total 207,625
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
ECOLOGICAL SERVICES & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$50,000 (b)Allied Waste N.A., Inc., Company Guarantee, 10.25%, 12/1/2006 $54,750
-------------------------------------------------------------------------------------------------- ------------
ELECTRONICS -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 (b)Fairchild Semiconductor, Sr. Sub., 10.125%, 3/15/2007 53,000
-------------------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Carr Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 27,875
--------------------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 56,375
-------------------------------------------------------------------------------------------------- ------------
Total 84,250
-------------------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007 52,750
--------------------------------------------------------------------------------------------------
50,000 International Home Foods, Sr. Sub. Note, 10.375%, 11/1/2006 54,750
--------------------------------------------------------------------------------------------------
25,000 Van De Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 27,875
-------------------------------------------------------------------------------------------------- ------------
Total 135,375
-------------------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 26,750
--------------------------------------------------------------------------------------------------
50,000 Stone Container, Sr. Note, 11.50%, 10/1/2004 54,750
-------------------------------------------------------------------------------------------------- ------------
Total 81,500
-------------------------------------------------------------------------------------------------- ------------
HEALTHCARE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 55,875
--------------------------------------------------------------------------------------------------
50,000 Tenet Healthcare, Sr. Sub. Note, 10.125%, 3/1/2005 54,313
-------------------------------------------------------------------------------------------------- ------------
Total 110,188
-------------------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
25,000 Cabot Safety Corp., Sr. Sub. Note, 12.50%, 7/15/2005 28,125
--------------------------------------------------------------------------------------------------
50,000 Continental Global, Inc., Sr. Note, 11.00%, 4/1/2007 53,750
--------------------------------------------------------------------------------------------------
50,000 Euramax International Plc, Sr. Sub. Note, 11.25%, 10/1/2006 54,375
--------------------------------------------------------------------------------------------------
50,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 51,750
-------------------------------------------------------------------------------------------------- ------------
Total 188,000
-------------------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 39,000
--------------------------------------------------------------------------------------------------
25,000 Cobblestone Golf, Sr. Note, 11.50%, 6/1/2003 27,125
--------------------------------------------------------------------------------------------------
50,000 Premier Parks, Sr. Note, 9.75%, 1/15/2007 53,500
--------------------------------------------------------------------------------------------------
50,000 Viacom Inc, Sub. Deb., 8.00%, 7/7/2006 50,000
-------------------------------------------------------------------------------------------------- ------------
Total 169,625
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
- ------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
MACHINERY & EQUIPMENT -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
$50,000 Alvey Systems, Sr. Sub. Note, 11.375%, 1/31/2003 $53,250
--------------------------------------------------------------------------------------------------
50,000 Clark Material Handling , Sr. Note, 10.75%, 11/15/2006 53,000
--------------------------------------------------------------------------------------------------
25,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 28,375
-------------------------------------------------------------------------------------------------- ------------
Total 134,625
-------------------------------------------------------------------------------------------------- ------------
OIL & GAS -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 54,437
--------------------------------------------------------------------------------------------------
50,000 Falcon Drilling Company, Sr. Note, 9.75%, 1/15/2001 52,500
--------------------------------------------------------------------------------------------------
50,000 Forcenergy Inc., Sr. Sub. Note, 9.50%, 11/1/2006 52,875
-------------------------------------------------------------------------------------------------- ------------
Total 159,812
-------------------------------------------------------------------------------------------------- ------------
PRINTING & PUBLISHING -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 56,250
--------------------------------------------------------------------------------------------------
50,000 Hollinger International, Sr. Sub. Note, 9.25%, 3/15/2007 52,000
--------------------------------------------------------------------------------------------------
Primedia, Inc., 500 Pfd. Shares, Series D, $10.00 51,875
-------------------------------------------------------------------------------------------------- ------------
Total 160,125
-------------------------------------------------------------------------------------------------- ------------
STEEL -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
50,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 55,250
-------------------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
25,000 Ameritruck Distribution, Sr. Sub. Note, 12.25%, 11/15/2005 26,375
--------------------------------------------------------------------------------------------------
50,000 Statia Terminals, 1st Mtg. Note, 11.75%, 11/15/2003 53,000
--------------------------------------------------------------------------------------------------
25,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 27,344
-------------------------------------------------------------------------------------------------- ------------
Total 106,719
-------------------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,000 Brooks Fiber Properties, Inc. Sr. Disc. Note, 0/10.875%, 3/1/2006 41,375
--------------------------------------------------------------------------------------------------
50,000 (b)Hermes Europe Railtel B.V, Sr. Note, 11.50%, 8/15/2007 55,000
--------------------------------------------------------------------------------------------------
50,000 Intermedia Communications, Sr. Disc. Note, 0/12.50%, 5/15/2006 39,000
--------------------------------------------------------------------------------------------------
50,000 (b)Metronet Communications, Unit, 12.00%, 8/15/2007 56,750
--------------------------------------------------------------------------------------------------
77 (a)NEXTEL Communications, Inc., Class A 1,944
--------------------------------------------------------------------------------------------------
50,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 43,375
--------------------------------------------------------------------------------------------------
25,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 10/15/2008 25,938
--------------------------------------------------------------------------------------------------
50,000 (b) Qwest Communications, Inc., Sr. Disc. Note, 10/15/2007 32,500
--------------------------------------------------------------------------------------------------
25,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 27,125
--------------------------------------------------------------------------------------------------
50,000 Teleport Communications, Sr. Disc. Note, 0/11.125%, 7/1/2007 39,813
--------------------------------------------------------------------------------------------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
PRINCIPAL
AMOUNT OR
FOREIGN
CURRENCY
PAR VALUE IN
AMOUNT U.S. DOLLARS
- -------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
HIGH YIELD BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS & CELLULAR --CONTINUED
- --------------------------------------------------------------------------------------------------------------------
$50,000 Vanguard Cellular Systems, Deb., 9.375%, 4/15/2006 $52,375
-------------------------------------------------------------------------------------------------- ------------
Total 415,195
-------------------------------------------------------------------------------------------------- ------------
UTILITIES -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
50,000 California Energy Co., Sr. Note, 10.25%, 1/15/2004 54,250
--------------------------------------------------------------------------------------------------
El Paso Electric Co., 605 PIK Pfd. Shares, Series A, 11.40% 66,248
-------------------------------------------------------------------------------------------------- ------------
Total 120,498
-------------------------------------------------------------------------------------------------- ------------
TOTAL HIGH YIELD BONDS 3,234,406
-------------------------------------------------------------------------------------------------- ------------
FOREIGN BONDS -- 4.1%
- --------------------------------------------------------------------------------------------------------------------
AUSTRALIA DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
115,000 Federal National Mortgage Association, 6.500%, 7/10/2002 80,147
--------------------------------------------------------------------------------------------------
85,000 Qtc-global Notes, Deb., 10.5%, 5/15/2003 69,575
--------------------------------------------------------------------------------------------------
260,000 West Aust T Corp, Local Government Guarantee, 8%, 7/15/2003 192,822
-------------------------------------------------------------------------------------------------- ------------
Total 342,544
-------------------------------------------------------------------------------------------------- ------------
BELGIUM FRANC -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
514,000 Belgian Govt., Bond, 6.50%, 3/31/2005 15,024
-------------------------------------------------------------------------------------------------- ------------
CANADA DOLLAR -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
204,000 Canada Government, Deb., 6.50%, 6/1/2004 151,534
--------------------------------------------------------------------------------------------------
155,000 Ontario Hydro, 9.00%, 6/24/2002 124,873
--------------------------------------------------------------------------------------------------
68,000 Ontario Hydro, Bond, 7.75%, 11/3/2005 53,839
-------------------------------------------------------------------------------------------------- ------------
Total 330,246
-------------------------------------------------------------------------------------------------- ------------
DANISH KRONE -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
1,927,000 Denmark - Bullet, Bond, 8.00%, 3/15/2006 327,903
--------------------------------------------------------------------------------------------------
500,000 Denmark, 8.00%, 5/15/2003 83,457
-------------------------------------------------------------------------------------------------- ------------
Total 411,360
-------------------------------------------------------------------------------------------------- ------------
FRENCH FRANC -- 0.2%
- --------------------------------------------------------------------------------------------------------------------
324,000 France O.A.T., Bond, 7.25%, 4/25/2006 61,965
--------------------------------------------------------------------------------------------------
187,500 France O.A.T., Bond, 7.50%, 4/25/2005 236,146
-------------------------------------------------------------------------------------------------- ------------
Total 298,111
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FOREIGN
CURRENCY
PAR VALUE IN
AMOUNT U.S. DOLLARS
- --------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
DEUTCHE MARK -- 0.6%
- --------------------------------------------------------------------------------------------------------------------
91,000 DG-HYPBK 5.75%, 1/22/2007 $52,170
--------------------------------------------------------------------------------------------------
20,000,000 KFW International Finance, 600%, 11/29/1999 173,399
--------------------------------------------------------------------------------------------------
150,000 KFW International Finance, Bank Guarantee, 6.75%, 6/20/2005 91,012
--------------------------------------------------------------------------------------------------
600,000 KFW International Finance, 7.00%, 5/12/2000 107,304
--------------------------------------------------------------------------------------------------
120,000 Tennesee Valley Authority -- Global Bond, 6.375%, 9/18/2006 71,347
--------------------------------------------------------------------------------------------------
435,000 Treuhandanstalt, 7.75%, 10/1/2002 274,764
-------------------------------------------------------------------------------------------------- ------------
Total 769,996
-------------------------------------------------------------------------------------------------- ------------
GREEK DRACHMA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
22,800,000 Hellenic Republic, FRN 10/23/2003 78,376
-------------------------------------------------------------------------------------------------- ------------
ITALIAN LIRA -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
150,000,000 Btps, Bond, 10.50%, 11/1/2000 98,714
--------------------------------------------------------------------------------------------------
215,000,000 Btps, Deb., 12.00%, 5/18/1999 135,403
--------------------------------------------------------------------------------------------------
380,000,000 Buoni Poliennali Del Tes, 9.50%, 1/1/2005 266,813
-------------------------------------------------------------------------------------------------- ------------
Total 500,930
-------------------------------------------------------------------------------------------------- ------------
JAPANESE YEN -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
11,000,000 Interamerican Development, Deb., 7.25%, 5/15/2000 99,927
-------------------------------------------------------------------------------------------------- ------------
NETHERLANDS GUILDER -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
255,000 Bank Ned Gemeenten, Bond, 6.375%, 1/4/2006 135,180
--------------------------------------------------------------------------------------------------
340,000 Bank Ned Gemeenten, Bond, 7.75%, 12/20/2004 193,328
--------------------------------------------------------------------------------------------------
130,000 Lkb-global Bd, Bank Guarantee, 6.00%, 1/25/2006 75,523
--------------------------------------------------------------------------------------------------
90,000 Netherlands Government, 6.00%, 1/15/2006 47,144
-------------------------------------------------------------------------------------------------- ------------
Total 451,175
-------------------------------------------------------------------------------------------------- ------------
NEW ZEALAND DOLLAR -- 0.0%
- --------------------------------------------------------------------------------------------------------------------
61,000 New Zealand Government, 8.00%, 2/15/2001 38,819
--------------------------------------------------------------------------------------------------
