FEDERATED MANAGED ALLOCATION 485BPOS

485BPOS 1 form.htm FEDERATED MANAGED ALLOCATION 485BPOS

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

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933               X
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      Pre-Effective Amendment No.      .............................
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      Post-Effective Amendment No.   19  ........................... X
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                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940       X
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      Amendment No.   20  ........................................   X
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                     FEDERATED MANAGED ALLOCATION PORTFOLIOS
                        (formerly, Managed Series Trust)
               (Exact Name of Registrant as Specified in Charter)

                            Federated Investors Funds
                              5800 Corporate Drive
                       Pittsburgh, Pennsylvania 15237-7000
                    (Address of Principal Executive Offices)

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

                           John W. McGonigle, Esquire,
                           Federated Investors Tower,
                               1001 Liberty Avenue
                       Pittsburgh, Pennsylvania 15222-3779
                     (Name and Address of Agent for Service)
                (Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

X immediately upon filing pursuant to paragraph (b) on _________________
pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a) (i) on
________________ pursuant to paragraph (a) (i) 75 days after filing pursuant to
paragraph (a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule 485

If appropriate, check the following box:

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

                                                                      Copies to:

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

Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Managed Allocation Portfolios

PROSPECTUS

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January 31, 2005

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Federated Conservative Allocation Fund
Federated Moderate Allocation Fund
Federated Growth Allocation Fund

INSTITUTIONAL SHARES

As with all mutual funds, the Securities and Exchange Commission (SEC) has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Not FDIC Insured * May Lose Value * No Bank Guarantee

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Risk/Return Summary		1
What are the Funds’ Fees and Expenses?		10
What are the Funds’ Investment Strategies?		15
What are the Principal Securities in Which the Funds Invest?		17
What are the Specific Risks of Investing in the Funds?		25
What Do Shares Cost?		29
How are the Funds Sold?		31
How to Purchase Shares		32
How to Redeem Shares		34
Account and Share Information		36
Who Manages the Funds?		39
Legal Proceedings		41
Financial Information		42

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Risk/Return Summary

WHAT IS EACH FUND’S INVESTMENT OBJECTIVE?

Fund		Objective

Federated Conservative Allocation Fund (“FCAF”)		To seek total return with an emphasis on income and capital appreciation

Federated Moderate Allocation Fund (“FMAF”)		To seek capital appreciation with income as a secondary objective

Federated Growth Allocation Fund (“FGAF”)		To seek capital appreciation

While there is no assurance that a Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUNDS’ MAIN INVESTMENT STRATEGIES?

The Funds pursue their investment objectives by investing in a mix of equity and fixed income investments. Each Fund’s portfolio is constructed by the Investment Adviser (Adviser) using an asset allocation process. The Adviser first determines the percentage of each Fund’s portfolio to invest in equity securities and the percentage to invest in fixed income securities. In making this determination, each Fund will start with a neutral exposure point for both equity and fixed income securities. The following table shows each Fund’s neutral position points (“Neutral Position”) for both equity and fixed income securities:

	Equity Neutral Position	Fixed Income Neutral Position

Federated Conservative Allocation Fund	40%	60%

Federated Moderate Allocation Fund	60%	40%

Federated Growth Allocation Fund	80%	20%

The Adviser will have the discretion to adjust the equity and fixed income portions of the portfolio by +/-15% from the stated Neutral Position based upon its view of the United States and foreign economies and securities markets.

Within the equity allocation, the Adviser anticipates investing primarily in the common stock of domestic companies with large and medium market capitalizations that offer superior growth prospects or companies whose stock is undervalued. However, the Adviser may also invest a portion of the equity allocation in foreign securities and common stock of domestic companies with small market capitalizations.

The Funds intend to invest in the securities of U.S. government-sponsored entities (GSEs), including GSE securities that are not backed by the full faith and credit of the United States government, such as those issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Federal Home Loan Bank System. These entities are, however, supported through federal subsidies, loans or other benefits. The Funds may also invest in GSE securities that are supported by the full faith and credit of the U.S. government, such as those issued by the Government National Mortgage Association. Finally, the Funds may invest in a few GSE securities that have no explicit financial support, but which are regarded as having implied support because the federal government sponsors their activities. Such securities include those issued by the Farm Credit System and the Financing Corporation.