55,000 New Zealand Government, Bond, 8.00%, 7/15/1998 34,085
-------------------------------------------------------------------------------------------------- ------------
Total 72,904
-------------------------------------------------------------------------------------------------- ------------
NORWEGIAN KRONE -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
641,000 NGB, Bond, 9.00%, 1/31/1999 93,662
--------------------------------------------------------------------------------------------------
330,000 Norwegian Government, Bond, 7.00%, 5/31/2001 48,802
--------------------------------------------------------------------------------------------------
247,000 Norwegian Government, Foreign Government Guarantee, 5.75%, 11/30/2004 34,979
-------------------------------------------------------------------------------------------------- ------------
Total 177,443
-------------------------------------------------------------------------------------------------- ------------
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FOREIGN
CURRENCY
PAR VALUE IN
AMOUNT U.S. DOLLARS
- -------------- ------------
BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
FOREIGN BONDS -- CONTINUED
- --------------------------------------------------------------------------------------------------------------------
PORTUGUESE ESCUDO -- 0.3%
- --------------------------------------------------------------------------------------------------------------------
50,250,000 Portuguese Ot's, Bond, 11.875%, 2/23/2000 $318,399
-------------------------------------------------------------------------------------------------- ------------
SPANISH PESETA -- 0.4%
- --------------------------------------------------------------------------------------------------------------------
16,000,000 Spanish Government, 10.00%, 2/28/2005 135,122
--------------------------------------------------------------------------------------------------
29,000,000 Spanish Government, Bond, 8.80%, 4/30/2006 234,192
--------------------------------------------------------------------------------------------------
3,410,000 Spanish Government, Bond, 9.40%, 4/30/1999 24,289
--------------------------------------------------------------------------------------------------
8,540,000 Spanish Government, Deb., 10.10%, 2/28/2001 65,844
-------------------------------------------------------------------------------------------------- ------------
Total 459,447
-------------------------------------------------------------------------------------------------- ------------
SWEDISH KRONA -- 0.1%
- --------------------------------------------------------------------------------------------------------------------
800,000 Sweden, 6.00%, 2/9/2005 102,464
-------------------------------------------------------------------------------------------------- ------------
UNITED KINGDOM POUND -- 0.5%
- --------------------------------------------------------------------------------------------------------------------
187,000 British Gas PLC, 8.875%, 7/8/2008 350,834
--------------------------------------------------------------------------------------------------
38,000 U.K. Treasury, Deb., 8.50%, 12/7/2005 71,739
--------------------------------------------------------------------------------------------------
92,000 United Kingdom Treasury, Bond, 7.50%, 12/7/2006 165,333
-------------------------------------------------------------------------------------------------- ------------
Total 587,906
-------------------------------------------------------------------------------------------------- ------------
TOTAL FOREIGN BONDS 5,016,252
-------------------------------------------------------------------------------------------------- ------------
TOTAL BONDS (IDENTIFIED COST $33,430,306) 35,737,219
-------------------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST $108,995,570)(D) $121,033,159
-------------------------------------------------------------------------------------------------- ------------
</TABLE>
* The Fund purchases index futures contracts to efficiently manage
cash flows resulting from shareholder purchases and redemptions,
dividends and capital gain payments to shareholders and corporate
actions while maintaining exposure to the index and minimize trading
costs. The underlying face amount, at value of open index futures
contracts is $1,943,325 at November 30, 1997, which represents 1.6%
of net assets. Taking into consideration these open index futures
contracts, the Fund's effective total exposure to stocks is 71.6%,
and increasing the total exposure to small company stocks is 17.5%.
(a) Non-income producing security.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities
amounted to $565,818 which represents 0.5% of net assets.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations. The investment in the repurchase agreement was through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $109,120,200.
The net unrealized appreciation of investments on a federal tax basis
amounts to $11,912,959 which is comprised of $14,778,325 appreciation and
$2,865,366 depreciation at November 30, 1997.
Certain securites may be classified in multiple categorizations based on
purpose of individual purchases.
Note: The categories of investments are shown as a percentage of net
assets ($121,785,040) at November 30, 1997.
The following acronyms are used throughout this portfolio:
ADR -- American Depository Receipt FRN -- Floating Rate Note LLC -- Limited
Liability Corporation PIK -- Payment in Kind PLC -- Public Limited Company PP --
Principal Payment SPA -- Standby Purchase Agreement TRANs -- Tax and Revenue
Anticipation Notes
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOVEMBER 30, 1997
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------------------------------
Total investments in securities, at value
(identified cost $108,995,570, and tax cost $109,120,200) $121,033,159
- -----------------------------------------------------------------------------------------
Income receivable 510,615
- -----------------------------------------------------------------------------------------
Receivable for investments sold 285,431
- -----------------------------------------------------------------------------------------
Receivable for shares sold 215,146
- -----------------------------------------------------------------------------------------
Deferred organizational costs 53,030
- -----------------------------------------------------------------------------------------
Other assets 10,830
- ----------------------------------------------------------------------------------------- ------------
Total assets 122,108,211
- -----------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------
Payable for investments purchased $ 158,619
- -------------------------------------------------------------------------
Payable for shares redeemed 63,420
- -------------------------------------------------------------------------
Payable to Bank 16,170
- -------------------------------------------------------------------------
Payable for taxes withheld 4,130
- -------------------------------------------------------------------------
Payable for daily variation margin 1,125
- -------------------------------------------------------------------------
Net payable for foreign currency exchange contracts purchased 754
- -------------------------------------------------------------------------
Accrued expenses 78,953
- ------------------------------------------------------------------------- ------------
Total liabilities 323,171
- ----------------------------------------------------------------------------------------- ------------
NET ASSETS for 8,972,539 shares outstanding $121,785,040
- ----------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- -----------------------------------------------------------------------------------------
Paid in capital $103,516,000
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investments and translation of assets and liabilities in
foreign currency 12,044,513
- -----------------------------------------------------------------------------------------
Accumulated net realized gain on investments and foreign currency transactions 6,376,159
- -----------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment income $(151,632)
- ----------------------------------------------------------------------------------------- ------------
Total Net Assets $121,785,040
- ----------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- -----------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- -----------------------------------------------------------------------------------------
$76,271,005 [Divided By] 5,616,365 shares outstanding $13.58
- ----------------------------------------------------------------------------------------- ------------
SELECT SHARES:
- -----------------------------------------------------------------------------------------
$45,514,035 [Divided By] 3,356,174 shares outstanding $13.56
- ----------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
YEAR ENDED NOVEMBER 30, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------
Dividends (net of foreign taxes withheld of $45,886) $901,795
- -------------------------------------------------------------------------------------------
Interest (net of foreign taxes withheld of $5,657) 2,361,762
- ------------------------------------------------------------------------------------------- ------------
Total income 3,263,557
- -------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------
Investment advisory fee $ 762,135
- ----------------------------------------------------------------------------
Administrative personnel and services fee 154,893
- ----------------------------------------------------------------------------
Custodian fees 82,950
- ----------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 135,742
- ----------------------------------------------------------------------------
Directors'/Trustees' fees 4,040
- ----------------------------------------------------------------------------
Auditing fees 16,542
- ----------------------------------------------------------------------------
Legal fees 4,044
- ----------------------------------------------------------------------------
Portfolio accounting fees 74,016
- ----------------------------------------------------------------------------
Distribution services fee -- Select Shares 301,711
- ----------------------------------------------------------------------------
Shareholder services fee -- Institutional Shares 153,479
- ----------------------------------------------------------------------------
Shareholder services fee -- Select Shares 100,570
- ----------------------------------------------------------------------------
Share registration costs 43,433
- ----------------------------------------------------------------------------
Printing and postage 40,047
- ----------------------------------------------------------------------------
Insurance premiums 3,596
- ----------------------------------------------------------------------------
Taxes 2,968
- ----------------------------------------------------------------------------
Miscellaneous 22,904
- ---------------------------------------------------------------------------- ------------
Total expenses 1,903,070
- ----------------------------------------------------------------------------
Waivers --
- -------------------------------------------------------------
Waiver of investment advisory fee $(326,658)
- -------------------------------------------------------------
Waiver of distribution services fee -- Select Shares (100,570)
- -------------------------------------------------------------
Waiver of shareholder services fee -- Institutional Shares (122,783)
- ------------------------------------------------------------- ------------
Total waivers (550,011)
- ---------------------------------------------------------------------------- ------------
Net expenses 1,353,059
- ------------------------------------------------------------------------------------------- ------------
Net investment income 1,910,498
- ------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
- -------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions
(net of foreign taxes withheld of $237) 6,131,980
- -------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 5,658,166
- ------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain on investments and foreign currency 11,790,146
- ------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 13,700,644
- ------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------
OPERATIONS --
- ---------------------------------------------------------------------------------------
Net investment income $ 1,910,498 $ 1,560,986
- ---------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions
($6,480,249 and $2,395,283, respectively, as computed for federal tax purposes) 6,131,980 2,610,405
- ---------------------------------------------------------------------------------------
Net change in unrealized appreciation/depreciation of investments and translation of
assets and liabilities in foreign currency 5,658,166 3,708,316
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from operations 13,700,644 7,879,707
- --------------------------------------------------------------------------------------- ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS --
- ---------------------------------------------------------------------------------------
Distributions from net investment income
- ---------------------------------------------------------------------------------------
Institutional Shares (1,427,543) (1,071,156)
- ---------------------------------------------------------------------------------------
Select Shares (678,606) (489,212)
- ---------------------------------------------------------------------------------------
Distributions from net realized gains on investments and
foreign currency transactions
- ---------------------------------------------------------------------------------------
Institutional Shares (1,462,069) (600,532)
- ---------------------------------------------------------------------------------------
Select Shares (920,615) (289,253)
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from distributions to shareholders (4,488,833) (2,450,153)
- --------------------------------------------------------------------------------------- ------------ ------------
SHARE TRANSACTIONS --
- ---------------------------------------------------------------------------------------
Proceeds from sale of shares 65,432,150 51,526,045
- ---------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of distributions declared 3,820,798 2,029,232
- ---------------------------------------------------------------------------------------
Cost of shares redeemed (37,784,914) (15,833,126)
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets resulting from share transactions 31,468,034 37,722,151
- --------------------------------------------------------------------------------------- ------------ ------------
Change in net assets 40,679,845 43,151,705
- ---------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------
Beginning of period 81,105,195 37,953,490
- --------------------------------------------------------------------------------------- ------------ ------------
End of period (including undistributed net investment income of
$0 and $285,713, respectively) $ 121,785,040 $ 81,105,195
- --------------------------------------------------------------------------------------- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
NOVEMBER 30, 1997
ORGANIZATION
Managed Series Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of four portfolios. The financial statements
included herein are only those of Federated Managed Aggressive Growth Fund (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to seek capital appreciation.
The Fund offers two classes of shares: Institutional Shares and
Select Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. U.S. government securities, listed corporate
bonds, other fixed income and asset-backed securities, and unlisted securities
and private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or less
at the time of purchase may be valued at amortized cost, which approximates fair
market value.
With respect to valuation of foreign securities, trading in foreign cities may
be completed at times which vary from the closing of the New York Stock
Exchange. Therefore, foreign securities are valued at the latest closing price
on the exchange on which they are traded prior to the closing of the New York
Stock Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at the foreign exchange rate in effect at noon, eastern time,
on the day the value of the foreign security is determined.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for foreign currency
transactions and passive foreign investment company transactions.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principals.
These differences are primarily due to differing treatments for foreign currency
transactions and passive foreign investment company transactions. The following
reclassifications have been made to the financial statements.
INCREASE (DECREASE)
- --------------------------------------------------------
ACCUMULATED
ACCUMULATED DISTRIBUTIONS IN
NET REALIZED EXCESS OF NET PAID-IN
GAIN/LOSS INVESTMENT INCOME CAPITAL
- -------------- ------------------ --------
$240,093 ($241,694) $1,601
Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly,
no provisions for federal tax are necessary.
However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. Withholding taxes
on foreign interest and dividends have been provided for in accordance with the
Fund's understanding of the applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. For the year ended November 30, 1997, the Fund had
realized gains of $26,181 on future contracts.
At November 30,z1997, the Fund had outstanding futures contracts as set forth
below:
CONTRACTS TO UNREALIZED
EXPIRATION DATE RECEIVE POSITION APPRECIATION
- --------------- -------------------------- ---------- -------------
December 1997 9 Russell 200 Index Future Long $9,215
FOREIGN EXCHANGE CONTRACTS
The Fund may enter into foreign currency contracts for the delayed delivery of
securities or foreign currency exchange transactions. These contracts are used
to hedge the Fund's securities against currency fluctuations. Risks may arise
upon entering these transactions from the potential inability of counter-parties
to meet the terms of their commitments and from unanticipated movements in
security prices or foreign exchange rates. The foreign currency transactions are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purpose as unrealized until the
settlement date.
At November 30,z1997, the Fund had outstanding foreign currency commitments as
set forth below:
<TABLE>
<CAPTION>
CONTRACTS SETTLEMENT FOREIGN CURRENCY IN EXCHANGE CONTRACTS AT UNREALIZED
PURCHASED DATE UNITS TO RECEIVE FOR VALUE (DEPRECIATION)
- ------------- ---------- ---------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Belgian Franc 12/1/97 1,183,540 $33,283 $32,529 (754)
</TABLE>
FOREIGN CURRENCY TRANSLATION
The accounting records of the Fund are maintained in U.S. dollars. All assets
and liabilities denominated in foreign currencies ("FC") are translated into
U.S. dollars based on the rate of exchange of such currencies against U.S.
dollars on the date of valuation. Purchases and sales of securities, income and
expenses are translated at the rate of exchange quoted on the respective date
that such transactions are recorded. Differences between income and expense
amounts recorded and collected or paid are adjusted when reported by the
custodian bank. The Fund does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss from
investments.
Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales of
FCs, currency gains or losses realized between the trade and settlement dates on
securities transactions, the difference between the amounts of dividends,
interest, and foreign withholding taxes recorded on the Fund's books, and the
U.S. dollar equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of assets and
liabilities other than investments in securities at fiscal year end, resulting
from changes in the exchange rate.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand by the Fund or
in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1997 is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
- --------------------------------------- -------------------- ----------------
<S> <C> <C>
Allied Waste N.A., Inc. 10/23/1997-12/3/1997 $222,585
Chilectra SA, ADR, 144A 2/28/1996 10,856
CS Wireless Systems, Inc. 2/16/1996 --
Diamond Cable Comm. 2/21/1997 44,586
Fairchild Semiconductor, Sr. Sub. 3/6/1997 50,000
Fox/Liberty Networks 8/15/1997 31,146
Glenoit Corporation, Sr. Sub. Note 3/26/1997 49,905
Grupo Financiero Bancomer SA de C.V.,
Class B 5/22/1997-5/23/1997 84,942
Hermes Europe Railtel B.V., Sr. Note 8/14/1997 51,094
Metronet Communications 7/18/1997 50,000
Qwest Communications, Inc. 10/22/1997 32,938
Sinclair Broadcast Group, Inc. 3/5/1997 50,000
</TABLE>
DOLLAR ROLL TRANSACTIONS
The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are therefore treated as short-term financing arrangements which
will not exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ---------- ------------ ---------- ------------
Shares sold 3,204,660 $ 41,207,438 2,592,730 $30,626,600
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions
declared 189,433 2,352,593 115,076 1,330,109
- ------------------------------------------------
Shares redeemed (1,748,701) (22,354,908) (946,450) (11,216,939)
- ------------------------------------------------ ---------- ------------ ---------- ------------
Net change resulting from
Institutional Share transactions 1,645,392 $ 21,205,123 1,761,356 $20,739,770
- ------------------------------------------------ ---------- ------------ ---------- ------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
----------------------------------------------------------
1997 1996
-------------------------- --------------------------
<S> <C> <C> <C> <C>
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------ ---------- ------------ ---------- ------------
Shares sold 1,899,443 $ 24,224,712 1,775,082 $20,899,445
- ------------------------------------------------
Shares issued to shareholders
in payment of distributions
declared 118,629 1,468,205 60,465 699,123
- ------------------------------------------------
Shares redeemed (1,173,146) (15,430,006) (389,611) (4,616,187)
- ------------------------------------------------ ---------- ------------ ---------- ------------
Net change resulting from
Select Share transactions 844,926 $ 10,262,911 1,445,936 $16,982,381
- ------------------------------------------------ ---------- ------------ ---------- ------------
Net change resulting from
share transactions 2,490,318 $ 31,468,034 3,207,292 $37,722,151
- ------------------------------------------------ ---------- ------------ ---------- ------------
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee and/or reimburse certain operating expenses of the Fund. The
Adviser can modify or terminate this voluntary waiver and/or reimbursement at
any time at its sole discretion.
Under the terms of a sub-advisory agreement between the Adviser and Federated
Global Research Corp. (the "Sub-Adviser"), 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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Select
Shares. The Plan provides that the Fund may incur distribution expenses up to
0.75% of average daily net assets of Select Shares annually, to compensate FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $88,333 were borne initially by the Adviser. The Fund
has agreed to reimburse the Adviser for the organizational expenses during the
five year period following the effective date. For the period ended November
30,z1997, the Fund paid $12,659 pursuant to this agreement.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1997, were as follows:
PURCHASES $129,880,285
- ------------------------------------------------ ------------
SALES $105,260,650
- ------------------------------------------------ ------------
CONCENTRATION OF CREDIT RISK
The Fund invests in securities of non-U.S. issuers. Although the Fund maintains
a diversified investment portfolio, the political or economic developments
within a particular country or region may have an adverse effect on the ability
of domiciled issuers to meet their obligations. Additionally, political or
economic developments may have an effect on the liquidity and volatility of
portfolio securities and currency holdings.
At November 30, 1997, the diversification of industries was as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
INDUSTRY NET ASSETS INDUSTRY NET ASSETS
- --------------------------------- --------------- -------------------------------- -------------
<S> <C> <C> <C>
Aerospace & Military Technology 0.2% Industrial Comp 0.2%
Agency 0.5% Insurance 0.7%
Appliances & Household Durables 0.1% Leisure & Tourism 0.3%
Automobile 0.4% Machinery & Engineering 0.5%
Banking 2.7% Merchandising 0.3%
Beverage & Tobacco 0.3% Metals - Non Ferrous 0.1%
Broadcasting & Publishing 0.5% Metals - Steel 0.2%
Building Materials & Components 0.1% Mining 0.0%
Business & Public Services 0.1% Miscellaneous Materials & Commodities 0.4%
Chemicals 0.6% Multi-Industry 0.2%
Conglomerate 0.0% Producer Manufacturing 0.3%
Construction & Housing 0.0% Real Estate 0.7%
Consumer Durables 0.2% Recreation, Other Consumer Goods 0.3%
Consumer Non-Durables 0.4% Services 1.0%
Data Processing & Reproduction 0.2% Sovereign 2.4%
Electrical & Electronics 0.6% Sovereign Government 0.4%
Electronic Components, Instruments 0.5% State/Provincial 0.1%
Energy - Oil and Gas 0.1% Supranational 0.1%
Energy Equipment & Services 0.0% Technology 0.6%
Energy Minerals 0.6% Telecommunications 1.0%
Energy Sources 0.8% Telecommunications & Cellular 0.0%
Financial Intermediaries 0.1% Textiles & Apparel 0.1%
Financial Services 0.5% Tobacco 0.1%
Food & Household Products 0.7% Transportation 0.2%
Forest Products & Paper 0.1% Transportation-Airlines 0.2%
Health & Personal Care 1.5% Utilities 0.3%
Health Care 0.4% Utilities - Electrical & Gas 0.4%
</TABLE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of MANAGED SERIES TRUST (Federated
Managed Aggressive Growth Fund):
We have audited the accompanying statement of assets and liabilities of
Federated Managed Aggressive Growth Fund (an investment portfolio of Managed
Series Trust, a Massachusetts business trust), including the schedule of
portfolio investments, as of November 30, 1997, and the related statement of
operations for the year then ended, and the statement of changes in net assets,
and the financial highlights (see pages 2 and 20 of the prospectus) for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30,z1997, by correspondence with the custodian and brokers. As to
securities purchased but not received, we requested confirmation from brokers
and, when replies were not received, we carried out other alternative auditing
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Managed Aggressive Growth Fund, an investment portfolio of Managed
Series Trust, as of November 30,z1997, the results of its operations for the
year then ended, and the changes in its net assets and its financial highlights
for the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
January 21, 1998
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.