The Adviser may also invest a portion of the fixed income allocation in foreign investment grade debt securities and domestic and foreign non-investment grade debt securities. The Funds may invest in derivative contracts to implement their investment strategies. The Adviser anticipates that it will primarily utilize other funds advised by the Adviser or its affiliates to gain exposure to equity and fixed income securities. However, the Adviser may invest directly in such securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Funds. The primary factors that may reduce the Funds’ returns include:

Stock Market Risks. The value of equity securities in a Fund’s portfolio will fluctuate and, as a result, a Fund’s share price may decline suddenly or over a sustained period of time.
Interest Rate Risks. Prices of fixed income securities generally fall when interest rates rise. Interest rate changes have a greater effect on the price of fixed income securities with longer durations.
Credit Risks. There is a possibility that issuers of securities in which a Fund may invest may default in the payment of interest or principal on the securities when due, which could cause a Fund to lose money.
Currency Risks. The exchange rates for currencies fluctuate daily; therefore, prices of the foreign securities in which a Fund invests are more volatile than prices of securities traded exclusively in the U.S.
Prepayment Risks. When homeowners prepay their mortgages in response to lower interest rates, the Funds will be required to reinvest the proceeds at the lower interest rates available. Also, when interest rates fall, the price of mortgage backed securities may not rise to as great an extent as that of other fixed income securities.
Call Risks. A Fund’s performance may be adversely affected by the possibility that an issuer of a security held by a Fund may redeem the security prior to maturity at a price below its current market value.
Sector Risks. The Funds may allocate relatively more assets to certain industry sectors than to others; therefore, the Funds’ performance may be more susceptible to any developments which affect those sectors emphasized by the Funds.
Liquidity Risks. The noninvestment grade securities and complex collateralized mortgage obligations in which the Funds may invest may not be readily marketable and may be subject to greater fluctuations in price than other securities. Additionally certain equity securities in which the Funds invest may be less readily marketable and may be subject to greater fluctuation in price than other securities.
Risks Related to Company Size. The Funds may invest in smaller companies which may have unproven track records, a limited product or service base and limited access to capital and may, therefore, be more likely to fail than larger companies.
Risks Associated with Noninvestment Grade Securities. A Fund may invest a portion of its assets in securities rated below investment grade which may be subject to greater interest rate, credit and liquidity risks than investment grade securities.
Risks of Foreign Investing. The Funds invest in securities issued by foreign companies; therefore, a Fund’s share price may be affected by foreign economic and political conditions, taxation policies and accounting and auditing standards.
Risks of Investing in Emerging Market Countries. Securities issued or traded in emerging markets generally entail greater risks than securities issued or traded in developed markets. Emerging market economies may also experience more severe downturns (with corresponding currency devaluations) than developed economies.
Risks of Investing in Derivative Contracts. Changes in the value of the derivative contracts in which the Fund invests may not be correlated with changes in the value of the underlying asset or, if they are correlated, may move in the opposite direction than originally anticipated. Also, derivative contracts may involve other risks described in this prospectus, such as stock market, interest rate, credit, liquidity and leverage risks.
Risks of Investing in American Depositary Receipts. Because the Fund may invest in American Depositary Receipts issued by foreign companies, the Fund’s Share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards, than would otherwise be the case.

The 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 or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency.

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Risk/Return Bar Chart and Table

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The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s Institutional Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

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The Fund’s Institutional Shares are sold without a sales charge (load). The total returns in the bar chart above are based upon net asset value.

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Within the period shown in the bar chart, the Fund’s Institutional Shares highest quarterly return was 9.08% (quarter ended June 30, 2003). Its lowest quarterly return was (5.40)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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Return Before Taxes is shown for the Fund’s Institutional Shares. In addition, Return After Taxes is shown for Institutional Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend upon each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Standard & Poor’s 500 Index (S&P 500) and the Lehman Brothers Aggregate Bond Index (LBAB), each a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. Indexes are unmanaged, and it is not possible to invest directly in an index.