[LOGO OMITTED] FEDERATED INVESTORS
FEDERATED MANAGED
AGGRESSIVE GROWTH
FUND
Select Shares
PROSPECTUS
JANUARY 31, 1998
A Diversified Portfolio of Managed Series Trust, an Open-End
Management Investment Company
FEDERATED MANAGED
AGGRESSIVE GROWTH FUND
SELECT SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779
INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779
SUB-ADVISER
Federated Global
Research Corp.
175 Water Street
New York, NY 10038-4965
CUSTODIAN
State Street Bank and
Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT
PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K800
3122008A-SEL (1/98)
[RECYCLE LOGO]
RECYCLED PAPER
3159PROS. Page 4
FEDERATED MANAGED INCOME FUND
FEDERATED MANAGED GROWTH AND INCOME FUND
FEDERATED MANAGED GROWTH FUND
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
(PORTFOLIOS OF MANAGED SERIES TRUST)
INSTITUTIONAL SHARES
SELECT SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the respective
prospectuses for Institutional Shares and Select Shares of Federated Managed
Income Fund, Federated Managed Growth and Income Fund, Federated Managed Growth
Fund and Federated Managed Aggressive Growth Fund, all dated January 31, 1998.
This Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED MANAGED INCOME FUND
FEDERATED MANAGED GROWTH AND INCOME FUND
FEDERATED MANAGED GROWTH FUND
FEDERATED MANAGED AGGRESSIVE GROWTH FUND
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 31, 1998
[GRAPHIC] Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 56166K 800
Cusip 56166K 701
Cusip 56166K 404
Cusip 56166K 305
Cusip 56166K 602
Cusip 56166K 503
Cusip 56166K 206
Cusip 56166K 107
3122014B (1/98)
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE TRUST 1
INVESTMENT OBJECTIVES AND POLICIES 1
Small Company Stocks 1
Mortgage-Backed Securities 1
Corporate Debt Obligations 1
Convertible Securities 1
Foreign Debt Obligations 2
Warrants 2
Futures and Options Transactions 2
Foreign Currency Transactions 4
Repurchase Agreements 6
Reverse Repurchase Agreements 6
When-Issued and Delayed Delivery Transactions 6
Investing in Securities of Other
Investment Companies 7
Lending of Portfolio Securities 7
Restricted and Illiquid Securities 7
Portfolio Turnover 7
Weighted Average Portfolio Duration 7
INVESTMENT LIMITATIONS 8
MANAGED SERIES TRUST MANAGEMENT 10
Trust Ownership 13
Trustee Compensation 14
Trustee Liability 15
INVESTMENT ADVISORY SERVICES 15
Adviser to the Trust 15
Advisory Fees 15
BROKERAGE TRANSACTIONS 15
OTHER SERVICES 16
Fund Administration 16
Custodian and Portfolio Accountant 16
Transfer Agent 16
Independent Public Accountants 16
PURCHASING SHARES 16
DISTRIBUTION PLAN AND SHAREHOLDER
SERVICES AGREEMENT 16
Conversion to Federal Funds 17
DETERMINING NET ASSET VALUE 17
Determining Market Value of Securities 17
Trading in Foreign Securities 18
REDEEMING SHARES 18
Redemption in Kind 18
MASSACHUSETTS PARTNERSHIP LAW 18
TAX STATUS 19
The Portfolios' Tax Status 19
Foreign Taxes 19
Shareholders' Tax Status 19
TOTAL RETURN 19
YIELD 20
PERFORMANCE COMPARISONS 20
Economic and Market Information 22
ABOUT FEDERATED INVESTORS 22
Mutual Fund Market 23
Institutional Clients 23
Bank Marketing 23
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 23
GENERAL INFORMATION ABOUT THE TRUST
Managed Series Trust (the "Trust") was established as a Massachusetts business
trust on November 15, 1993. As of the date of this Statement, the Trust consists
of the following four separate portfolios of securities (collectively, the
"Portfolios" and each individually, the "Portfolio"): Federated Managed Income
Fund; Federated Managed Growth and Income Fund; Federated Managed Growth Fund;
and Federated Managed Aggressive Growth Fund. Each Portfolio has two classes of
shares of beneficial interest, Institutional Shares and Select Shares. Prior to
June 30, 1995, the Institutional Shares of each portfolio of the Trust were
known as Institutional Service Shares.
INVESTMENT OBJECTIVES AND POLICIES
The prospectuses discuss the objectives of the Portfolios and the policies that
each employs to achieve those objectives. The following discussion supplements
the description of the Portfolios' investment policies set forth in the
prospectuses. The Portfolios' respective investment objectives cannot be changed
without approval of shareholders. Except as noted, the investment policies
described below may be changed by the Board of Trustees ("Trustees") without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
SMALL COMPANY STOCKS
Stocks in the small capitalization sector of the United States equity market
have historically been more volatile in price than larger capitalization stocks,
such as those included in the Standard & Poor's 500 Index. This is because,
among other things, small companies have less certain growth prospects than
larger companies; have a lower degree of liquidity in the equity market; and
tend to have a greater sensitivity to changing economic conditions. Further, in
addition to exhibiting greater volatility, the stocks of small companies may, to
some degree, fluctuate independently of the stocks of large companies; that is,
the stocks of small companies may decline in price as the price of large company
stocks rises or vice versa.
MORTGAGE-BACKED SECURITIES
PRIVATELY ISSUED MORTGAGE-RELATED SECURITIES
The privately issued mortgage-related securities purchased by the Portfolios
generally represent an ownership interest in federal agency mortgage
pass-through securities, such as those issued by Government National Mortgage
Association ("GNMA"). The terms and characteristics of the mortgage instruments
may vary among
pass-through mortgage loan pools.
Privately issued mortgage-related securities generally pay back principal and
interest over the life of the security. At the time the Portfolios reinvest the
payments and any unscheduled prepayments of principal received, the Portfolios
may receive a rate of interest which is actually lower than the rate of interest
paid on these securities ("prepayment risks"). Privately issued mortgage-related
securities are subject to higher prepayment risks than most other types of debt
instruments with prepayment risks because the underlying mortgage loans may be
prepaid without penalty or premium. Prepayment risks on privately issued
mortgage-related securities tend to increase during periods of declining
mortgage interest rates because many borrowers refinance their mortgages to take
advantage of the more favorable rates. Prepayments on privately issued
mortgage-related securities are also affected by other factors, such as the
frequency with which people sell their homes or elect to make unscheduled
payments on their mortgages.
The market for privately issued mortgage-related securities has expanded
considerably since its inception. The size of the primary issuance market and
the active participation in the secondary market by securities dealers and other
investors make government-related pools highly liquid.
CORPORATE DEBT OBLIGATIONS
The corporate debt obligations in which the Portfolios invest may bear fixed,
floating, floating and contingent, or increasing rates of interest. The
Portfolios may invest in investment-grade corporate debt obligations (which are
rated BBB or higher by nationally recognized statistical rating organizations)
or high yield corporate debt obligations (which are rated BB or lower by
nationally recognized statistical rating organizations).
CONVERTIBLE SECURITIES
Dividend Enhanced Convertible Stock, or Debt Exchangeable for Common Stock
("DECS"), or similar instruments marketed under different names, offer a
substantial dividend advantage with the possibility of unlimited upside
potential if the price of the underlying common stock exceeds a certain level.
DECS convert to common stock at maturity. The amount received is dependent on
the price of the common stock at the time of maturity. DECS contain two call
options at different strike prices. The DECS participate with the common stock
up to the first call price. They are effectively capped at that point unless the
common stock rises above a second price point, at which time they participate
with unlimited upside potential.
Preferred Equity Redemption Cumulative Stock ("PERCS"), or similar instruments
marketed under different names, offer a substantial dividend advantage, but
capital appreciation potential is limited to a predetermined level. PERCS are
less risky and less volatile than the underlying common stock because their
superior income mitigates declines when the common stock falls, while the cap
price limits gains when the common stock rises.
FOREIGN DEBT OBLIGATIONS
The Portfolios may invest in investment-grade debt securities (which are rated
BBB or higher by nationally recognized statistical rating organizations) of
countries other than the United States.
WARRANTS
The Portfolios may invest in warrants. Warrants are basically options to
purchase common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than one year to twenty years,
or they may be perpetual. However, most warrants have expiration dates after
which they are worthless. In addition, a warrant is worthless if the market
price of the common stock does not exceed the warrant's exercise price during
the life of the warrant. Warrants have no voting rights, pay no dividends, and
have no rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may tend to
be greater than the percentage increase or decrease in the market price of the
optioned common stock. Warrants acquired in units or attached to securities may
be deemed to be without value for purposes of this policy.
FUTURES AND OPTIONS TRANSACTIONS
The Portfolios may attempt to hedge all or a portion of its portfolio by buying
and selling futures contracts and options on futures contracts.
FUTURES CONTRACTS
A futures contract is a firm commitment by two parties, the seller who agrees to
make delivery of the specific type of security called for in the contract
("going short") and the buyer who agrees to take delivery of the security
("going long") at a certain time in the future. However, a stock index futures
contract is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the difference between the value of the
index at the close of the last trading day of the contract and the price at
which the index was originally written. No physical delivery of the underlying
security in the index is made.