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years

Institutional Shares:

Return Before Taxes	6.18%	2.90%	6.98%

Return After Taxes on Distributions¹	5.33%	1.55%	4.98%

Return After Taxes on Distributions and Sale of Fund Shares¹	4.00%	1.69%	4.85%

S&P 500	10.88%	(2.30)%	12.07%

LBAB	4.34%	7.71%	7.72%

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1 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Returns After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding shares through tax-deferred programs, such as IRA or 401(k) plans.

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Risk/Return Bar Chart and Table

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The Fund’s Institutional Shares are sold without a sales charge (load). The total returns in the bar chart above are based upon net asset value.

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Within the period shown in the bar chart, the Fund’s Institutional Shares highest quarterly return was 12.66% (quarter ended June 30, 2003). Its lowest quarterly return was (9.42)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years

Institutional Shares:

Return Before Taxes	7.09%	0.79%	7.50%

Return After Taxes on Distributions¹	6.46%	(0.16)%	5.72%

Return After Taxes on Distributions and Sale of Fund Shares¹	4.59%	0.14%	5.51%

S&P 500	10.88%	(2.30)%	12.07%

LBAB	4.34%	7.71%	7.72%

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Risk/Return Bar Chart and Table

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The Fund’s Institutional Shares are sold without a sales charge (load). The total returns in the bar chart above are based upon net asset value.

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Within the period shown in the bar chart, the Fund’s Institutional Shares highest quarterly return was 15.71% (quarter ended December 31, 1998). Its lowest quarterly return was (14.07)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years

Institutional Shares:

Return Before Taxes	7.56%	(1.82)%	6.93%

Return After Taxes on Distributions¹	7.32%	(2.37)%	5.56%

Return After Taxes on Distributions and Sale of Fund Shares¹	4.91%	(1.81)%	5.30%

S&P 500	10.88%	(2.30)%	12.07%

LBAB	4.34%	7.71%	7.72%

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What are the Fund’s Fees and Expenses?

FEDERATED CONSERVATIVE ALLOCATION FUND

FEES AND EXPENSES

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This table describes the fees and expenses that you may pay if you buy and hold
the Fund’s Institutional Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waivers and Reimbursements)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.75%
Distribution (12b-1) Fee		None
Shareholder Services Fees³		0.25%
Other Expenses⁴		0.45%
Estimated Indirect Expenses of Underlying Funds⁵		0.30%
Total Annual Fund Operating Expenses		1.75%


1 The percentages shown are based on the expenses for the entire fiscal year ended November 30, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the shareholder services provider and administrator waived and/or reimbursed certain amounts. The adviser has agreed to reimburse certain investment adviser fees as a result of investment in other funds which are managed by the adviser or an affiliate of the adviser. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers and Reimbursements of Fund Expenses		0.41%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursements)		1.34%
2 The adviser voluntarily reimbursed a portion of the management fee. The management fee paid by the Fund (after the voluntary reimbursement) was 0.60% for the fiscal year ended November 30, 2004.
3 A portion of the shareholder services fee has been voluntarily waived and reimbursed. This voluntary waiver and reimbursement can be terminated at any time. The shareholder services fee paid by the Fund’s Institutional Shares (after the voluntary waiver and reimbursement) was 0.03% for the fiscal year ended November 30, 2004.
4 The administrator voluntarily waived certain operating expenses of the Fund. This voluntary waiver can be terminated at any time. Total other operating expenses paid by the Fund (after the voluntary waiver) were 0.41% for the fiscal year ended November 30, 2004.
5 The Fund’s shareholders indirectly bear the expenses of the underlying funds in which the Fund invests. The Fund’s estimated indirect expense from investing in the underlying funds is based upon the average allocation of the Fund’s investment in the underlying funds and upon the actual total operating expenses of the underlying funds (including any current waivers and expense limitations) for the fiscal year ended November 30, 2004. Actual underlying fund expenses incurred by the Fund may vary with changes in the allocation of Fund assets among the underlying funds and with other events that directly affect the expenses of the underlying funds.

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EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund’s Institutional Shares with the cost of investing in other mutual funds.

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The Example assumes that you invest $10,000 in the Fund’s Institutional Shares for the time periods indicated and then redeem all of your Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s Institutional Shares operating expenses are before waivers and reimbursements as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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1 Year		$178

3 Years		$551

5 Years		$949

10 Years		$2,062

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What are the Fund’s Fees and Expenses?

FEDERATED MODERATE ALLOCATION FUND

FEES AND EXPENSES

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This table describes the fees and expenses that you may pay if you buy and hold
the Fund’s Institutional Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waivers and Reimbursements)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.75%
Distribution (12b-1) Fee		None
Shareholder Services Fees³		0.25%
Other Expenses⁴		0.40%
Estimated Indirect Expenses of Underlying Funds⁵		0.27%
Total Annual Fund Operating Expenses		1.67%


1 The percentages shown are based on the expenses for the entire fiscal year ended November 30, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the shareholder services provider and administrator waived and/or reimbursed certain amounts. The adviser has agreed to reimburse certain investment adviser fees as a result of investment in other funds which are managed by the adviser or an affiliate of the adviser. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers and Reimbursements of Fund Expenses		0.37%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursements)		1.30%
2 The adviser voluntarily reimbursed a portion of the management fee. The management fee paid by the Fund (after the voluntary reimbursement) was 0.63% for the fiscal year ended November 30, 2004.
3 A portion of the shareholder services fee has been voluntarily waived and reimbursed. This voluntary waiver and reimbursement can be terminated at any time. The shareholder services fee paid by the Fund’s Institutional Shares (after the voluntary waiver and reimbursement) was 0.03% for the fiscal year ended November 30, 2004.
4 The administrator voluntarily waived certain operating expenses of the Fund. This voluntary waiver can be terminated at any time. Total other operating expenses paid by the Fund (after the voluntary waiver) were 0.37% for the fiscal year ended November 30, 2004.
5 The Fund’s shareholders indirectly bear the expenses of the underlying funds in which the Fund invests. The Fund’s estimated indirect expense from investing in the underlying funds is based upon the average allocation of the Fund’s investment in the underlying funds and upon the actual total operating expenses of the underlying funds (including any current waivers and expense limitations) for the fiscal year ended November 30, 2004. Actual underlying fund expenses incurred by the Fund may vary with changes in the allocation of Fund assets among the underlying funds and with other events that directly affect the expenses of the underlying funds.

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EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund’s Institutional Shares with the cost of investing in other mutual funds.

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1 Year		$170

3 Years		$526

5 Years		$907

10 Years		$1,976

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What are the Fund’s Fees and Expenses?

FEDERATED GROWTH ALLOCATION FUND

FEES AND EXPENSES

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This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund’s Institutional Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waivers and Reimbursements)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee		0.75%
Distribution (12b-1) Fee		None
Shareholder Services Fees²		0.25%
Other Expenses		0.66%
Estimated Indirect Expenses of Underlying Funds⁵		0.24%
Total Annual Fund Operating Expenses		1.90%