The purpose of the acquisition or sale of a futures contact by the Portfolios is
to protect the Portfolios from fluctuations in the value of their securities
caused by anticipated changes in interest rates or market conditions. For
example, in the fixed-income securities market, price moves inversely to
interest rates. A rise in rates results in a drop in price. Conversely, a drop
in rates results in a rise in price. In order to hedge its holdings of fixed
income securities against a rise in market interest rates, a Portfolio could
enter into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed-income securities may decline during the Portfolio's anticipated holding
period. A Portfolio would agree to purchase securities in the future at a
predetermined price (i.e., "go long") to hedge against a decline in market
interest rates.
PURCHASING PUT OPTIONS ON FUTURES CONTRACTS
The Portfolios may purchase listed put options or over-the-counter put options
on futures contracts. Unlike entering directly into a futures contract, which
requires the purchaser to buy a financial instrument on a set date at a
specified price, the purchase of a put option on a futures contract entitles
(but does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price. A Portfolio would
purchase put options on futures contracts to protect its portfolio securities
against decreases in value resulting from market factors such as an anticipated
increase in interest rates.
Generally, if the hedged portfolio securities decrease in value during the term
of an option, the related futures contracts will also decrease in value and the
option will increase in value. In such an event, a Portfolio will normally close
out its option by selling an identical option. If the hedge is successful, the
proceeds received by a Portfolio upon the sale of the second option may be large
enough to offset both the premium paid by the Portfolio for the original option
plus the decrease in value of the hedged securities.
Alternatively, a Portfolio may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract of the
type underlying the option (for a price less than the strike price of the
option) and exercise the option. The Portfolio would then deliver the futures
contract in return for payment of the strike price. If a Portfolio neither
closes out nor exercises an option, the option will expire on the date provided
in the option contract, and only the premium paid for the contract will be lost.
WRITING PUT OPTIONS ON FUTURES CONTRACTS
The Portfolios may write listed put options on financial futures contracts to
hedge its portfolio against a decrease in market interest rates. When a
Portfolio writes a put option on a futures contract, it receives a premium for
undertaking the obligation to assume a long futures position (buying a futures
contract) at a fixed price at any time during the life of the option. As market
interest rates decrease, the market price of the underlying futures contract
normally increases.
As the market value of the underlying futures contract increases, the buyer of
the put option has less reason to exercise the put because the buyer can sell
the same futures contract at a higher price in the market. The premium received
by a Portfolio can then be used to offset the higher prices of portfolio
securities to be purchased in the future due to the decrease in market interest
rates.
Prior to the expiration of the put option, or its exercise by the buyer, a
Portfolio may close out the option by buying an identical option. If the hedge
is successful, the cost of buying the second option will be less than the
premium received by a Portfolio for the initial option.
PURCHASING CALL OPTIONS ON FUTURES CONTRACTS
An additional way in which the Portfolios may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures contract.
When a Portfolio purchases a call option on a futures contract, it is purchasing
the right (not the obligation) to assume a long futures position (buy a futures
contract) at a fixed price at any time during the life of the option. As market
interest rates fall, the value of the underlying futures contract will normally
increase, resulting in an increase in value of a Portfolio's option position.
When the market price of the underlying futures contract increases above the
strike price plus premium paid, a Portfolio could exercise its option and buy
the futures contract below market price.
Prior to the exercise or expiration of the call option, a Portfolio could sell
an identical call option and close out its position. If the premium received
upon selling the offsetting call is greater than the premium originally paid, a
Portfolio has completed a successful hedge.
WRITING CALL OPTIONS ON FUTURES CONTRACTS
The Portfolios may write listed call options or over-the-counter call options on
futures contracts to hedge against, for example, an increase in market interest
rates. When a Portfolio writes a call option on a futures contract, it is
undertaking the obligation of assuming a short futures position (selling a
futures contract) at the strike price at any time during the life of the option
if the option is exercised. As market interest rates rise or as stock prices
fall, causing the prices of futures to go down, a Portfolio's obligation under a
call option on a future (to sell a futures contract) costs less to fulfill,
causing the value of a Portfolio's call option position to increase.
In other words, as the underlying future's price falls below the strike price,
the buyer of the option has no reason to exercise the call, so that a Portfolio
keeps the premium received for the option. This premium can help substantially
to offset the drop in value of a Portfolio's portfolio securities.
Prior to the expiration of a call written by a Portfolio, or exercise of it by
the buyer, a Portfolio may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less than the
premium received by a Portfolio for the initial option. The net premium income
of a Portfolio will then substantially offset the decrease in value of the
hedged securities.
LIMITATION ON OPEN FUTURES POSITIONS
A Portfolio will not maintain open positions in futures contracts it has sold or
options it has written on futures contracts if, in the aggregate, the value of
the open positions (marked to market) exceeds the current market value of its
securities portfolio plus or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility between the hedged
securities and the futures contracts. If this limitation is exceeded at any
time, a Portfolio will take prompt action to close out a sufficient number of
open contracts to bring its open futures and options positions within this
limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Portfolios do not pay or receive
money upon the purchase or sale of a futures contract. Rather, a Portfolio is
required to deposit an amount of "initial margin" in cash or U.S. Treasury bills
with the custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in securities
transactions in that futures contracts initial margin does not involve a
borrowing by a Portfolio to finance the transactions. Initial margin is in the
nature of a performance bond or good-faith deposit on the contract which is
returned to a Portfolio upon termination of the futures contract, assuming all
contractual obligations have been satisfied.
A futures contract held by a Portfolio is valued daily at the official
settlement price of the exchange on which it is traded. Each day a Portfolio
pays or receives cash, called "variation margin," equal to the daily change in
value of the futures contract. This process is known as "marking to market."
Variation margin does not represent a borrowing or loan by a Portfolio but is
instead settlement between a Portfolio and the broker of an amount one would owe
the other if the futures contract expired. In computing its daily net asset
value, a Portfolio will mark to market its open futures positions.
The Portfolios are also required to deposit and maintain margin when they write
call options on futures contracts.
PURCHASING AND WRITING OVER-THE-COUNTER OPTIONS
The Portfolios may purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the options
for those options on portfolio securities held by a Portfolio and not traded on
an exchange.
Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.
FOREIGN CURRENCY TRANSACTIONS
CURRENCY RISKS
The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation and
other economic and political conditions. Although the Portfolios value their
assets daily in U.S. dollars, the Portfolios may not convert their holdings of
foreign currencies to U.S. dollars daily. The Portfolios may incur conversion
costs when they convert their holdings to another currency. Foreign exchange
dealers may realize a profit on the difference between the price at which the
Portfolios buy and sell currencies.
The Portfolios will engage in foreign currency exchange transactions in
connection with their investments in the securities. The Portfolios will conduct
their foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market or through
forward contracts to purchase or sell foreign currencies.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Portfolios may enter into forward foreign currency exchange contracts in
order to protect themselves against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign currency
involved in an underlying transaction. However, forward foreign currency
exchange contracts may limit potential gains which could result from a positive
change in such currency relationships. The Portfolios' investment adviser
believes that it is important to have the flexibility to enter into forward
foreign currency exchange contracts whenever it determines that it is in the
Portfolios' best interest to do so. The Portfolios will not speculate in foreign
currency exchange.
The Portfolios will not enter into forward foreign currency exchange contracts
or maintain a net exposure in such contracts when they would be obligated to
deliver an amount of foreign currency in excess of the value of their portfolio
securities or other assets denominated in that currency or, in the case of a
"cross-hedge" denominated in a currency or currencies that the Portfolios'
investment adviser believes will tend to be closely correlated with that
currency with regard to price movements. Generally, the Portfolios will not
enter into a forward foreign currency exchange contract with a term longer than
one year.
FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to buy or
sell a stated amount of foreign currency at the exercise price on a specified
date or during the option period. The owner of a call option has the right, but
not the obligation, to buy the currency. Conversely, the owner of a put option
has the right, but not the obligation, to sell the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the seller or
the buyer may, in the secondary market, close its position during the option
period at any time prior to expiration.
A call option on foreign currency generally rises in value if the underlying
currency appreciates in value, and a put option on foreign currency generally
falls in value if the underlying currency depreciates in value. Although
purchasing a foreign currency option can protect a Portfolio against an adverse
movement in the value of a foreign currency, the option will not limit the
movement in the value of such currency. For example, if a Portfolio were holding
securities denominated in a foreign currency that was appreciating and had
purchased a foreign currency put to hedge against a decline in the value of the
currency, the Portfolio would not have to exercise their put option. Likewise,
if a Portfolio were to enter into a contract to purchase a security denominated
in foreign currency and, in conjunction with that purchase, were to purchase a
foreign currency call option to hedge against a rise in value of the currency,
and if the value of the currency instead depreciated between the date of
purchase and the settlement date, the Portfolio would not have to exercise its
call. Instead, the Portfolio could acquire in the spot market the amount of
foreign currency needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same risks
that apply to options generally. In addition, there are certain additional risks
associated with foreign currency options. The markets in foreign currency
options are relatively new, and the Portfolios' ability to establish and close
out positions on such options is subject to the maintenance of a liquid
secondary market. Although the Portfolios will not purchase or write such
options unless and until, in the opinion of the Portfolios' investment adviser,
the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the underlying
currency relative to the U.S. dollar. As a result, the price of the option
position may vary with changes in the value of either or both currencies and may
have no relationship to the investment merits of a foreign security. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign currencies
or any regulatory requirement that quotations available through dealers or other
market sources be firm or revised on a timely basis. Available quotation
information is generally representative of very large transactions in the
interbank market and thus may not reflect relatively smaller transactions (i.e.,
less than $1 million) where rates may be less favorable. The interbank market in
foreign currencies is a global, around-the-clock market. To the extent that the
U.S. option markets are closed while the markets for the underlying currencies
remain open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets until they
reopen.
FOREIGN CURRENCY FUTURES TRANSACTIONS
By using foreign currency futures contracts and options on such contracts, the
Portfolios may be able to achieve many of the same objectives as they would
through the use of forward foreign currency exchange contracts. The Portfolios
may be able to achieve these objectives possibly more effectively and at a lower
cost by using futures transactions instead of forward foreign currency exchange
contracts.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS
Buyers and sellers of foreign currency futures contracts are subject to the same
risks that apply to the use of futures generally. In addition, there are risks
associated with foreign currency futures contracts and their use as a hedging
device similar to those associated with options on futures currencies, as
described above.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such options
is subject to the maintenance of a liquid secondary market. To reduce this risk,
the Portfolios will not purchase or write options on foreign currency futures
contracts unless and until, in the opinion of the Portfolios' investment
adviser, the market for such options has developed sufficiently that the risks
in connection with such options are not greater than the risks in connection
with transactions in the underlying foreign currency futures contracts. Compared
to the purchase or sale of foreign currency futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Portfolios because the maximum amount at risk is the premium paid for the option
(plus transaction costs). However, there may be circumstances when the purchase
of a call or put option on a futures contract would result in a loss, such as
when there is no movement in the price of the underlying currency or futures
contract.
REPURCHASE AGREEMENTS
The Portfolios or their custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Portfolio, the Portfolio could receive less than the repurchase price in any
sale of such securities. In the event that a defaulting seller files for
bankruptcy or becomes insolvent, disposition of such securities by a Portfolio
might be delayed pending court action. The Portfolios believe that under the
regular procedures normally in effect for custody of a Portfolio's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of a Portfolio and allow retention or disposition of such
securities. The Portfolios will only enter into repurchase agreements with banks
and other recognized financial institutions such as broker/dealers which are
deemed by the Portfolios' investment adviser to be creditworthy pursuant to
guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Portfolios may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement, a
Portfolio transfers possession of a portfolio instrument to another person, such
as a financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Portfolio will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable a Portfolio to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that a
Portfolio will be able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Portfolio, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Portfolios. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Portfolios
sufficient to make payment for the securities to be purchased are segregated on
a Portfolio's records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Portfolios do not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of a
Portfolio's assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Portfolios lend portfolio securities must be
valued daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the particular Portfolio. During
the time portfolio securities are on loan, the borrower pays the Portfolios any
dividends or interest paid on such securities. Loans are subject to termination
at the option of the Portfolios or the borrower. The Portfolios may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker.
RESTRICTED AND ILLIQUID SECURITIES
The Portfolios may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933. Section 4(2) commercial paper is restricted as to disposition under
federal securities law and is generally sold to institutional investors, such as
the Portfolios, who agree that they are purchasing paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must be
in an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Portfolios through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity. The Portfolios believe that Section 4(2)
commercial paper and possibly certain other restricted securities which meet the
criteria for liquidity established by the Trustees are quite liquid. The
Portfolios intend, therefore, to treat the restricted securities which meet the
criteria for liquidity established by the Trustees, including Section 4(2)
commercial paper, as determined by the Portfolios' investment adviser, as liquid
and not subject to the investment limitation applicable to illiquid securities.
In addition, because Section 4(2) commercial paper is liquid, the Portfolios
intend to not subject such paper to the limitation applicable to restricted
securities.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under the Securities and Exchange commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe harbor for
certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under Rule
144A. The Portfolios believe that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees consider the following criteria in determining the liquidity of certain
restricted securities:
* the frequency of trades and quotes for the security;
* the number of dealers willing to purchase or sell the security
and the number of other potential buyers;
* dealer undertakings to make a market in the security; and
* the nature of the security and the nature of the marketplace
trades.
PORTFOLIO TURNOVER
The Portfolios' investment adviser does not anticipate that portfolio turnover
will result in adverse tax consequences. However, relatively high portfolio
turnover may result in high transaction costs to the Portfolios. For the fiscal
years ended November 30, 1997 and 1996, the portfolio turnover rates for
Federated Managed Income Fund, Federated Managed Growth and Income Fund,
Federated Managed Growth Fund, and Federated Managed Aggressive Growth Fund were
99% and 164%; 130% and 154%; 136% and 95%; and 115% and 86%, respectively.
WEIGHTED AVERAGE PORTFOLIO DURATION
Duration is a commonly used measure of the potential volatility of the price of
a debt security, or the aggregate market value of a portfolio of debt
securities, prior to maturity. Duration measures the magnitude of the change in
the price of a debt security relative to a given change in the market rate of
interest. The duration of a debt security depends on three primary variables:
the security's coupon rate, maturity date, and level of market interest rates
for similar debt securities. Generally, debt securities with lower coupons or
longer maturities will have a longer duration than securities with higher
coupons or shorter maturities.
Duration is calculated by dividing the sum of the time-weighted values of cash
flows of a security or portfolio of securities, including principal and interest
payments, by the sum of the present values of the cash flows. Certain debt
securities, such as asset-backed securities, may be subject to prepayment at
irregular intervals. The duration of these instruments will be calculated based
upon assumptions established by the investment adviser as to the probable amount
and sequence of principal prepayments.
Mathematically, duration is measured as follows:
Duration = PVCF1(1) + PVCF2(2) + PVCF3(3) + ............. + PVCFn(n)
--------- -------- -------- --------
PVTCF PVTCF PVTCF PVTCF
where
PVCFt = the present value of the cash flow in period t discounted
at the prevailing yield-to-maturity
t = the period when the cash flow is received
n = remaining number of periods until maturity total present value of the
cash flow from the bond where the present value is determined using the
prevailing
PVTCF = yield-to-maturity
INVESTMENT LIMITATIONS
ISSUING SENIOR SECURITIES AND BORROWING MONEY
A Portfolio will not issue senior securities, except that it may borrow money
directly or through reverse repurchase agreements in amounts up to one-third of
the value of its total assets, including the amount borrowed, and except to the
extent that a Portfolio may enter into futures contracts.
A Portfolio will not borrow money or engage in reverse repurchase agreements
except as a temporary, extraordinary, or emergency measure or to facilitate
management of the Portfolio by enabling it to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. A Portfolio will not purchase any securities while any
borrowings in excess of 5% of its total assets are outstanding.
INVESTING IN COMMODITIES
The Portfolios will not invest in commodities, except that the Portfolios
reserve the right to engage in transactions involving financial futures
contracts, options, and forward contracts with respect to foreign securities or
currencies.
INVESTING IN REAL ESTATE
The Portfolios will not purchase or sell real estate, including limited
partnership interests, although the Portfolios may invest in securities of
issuers whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or which represent interests in real
estate.
CONCENTRATION OF INVESTMENTS
A Portfolio will not invest 25% or more of the value of its total assets in any
one industry (other than securities issued by the U.S. government, its agencies,
or instrumentalities).
UNDERWRITING
A Portfolio will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection with
the sale of securities which the Portfolio may purchase in accordance with its
investment objective, policies, and limitations.
SELLING SHORT AND BUYING ON MARGIN
The Portfolios will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. A deposit or payment by a
Portfolio of initial or variation margin in connection with financial futures
contracts or related options transactions is not considered the purchase of a
security on margin.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total assets, a
Portfolio will not purchase securities issued by any one issuer (other than
cash, cash items or securities issued or guaranteed by the government of the
United States or its agencies or instrumentalities and repurchase agreements
collateralized by such securities) if as a result more than 5% of the value of
its total assets would be invested in the securities of that issuer or if it
would own more than 10% of the outstanding voting securities of such issuer.
PLEDGING ASSETS
The Portfolios will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, a Portfolio may pledge assets
having a market value not exceeding the lesser of the dollar amounts borrowed or
15% of the value of total assets at the time of the pledge. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits for the
purchase and sale of financial futures contracts and related options; and
segregation of collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.
LENDING CASH OR SECURITIES
A Portfolio will not lend any of its assets except portfolio securities. This
shall not prevent the purchase or holding of U.S. government obligations,
corporate bonds, debentures, notes, certificates of indebtedness, or other debt
securities of any issuer, repurchase agreements, or other transactions which are
permitted by the Portfolios' respective investment objectives, policies, or
Declaration of Trust.
The above investment limitations cannot be changed with respect to a Portfolio
without approval of that Portfolio's shareholders. The following limitations may
be changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
A Portfolio will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement in
more than seven days after notice, over-the-counter options, and certain
securities not determined by the Trustees to be liquid.
INVESTING IN WARRANTS
A Portfolio will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. For purposes
of this investment restriction, warrants will be valued at the lower of cost or
market, except that warrants acquired by a Portfolio in units with or attached
to securities may be deemed to be without value.
INVESTING IN PUT OPTIONS
A Portfolio will not purchase put options on securities, unless the securities
are held in the Portfolio's portfolio or unless the Portfolio is entitled to
them in deliverable form without further payment or after segregating cash in
the amount of any further payment.
WRITING COVERED CALL OPTIONS
A Portfolio will not write call options on securities unless the securities are
held in the Portfolio's portfolio or unless the Portfolio is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
No Portfolio expects to borrow money in excess of 5% of the value of its net
assets during the coming fiscal year.
For purposes of its policies and limitations, the Portfolios consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings association having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."
MANAGED SERIES TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Managed Series Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; Chairman and Director,
Federated Research Corp. and Federated Global Research Corp.;
Chairman, Passport Research, Ltd.; Chief Executive Officer and
Director or Trustee of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, Executive Vice President of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John R. Wood and Associates, Inc., Realtors; Partner or Trustee in
private real estate ventures in Southwest Florida; formerly,
President, Naples Property Management, Inc. and Northgate Village
Development Corporation; Director or Trustee of the Funds.
William J. Copeland
One PNC Plaza -- 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director
or Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center -- Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western Region;
Director or Trustee of the Funds.
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of
Massachusetts; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation; Director or Trustee of
the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning; Director or Trustee
of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and
Director, Federated Research Corp. and Federated Global Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company, and Federated Shareholder Services;
Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds.
Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of
the Company.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; WesMark Funds; WCT Funds; and World Investment Series,
Inc.
TRUST OWNERSHIP
Officers and Trustees as a group own less than 1% of the Trust's outstanding
shares.
As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding Institutional Shares of Federated Managed Income Fund.
As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding Select Shares of Federated Managed Income Fund: Kirchbak & Co.,
Richfield, MN, owned approximately 660,797 shares (18.94%); The Farmers Company,
Lititz, PA, owned approximately 192,548 shares (5.52%); and Federated Bank &
Trust, Pittsburgh, PA, owned approximately 255,231 shares (7.31%).
As of January 7, 1998, the following shareholder of record owned 5%
or more of the outstanding Institutional Shares of Federated Managed
Growth and Income Fund: Western Bank, Medford, OR, owned
approximately 1,191,908 shares (8.33%).