1 The percentages shown are based on the expenses for the entire fiscal year ended November 30, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the shareholder services provider and administrator waived and/or reimbursed certain amounts. The adviser has agreed to reimburse certain investment adviser fees as a result of investment in other funds which are managed by the adviser or an affiliate of the adviser. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers and Reimbursements of Fund Expenses		0.36%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursements)		1.54%
2 The adviser voluntarily reimbursed a portion of the management fee. The management fee paid by the Fund (after the voluntary reimbursement) was 0.66% for the fiscal year ended November 30, 2004.
3 A portion of the shareholder services fee has been voluntarily waived and reimbursed. This voluntary waiver and reimbursement can be terminated at any time. The shareholder services fee paid by the Fund’s Institutional Shares (after the voluntary waiver and reimbursement) was 0.02% for the fiscal year ended November 30, 2004.
4 The administrator voluntarily waived certain operating expenses of the Fund. This voluntary waiver can be terminated at any time. Total other operating expenses paid by the Fund (after the voluntary waiver) were 0.62% for the fiscal year ended November 30, 2004.
5 The Fund’s shareholders indirectly bear the expenses of the underlying funds in which the Fund invests. The Fund’s estimated indirect expense from investing in the underlying funds is based upon the average allocation of the Fund’s investment in the underlying funds and upon the actual total operating expenses of the underlying funds (including any current waivers and expense limitations) for the fiscal year ended November 30, 2004. Actual underlying fund expenses incurred by the Fund may vary with changes in the allocation of Fund assets among the underlying funds and with other events that directly affect the expenses of the underlying funds.

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EXAMPLE

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This Example is intended to help you compare the cost of investing in the Fund’s Institutional Shares with the cost of investing in other mutual funds.

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1 Year		$193

3 Years		$597

5 Years		$1,026

10 Years		$2,222

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What are the Funds’ Investment Strategies?

The Funds pursue their investment objectives by investing in a mix of equity and fixed income investments. Each Fund’s portfolio is constructed by the Adviser using an asset allocation process. The Adviser first determines the percentage of each Fund’s portfolio to invest in equity securities and the percentage to invest in fixed income securities. In making this determination, each Fund will start with a neutral exposure point for both equity and fixed income securities. The following table shows each Fund’s neutral position points (“Neutral Position”) for both equity and fixed income securities:

	Equity Neutral Position	Fixed Income Neutral Position

Federated Conservative Allocation Fund	40%	60%

Federated Moderate Allocation Fund	60%	40%

Federated Growth Allocation Fund	80%	20%

Within the fixed income allocation the Adviser anticipates investing primarily in U.S.-dollar dominated investment-grade fixed income securities. Such investment grade securities include U.S. government agency and treasury securities, investment grade corporate debt securities and mortgage backed securities. The Adviser may also invest a portion of the fixed income allocation in foreign investment grade debt securities and domestic and foreign non-investment grade debt securities. Domestic non-investment grade securities include both convertible and high-yield corporate debt securities. Foreign governments or corporations in either emerging or developed market countries issue foreign non-investment grade and foreign investment grade securities. The foreign debt securities in which the Fund may invest may be dominated in either foreign currency or in U.S. Dollars.

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The Adviser may invest a portion of the Fund’s assets in derivative contracts to efficiently implement the Fund’s overall investment strategies. The following are examples of some of the specific ways in which the Fund may use derivatives. First, the Funds may invest otherwise uninvested cash positions in derivatives in order to efficiently gain exposure to a diversified portfolio of securities, such as an index related to the domestic stock market. Second, the Fund may buy or sell derivatives to increase or decrease the Fund’s exposure to an underlying asset without actually buying or selling the asset. Finally, the Adviser may use derivatives to implement the Fund’s hedging strategies, as more fully described below.

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Exposure gained through use of derivatives will be counted for purposes of calculating the percentage of a Fund’s portfolio dedicated to either equity or fixed income securities.

The Adviser anticipates that it will primarily utilize other funds advised by the Adviser or its affiliates to gain exposure to equity and fixed income securities. However the Adviser may invest directly in such securities. The funds in which the Adviser invest may include funds which are not available for general investment by the public. The investment companies in which the Funds invest are managed independently of the Funds and may incur additional administrative expenses. Therefore, any investment by the Funds in other funds may be subject to duplicate expenses. However, the Adviser believes that the benefits and efficiencies of this approach should outweigh the potential additional expenses.