As of January 7, 1998, no shareholder of record owned 5% or more of the
outstanding Select Shares of Federated Managed Growth and Income Fund.
As of January 7, 1998, the following shareholder of record owned 5% or more of
the outstanding Institutional Shares of Federated Managed Growth Fund: Careco,
Salina, KS, owned approximately 773,609 shares (5.85%).
As of January 7, 1998, the following shareholders of record owned 5% or more of
the outstanding Select Shares of Federated Managed Growth Fund: LaSalle National
Bank, Chicago, IL, owned approximately
321,139 shares (5.33%).
As of January 7, 1998, no shareholder of record owned 5% or more of the
outstanding Institutional Shares of Federated Managed Aggressive
Growth Fund.
As of January 7, 1998, the following shareholder of record owned 5% or more of
the outstanding Select Shares of Federated Managed Aggressive Growth Fund:
Federated Bank & Trust, Pittsburgh, PA, owned approximately 199,519 shares
(5.52%).
TRUSTEES COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue $ -0- $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley $1,463 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $1,611 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland $1,611 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Glen R. Johnson $ -0- $0 for the Trust and
President and Trustee 8 other investment companies in the Fund Complex
James E. Dowd $1,611 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $1,463 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $1,611 $122,362 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Peter E. Madden $1,463 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr., $1,463 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar $1,463 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts $1,463 $111,222 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>
* Information is furnished for the fiscal year ended November 30, 1997
# The aggregate compensation is provided for the Trust which is comprised of
four portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE TRUST
The Trust's investment adviser is Federated Management (the Adviser) and the
Trust's sub-adviser is Federated Global Research Corporation ( the
"Sub-Adviser"). They are subsidiaries of Federated Investors. All the voting
securities of Federated Investors are owned by a trust, the trustees of which
are John F. Donahue, his wife and his son, J. Christopher Donahue.
ADVISORY FEES
For their advisory services, the Adviser and Sub-Adviser receive an annual
investment advisory fee as described in the prospectus of each Portfolio.
For the fiscal years ended November 30, 1997, 1996, and 1995, the Adviser for
Federated Managed Income Fund, Federated Managed Growth and Income Fund,
Federated Managed Growth Fund, and Federated Aggressive Growth Fund earned
advisory fees of $696,806, 599,171, and $354,801; $1,535,953, $1,264,932, and
$606,491; $1,653,493, $1,108,082, and $434,181; and $762,135, $434,558, and
$183,693, respectively, of which $461,157, $479,814, and $354,801, $101,972,
$179,385, and $243,174; $129,366, $299,180, and $294,373; and $326,658,
$393,073, and $183,693, respectively, were waived.
For the fiscal years ended November 30, 1997 and 1996, and for the period from
November 20, 1995 to November 30, 1995, the Sub-Adviser for Federated Managed
Income Fund, Federated Managed Growth and Income Fund, Federated Managed Growth
Fund, and Federated Managed Aggressive Growth Fund earned advisory fees $8,724,
$2,837 and $886; $99,378, $110,351 and $2,518; $243,773, $143,091 and $3,587;
and $87,324, $12,035 and $0, respectively, none of which were waived.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Portfolios or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the Adviser or its
affiliates in advising the Portfolios and other accounts. To the extent that
receipt of these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided. For the fiscal years ended November 30, 1997, 1996,
and 1995, Federated Managed Income Fund, Federated Managed Growth and Income
Fund, Federated Managed Growth Fund, and Federated Managed Aggressive Growth
Fund paid total brokerage commissions of $18,013, $19,712, and $10,473;
$235,841, $168,036, and $82,752; $423,125, $291,744, and $104,808; and $279,734,
$163,845, and $70,266, respectively.
Although investment decisions for the Portfolios are made independently from
those of any other accounts managed by the Adviser, investments of the type the
Portfolios may make may also be made by those other accounts. When the
Portfolios and one or more other accounts managed by the Adviser are prepared to
invest in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Adviser to
be equitable to each. In some cases, this procedure may adversely affect the
price paid or received by the Portfolios or the size of the position obtained or
disposed of by the Portfolios. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Portfolios.
OTHER SERVICES
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of shares of funds offered by Federated Securities Corp.
FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Portfolios for a fee as described
in the prospectus of each Portfolio. From March 1, 1994, to March 1, 1996,
Federated Administrative Services, a subsidiary of Federated Investors, served
as the Trust's Administrator. For purposes of this Statement of Additional
Information, Federated Services Company and Federated Administrative Services
may hereinafter collectively be referred to as the Administrators. With regard
to Federated Managed Income Fund, for the fiscal years ended November 30, 1997,
1996, and 1995, the Administrators collectively earned $154,890, $155,001, and
$155,000, respectively. With regard to Federated Managed Growth and Income Fund,
for the fiscal years ended November 30, 1997, 1996, and 1995, the Administrators
collectively earned $155,085, $155,001, and $155,000, respectively. With regard
to Federated Managed Growth Fund, for the fiscal years ended November 30, 1997,
1996, and1995, the Administrators collectively earned $166,775, $155,001, and
$155,000, respectively. With regard to Federated Managed Aggressive Growth Fund,
for the fiscal years ended November 30, 1997, 1996, and 1995, the Administrators
collectively earned $154,893, $155,001, and $155,000, respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Trust. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Trust's
portfolio investments. The fee paid for this service is based upon the level of
the Trust's average net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions
made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Portfolios are Arthur Andersen LLP,
Pittsburgh, PA.
PURCHASING SHARES
Shares of the Portfolios are sold at net asset value on days that the New York
Stock Exchange is open for business. The procedure for purchasing shares of the
Portfolios is explained in each Portfolio's respective prospectus under
"Investing in Institutional Shares" or Investing in Select Shares.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES AGREEMENT
With respect to Select Shares, the Trust has adopted a Distribution Plan in
accordance with Investment Company Act Rule 12b-1. Additionally, the Trust has
adopted a Shareholder Services Agreement with respect to both Select Shares and
Institutional Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Distribution Plan, the Trustees expect that the Portfolios will
be able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio management
and assist the Portfolios in pursuing their investment objectives. By
identifying potential investors whose needs are served by the Portfolios'
objectives, and properly servicing these accounts, it may be possible to curb
sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal year ended November 30, 1997, the Select Shares of the Portfolios
incurred distribution service fees as follows: Federated Managed Income Fund
incurred $198,061, of which $66,010 was waived; Federated Managed Growth and
Income Fund incurred $344,598, of which $114,866 was waived; Federated Managed
Growth Fund incurred $534,330, of which $178,110 was waived; and Federated
Managed Aggressive Growth Fund incurred $301,711, of which $100,570 was waived.
In addition, for the fiscal year ended November 30, 1997, the Select Shares and
Institutional Shares of Federated Managed Income Fund paid shareholder services
fees in the amount of $66,010 and $166,258, respectively, of which $0 and
$133,007, respectively, were waived. For the fiscal year ended November 30,
1997, the Select Shares and Institutional Shares of Federated Managed Growth and
Income Fund paid shareholder services fees in the amount of $114,866 and
$397,118, respectively, of which $0 and $317,695, respectively, were waived. For
the fiscal year ended November 30, 1997, the Select Shares and Institutional
Shares of Federated Managed Growth Fund paid shareholder services fees in the
amount of $178,110 and $373,054, respectively, of which $0 and $298,444,
respectively, were waived. For the fiscal year ended November 30, 1997, the
Select Shares and Institutional Shares of Federated Managed Aggressive Growth
Fund paid shareholder services fees in the amount of $100,570 and $153,479,
respectively, of which $0 and $122,783, respectively, were waived.
CONVERSION TO FEDERAL FUNDS
It is each Portfolio's policy to be as fully invested as possible so that
maximum income may be earned. To this end, all payments from shareholders must
be in federal funds or be converted into federal funds. State Street Bank and
Trust Company acts as the shareholder's agent in depositing checks and
converting them to federal funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset value is
calculated by each Portfolio are described in the prospectus. Net asset value
will not be calculated on days on which the New York Stock Exchange is closed.
DETERMINING MARKET VALUE OF SECURITIES
Market values of each Portfolio's portfolio securities are determined as
follows:
* for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;
* in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices;
* for bonds and other fixed-income securities, as determined by an
independent pricing service;
* for short-term obligations, according to the prices as furnished
by an independent pricing service;
* for short-term obligations with remaining maturities of 60 days or less at the
time of purchase, at amortized cost, or at fair value as determined in good
faith by the Trustees; and
* for all other securities, at fair value as determined in good
faith by the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.
The Portfolios will value futures contracts, options, and put options on futures
at their market values established by the exchanges at the close of option
trading on such exchanges unless the Trustees determines in good faith that
another method of valuing option positions is necessary to appraise their fair
market value.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Portfolios value foreign securities at the latest closing price on the exchange
on which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at the
latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as determined in
good faith by the Trustees, although the actual calculation may be done by
others.
REDEEMING SHARES
The Portfolios redeem shares at the next computed net asset value after the
particular Portfolio receives the redemption request. Redemption procedures are
explained in the prospectuses under the section entitled "Redeeming
Institutional Shares" or "Redeeming
Select Shares."
Because portfolio securities of the Portfolios may be traded on foreign
exchanges which trade on Saturdays or on holidays on which the Portfolios will
not make redemptions, the net asset value of shares of the Portfolios may be
significantly affected on days when shareholders do not have an opportunity to
redeem their shares.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the respective Portfolio's investment portfolio.
To the extent available, such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable SEC rules, taking
such securities at the same value employed in determining net asset value and
selecting the securities in a manner that the Trustees determine to be fair and
equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, under which, with respect to each Portfolio, the Trust is obligated to
redeem shares for any one shareholder in cash only up to the lesser of $250,000
or 1% of the respective class's net asset value during any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.
TAX STATUS
THE PORTFOLIOS' TAX STATUS
The Portfolios expect to pay no federal income tax because they expect to meet
the requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, each Portfolio must, among
other requirements:
* derive at least 90% of its gross income from dividends, interest
and gains from the sale of securities;
* invest in securities within certain statutory limits; and
* distribute to its shareholders at least 90% of its net income
earned during the year.
However, the Portfolios may invest in the stock of certain foreign corporations
which would constitute a Passive Foreign Investment Company (PFIC). Federal
income taxes may be imposed on the Portfolios upon disposition of PFIC
investments.
Each Portfolio will be treated as a single, separate entity for federal income
tax purposes so that income and losses (including capital gains and losses)
realized by a Portfolio will not be combined for tax purposes with income and
losses realized by any of the other Portfolios.
FOREIGN TAXES
Investment income on certain foreign securities in which the Portfolios may
invest may be subject to foreign withholding or other taxes that could reduce
the return on these securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the amount of foreign taxes
to which the Portfolios would be subject.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The dividends received deduction for
corporations will apply to ordinary income distributions to the extent the
distribution represents amounts that would qualify for the dividends received
deduction to a particular fund if that fund were a regular corporation and to
the extent designated by a fund as so qualifying. These dividends, and any
short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax on long-term capital gains distributed to them
regardless of how long they have held the shares of the particular Portfolio.
TOTAL RETURN
The average annual total return for the Portfolios is the average compounded
rate of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable value
is compounded by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and distributions.
With respect to Federated Managed Income Fund, for the one-year period ended
November 30, 1997 and for the period from May 25, 1994 (date of initial public
investment) through November 30, 1997, the average annual total returns for
Institutional Shares were 8.88% and 8.76%, respectively, and 8.14% and 7.98%,
respectively, for Select Shares.
With respect to Federated Managed Growth and Income Fund, for the one-year
period ended November 30, 1997, and for the period from May 25, 1994 (date of
initial public investment) through November 30, 1997, the average annual total
returns for Institutional Shares were 11.25% and 10.73%, respectively, and
10.41% and 9.98%, respectively, for Select Shares.
With respect to Federated Managed Growth Fund, for the one-year period ended
November 30, 1997, and for the period from May 25, 1994 (date of initial public
investment) through November 30, 1997, the average annual total returns for
Institutional Shares were 13.39% and 13.17%, respectively, and 12.56% and
12.38%, respectively, for Select Shares.
With respect to Federated Managed Aggressive Growth Fund, for the one-year
period ended November 30, 1997, and for the period from May 25, 1994 (date of
initial public investment) through November 30, 1997, the average annual total
returns for Institutional Shares were 14.40% and 13.86%, respectively, and
13.66% and 13.12%, respectively, for Select Shares.
YIELD
The yield for both classes of each Portfolio is determined by dividing the net
investment income per share (as defined by the SEC) earned by the particular
Portfolio over a thirty-day period by the maximum offering price per share of
the particular Portfolio on the last day of the period. This value is then
annualized using semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each month
over a twelve month period and is reinvested every six months. The yield does
not necessarily reflect income actually earned by the particular Portfolio
because of certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions charge fees in connection with
services provided in conjunction with an investment in a Portfolio, the
performance will be reduced for those shareholders paying those fees.
Federated Managed Income Fund's 30-day SEC yields for the period ended November
30, 1997, for Institutional Shares and Select Shares
were 4.88% and 4.18%, respectively.
Federated Managed Growth and Income Fund's 30-day SEC yields for the period
ended November 30, 1997, for Institutional Shares and Select Shares were 3.83%
and 3.13%, respectively.
Federated Managed Growth Fund's 30-day SEC yields for the period ended November
30, 1997, for Institutional Shares and Select Shares
were 2.55% and 1.85%, respectively.
Federated Managed Aggressive Growth Fund's 30-day SEC yields for the period
ended November 30, 1997, for Institutional Shares and Select Shares were 1.41%
and 0.72%, respectively.
PERFORMANCE COMPARISONS
Each Portfolio's performance of both classes of shares depends upon such
variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the particular Portfolio is
invested;
* changes in the expenses of the Trust, the particular Portfolio or
either class of shares; and
* various other factors.
Each Portfolio's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return for each class of the Portfolios.
Investors may use financial publications and/or indices to obtain a more
complete view of a Portfolio's performance of either class of shares. When
comparing performance of either class of shares, investors should consider all
relevant factors such as the composition of any index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which a Portfolio uses in advertising may include:
* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making competitive calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time.
From time to time, a Portfolio will quote its Lipper ranking in advertising
and sales literature.
* STANDARD & POOR'S RATINGS GROUP UTILITY INDEX is an unmanaged index of common
stocks from forty different utilities. This index indicates daily changes in
the price of the stocks. The index also provides figures for changes in price
from the beginning of the year to date and for a twelve-month period.
* STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS,
a composite index of common stocks in industry, transportation, and financial
and public utility companies, can be used to compare to the total returns of
funds whose portfolios are invested primarily in common stocks. In addition,
the Standard & Poor's index assumes reinvestments of all dividends paid by
stocks listed on its index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in the Standard & Poor's
figures.
* STANDARD & POOR'S RATINGS GROUP SMALL STOCK INDEX, is a broadly diversified
index consisting of approximately 600 small capitalization common stocks that
can be used to compare to the total returns of funds whose portfolios are
invested primarily in small capitalization common stocks.
* EUROPE, AUSTRALIA, AND FAR EAST (EAFE) is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return
is a net dividend figure less Luxembourg withholding tax. The EAFE is
monitored by Capital International, S.A., Geneva, Switzerland.
* RUSSELL 1000 INDEX measures the performance of the 1,000 largest companies in
the Russell 3000 Index, which represents approximately 90% of the total market
capitalization of the Russell 3000 Index.
* RUSSELL 2000 INDEX is a broadly diversified index consisting of approximately
2,000 small capitalization common stocks that can be used to compare to the
total returns of funds whose portfolios are invested primarily in small
capitalization common stocks.
* LEHMAN BROTHERS TREASURY INTERMEDIATE BOND INDEX (U.S. DOLLARS) is an index
composed of all bonds covered by the Lehman Brothers Treasury Bond Index with
maturities between one and 9.9 years. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
* LEHMAN BROTHERS TREASURY LONG-TERM BOND INDEX (U.S. DOLLARS) is an index
composed of all bonds covered by the Lehman Brothers Treasury Bond Index with
maturities of 10 years or greater. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
* J.P. MORGAN GLOBAL NON-U.S. GOVERNMENT BOND INDEX is a total
return, market capitalization weighted index, rebalanced monthly
consisting of the following countries: Australia, Belgium, Canada,
Denmark, France, Germany, Italy, Japan, Netherlands, Spain, Sweden
and United Kingdom.
* LEHMAN BROTHERS CORPORATE INTERMEDIATE BOND INDEX (U.S. DOLLARS) is a subset
of the Lehman Brothers Corporate Bond Index covering all corporate, publicly
issued, fixed-rate, nonconvertible U.S. debt issues rated at least Baa with at
least $50 million principal outstanding and maturity less than 10 years.
* LEHMAN BROTHERS CORPORATE B INDEX is an index composed of all bonds covered by
Lehman Brothers High Yield Index rated "B" by Moody's Investors Service. Bonds
have a minimum amount outstanding of $100 million and at least one year to
maturity. Total return comprises price appreciation/depreciation and income as
a percentage of the original investment. Indexes are rebalanced monthly by
market capitalization.
* LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and 30-year
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association , Federal Home Loan Mortgage Corporation , and Federal
National Mortgage Corporation . Graduated payment mortgages and balloons are
included in the index.
* LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds publicly issued
by the U.S. government or its agencies; corporate bonds guaranteed by the U.S.
government and quasi-federal corporations; and publicly issued, fixed rate,
non-convertible domestic bonds of companies in industry, public utilities and
finance. The average maturity of these bonds approximates nine years. Tracked
by Lehman Brothers, Inc., the index calculates total returns for one month,
three month, twelve month and ten year periods and year-to-date.
* LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is an unmanaged
index comprised of all the bonds issued by the Lehman Brothers
Government/Corporate Bond Index with maturities between 1 and 9.99 years.
Total return is based on price appreciation/depreciation and income as a
percentage of the original investment. Indices are rebalanced monthly by
market capitalization.
* LEHMAN BROTHERS HIGH YIELD INDEX covers the universe of fixed rate, publicly
issued, noninvestment grade debt registered with the SEC. All bonds included
in the High Yield Index must be dollar-denominated and nonconvertible and have
at least one year remaining to maturity and an outstanding par value of at
least $100 million. Generally securities must be rated Ba1 or lower by Moodys
Investors Service, including defaulted issues. If no Moodys rating is
available, bonds must be rated BB+ or lower by S&P; and if no S&P rating is
available, bonds must be rated below investment grade by Fitch Investor's
Service. A small number of unrated bonds is included in the index; to be
eligible they must have previously held a high yield rating or have been
associated with a high yield issuer, and must trade accordingly.
* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for both classes of shares of the
Portfolios may quote total returns which are calculated on non-standardized base
periods. The total returns represent the historic change in the value of an
investment in either class of shares of the Portfolios based on monthly or
quarterly, as applicable, reinvestment of dividends over a specified period of
time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Portfolios' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Portfolios can
compare their performance, or performance for the types of securities in which
they invest, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Trust portfolio managers and their views and analysis on how
such developments could affect the Trust. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making --structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.
In the equity sector, Federated Investors has more than 27 years' experience. As
of December 31, 1997, Federated managed 29 equity funds totaling approximately
$11.7 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.
In the corporate bond sector, as of December 31, 1997, Federated Investors
managed 12 money market funds, and 17 bond funds with assets approximating $22.5
billion, and $5.6 billion, respectively. Federated's corporate bond decision
making--based on intensive, diligent credit analysis--is backed by over 22 years
of experience in the corporate bond sector. In 1972, Federated introduced one of
the first high-yield bond funds in the industry. In 1983, Federated was one of
the first fund managers to participate in the asset-backed securities market, a
market totaling more than $200 billion.
In the government sector, as of December 31, 1997, Federated Investors managed 9
mortgage-backed, 6 government/agency and 17 government money market mutual
funds, with assets approximating $5.9 billion, $1.5 billion and $29.7 billion,
respectively. Federated trades approximately $400 million in U.S. government and
mortgage-backed securities daily and places approximately $23 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in U.S. government bond securities in 1969. Federated has been a
major force in the short-and intermediate-term government markets since 1982 and
currently manages nearly $36 billion in government funds within these maturity
ranges.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high rankings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.
*Source: Investment Company Institute
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