HEDGING

Hedging transactions are intended to reduce specific risks. For example, to protect the Funds against circumstances that would normally cause the Funds’ portfolio securities to decline in value, the Funds may buy or sell a derivative contract that would normally increase in value under the same circumstances. The Funds may also attempt to hedge by using combinations of different derivatives contracts, or derivatives contracts and securities. The Funds’ ability to hedge may be limited by the costs of the derivatives contracts. The Funds may attempt to lower the cost of hedging by entering into transactions that provide only limited protection, including transactions that (1) hedge only a portion of the portfolio, (2) use derivatives contracts that cover a narrow range of circumstances or (3) involve the sale of derivatives contracts with different terms. Consequently, hedging transactions will not eliminate risk even if they work as intended. In addition, hedging strategies are not always successful, and could result in increased expenses and losses to the Funds.

PORTFOLIO TURNOVER

Each Fund actively trades its portfolio securities in an attempt to achieve its investment objective. Active trading will cause a Fund to have an increased portfolio turnover rate, which is likely to generate shorter-term gains (losses) for its shareholders, which are taxed at a higher rate than longer-term gains (losses). Actively trading portfolio securities increases a Fund’s trading costs and may have an adverse impact on a Fund’s performance.

What are the Principal Securities in Which the Funds Invest?

EQUITY SECURITIES

Equity securities represent a share of an issuer’s earnings and assets, after the issuer pays its liabilities. The Funds cannot predict the income they will receive from equity securities because issuers generally have discretion as to the payment of any dividends or distributions. However, equity securities offer greater potential for appreciation than many other types of securities, because their value should increase directly with the value of the issuer’s business. The following describes the type of equity security in which the Funds principally invest:

Common Stocks

Common stocks are the most prevalent type of equity security. Common stocks receive the issuer’s earnings after the issuer pays its creditors and any preferred stockholders. As a result, changes in an issuer’s earnings directly influence the value of its common stock.

FOREIGN SECURITIES

Foreign equity securities are equity securities of issuers based outside the United States. The Funds consider an issuer to be based outside the United States if:

it is organized under the laws of, or has a principal office located in, another country;
the principal trading market for its securities is in another country; or
it (or its subsidiaries) derived in its most current fiscal year at least 50% of its total assets, capitalization, gross revenue or profit from goods produced, services performed, or sales made in another country.

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Foreign securities are often denominated in foreign currencies. Along with the risks normally associated with domestic equity securities, foreign equity securities are subject to currency risks and risks of foreign investing. Trading in certain foreign markets is also subject to liquidity risks.

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Depositary Receipts

Depositary receipts represent interests in underlying securities issued by a foreign company. Depositary receipts are not traded in the same market as the underlying security. The foreign securities underlying American Depositary Receipts (ADRs) are traded outside the United States. ADRs provide a way to buy shares of foreign-based companies in the United States rather than in overseas markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign exchange transactions. The foreign securities underlying European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary Receipts (IDRs), are traded globally or outside the United States. Depositary receipts involve many of the same risks of investing directly in foreign securities, including currency risks and risks of foreign investing.

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted periodically. In addition, the issuer of a fixed income security must repay the principal amount of the security, normally within a specified time.

The following describes the types of fixed income securities in which the Funds principally invest:

Treasury Securities

Treasury securities are direct obligations of the federal government of the United States. Treasury securities are generally regarded as having the lowest credit risks.

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other government sponsored entity (GSE) acting under federal authority. Some GSE securities are supported by the full faith and credit of the United States. These include the Government National Mortgage Association, Small Business Administration, Farm Credit System Financial Assistance Corporation, Farmer’s Home Administration, Federal Financing Bank, General Services Administration, Department of Housing and Urban Development, Export-Import Bank, Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority Bonds.

Other GSE securities receive support through federal subsidies, loans or other benefits. For example, the U.S. Treasury is authorized to purchase specified amounts of securities issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Student Loan Marketing Association, and Tennessee Valley Authority in support of such obligations.

A few GSE securities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. These include the Farm Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as Treasury securities. A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or guaranteed by a federal agency.

Although such a guarantee protects against credit risks, it does not reduce market and prepayment risks.

Corporate Debt Securities

Corporate debt securities are fixed income securities issued by businesses. Notes, bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. The Funds may also purchase interests in bank loans to companies. The credit risks of corporate debt securities vary widely among issuers. In addition, the credit risk of an issuer’s debt security may vary based on its priority for repayment.

FOREIGN GOVERNMENT SECURITIES

Foreign government securities generally consist of fixed income securities supported by national, state or provincial governments or similar political subdivisions. Foreign government securities also include debt obligations of supranational entities, such as international organizations designed or supported by governmental entities to promote economic reconstruction or development, international banking institutions and related government agencies. Examples of these include, but are not limited to, the International Bank for Reconstruction and Development (the World Bank), the Asian Development Bank, the European Investment Bank and the Inter-American Development Bank.

Foreign government securities also include fixed income securities of quasi-governmental agencies that are either issued by entities owned by a national, state or equivalent government or are obligations of a political unit that are not backed by the national government’s full faith and credit. Further, foreign government securities include mortgage related securities issued or guaranteed by national, state or provincial governmental instrumentalities, including quasi-governmental agencies.

Foreign Corporate Debt Securities

The Funds will also invest in debt securities of foreign corporations. Notes, bonds, debentures and commercial paper are the most prevalent types of corporate debt securities. The Funds may also purchase interests in bank loans to companies.

The credit risks of corporate debt securities vary widely among issuers. The credit risk of an issuer’s debt security may also vary based on its priority for repayment. For example, higher ranking (senior) debt securities have a higher priority than lower ranking (subordinated) securities. This means that the issuer might not make payments on subordinated securities while continuing to make payments on senior securities. In addition, in the event of bankruptcy, holders of senior securities may receive amounts otherwise payable to the holders of subordinated securities.

MORTGAGE BACKED SECURITIES

Mortgage backed securities represent interests in pools of mortgages. The mortgages that comprise a pool normally have similar interest rates, maturities and other terms. Mortgages may have fixed or adjustable interest rates. Interests in pools of adjustable rate mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of mortgage backed securities is pass- through certificates. An issuer of pass-through certificates gathers monthly payments from an underlying pool of mortgages. Then, the issuer deducts its fees and expenses and passes the balance of the payments onto the certificate holders once a month. Holders of pass-through certificates receive a pro data share of all payments and pre-payments from the underlying mortgages. As a result, the holders assume all the prepayment risks of the underlying mortgages.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

CMOs, including interests in real estate mortgage investment conduits (REMICs) allocate payments and prepayments from an underlying pass-through certificate among holders of different classes of mortgage backed securities. This creates different prepayment and interest rate risks for each CMO class. The degree of increased or decreased prepayment risks depends upon the structure of the CMOs. However, the actual returns on any type of mortgage backed security depend upon the performance of the underlying pool of mortgages, which no one can predict and will vary among pools.

Sequential CMOs

In a sequential pay CMO, one class of CMOs receives all principal payments and prepayments. The next class of CMOs receives all principal payments after the first class is paid off. This process repeats for each sequential class of CMO. As a result, each class of sequential pay CMOs reduces the prepayment risks of subsequent classes.

PACs, TACs and Companion Classes

More sophisticated CMOs include planned amortization classes (PACs) and targeted amortization classes (TACs). PACs and TACs are issued with companion classes. PACs and TACs receive principal payments and prepayments at a specified rate. The companion classes receive principal payments and prepayments in excess of the specified rate. In addition, PACs will receive the companion classes’ share of principal payments, if necessary, to cover a shortfall in the prepayment rate. This helps PACs and TACs to control prepayment risks by increasing the risks to their companion classes.

IOs and POs

CMOs may allocate interest payments to one class (Interest Only or IOs) and principal payments to another class (Principal Only or POs). POs increase in value when prepayment rates increase. POs tend to increase in value when interest rates decline (and prepayments increase) making POs a useful hedge against interest rate risk. In contrast, IOs decrease in value when prepayments increase, because the underlying mortgages generate less interest payments. However, IOs tend to increase in value when interest rates rise (and prepayments decrease), making IOs a useful hedge against interest rate risks.

Floaters and Inverse Floaters

Another variant allocates interest payments between two classes of CMOs. One class (Floaters) receives a share of interest payments based upon a market index such as the London Interbank Offer Rate (LIBOR). The other class (Inverse Floaters) receives any remaining interest payments from the underlying mortgages. Floater classes receive more interest (and Inverse Floater classes receive correspondingly less interest) as interest rates rise. This shifts prepayment and interest rate risks from the Floater to the Inverse Floater class, reducing the price volatility of the Floater class and increasing the price volatility of the Inverse Floater class.

Z Classes

CMOs must allocate all payments received from the underlying mortgages to some class. To capture any unallocated payments, CMOs generally have an accrual (Z) class. Z classes do not receive any payments from the underlying mortgages until all other CMO classes have been paid off. Once this happens, holders of Z class CMOs receive all payments and prepayments.

DERIVATIVE CONTRACTS

Derivative contracts are financial instruments that require payments based upon changes in the values of designated (or underlying) securities, commodities, currencies, financial indices or other assets or instruments. Some derivative contracts (such as futures, forwards and options) require payments relating to a future trade involving the underlying asset. Other derivative contracts (such as swaps) require payments relating to the income or returns from the underlying asset or instrument. The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In this case, the exchange sets all the terms of the contract except for the price. Investors make payments due under their contracts through the exchange. Most exchanges require investors to maintain margin accounts through their brokers to cover their potential obligations to the exchange. Parties to the contract make (or collect) daily payments to the margin accounts to reflect losses (or gains) in the value of their contracts. This protects investors against potential defaults by the counterparty. Trading contracts on an exchange also allows investors to close out their contracts by entering into offsetting contracts.

The Funds may also trade derivative contracts over-the-counter (OTC) in transactions negotiated directly between a Fund and the counterparty. OTC contracts do not necessarily have standard terms, so they cannot be directly offset with other OTC contracts. In addition, OTC contracts with more specialized terms may be more difficult to price than exchange traded contracts.

Depending on how a Fund uses derivative contracts and the relationships between the market value of a derivative contract and the underlying asset or instrument, derivative contracts may increase or decrease the Funds’ exposure to interest rate, stock market, currency and credit risks, and may also expose the fund to liquidity and leverage risks. OTC contracts also expose the Fund to credit risks in the event that a counterparty defaults on the contract.

A Fund may trade in the following types of derivative contracts.

Futures Contracts

Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of an underlying asset at a specified price, date, and time. Entering into a contract to buy an underlying asset is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell an underlying asset is commonly referred to as selling a contract or holding a short position in the asset. Futures contracts are considered to be commodity contracts. The Funds have claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a commodity pool operator under that Act. Futures contracts traded OTC are frequently referred to as forward contracts. The Funds can buy or sell financial futures, index futures and foreign currency forward contracts.

Options

Options are rights to buy or sell an underlying asset or instrument for a specified price (the exercise price) during, or at the end of, a specified period. The seller (or writer) of the option receives a payment, or premium, from the buyer, which the writer keeps regardless of whether the buyer uses (or exercises) the option. A call option gives the holder (buyer) the right to buy the underlying asset from the seller (writer) of the option. A put option gives the holder the right to sell the underlying asset to the writer of the option. Options can trade on exchanges or in the OTC market and may be bought or sold on a wide variety of underlying assets or instruments, including financial indices, individual securities, and other derivative instruments, such as futures contracts.

SPECIAL TRANSACTIONS

Delayed Delivery Transactions

Delayed delivery transactions, including when issued transactions, are arrangements in which a Fund buys securities for a set price, with payment and delivery of the securities scheduled for a future time. During the period between purchase and settlement, no payment is made by a Fund to the issuer and no interest accrues to a Fund. Each Fund records the transaction when it agrees to buy the securities and reflects their value in determining the price of its Shares. Settlement dates may be a month or more after entering into these transactions so that the market values of the securities bought may vary from the purchase prices. Therefore, delayed delivery transactions create interest rate risks for the Funds. Delayed delivery transactions also involve credit risks in the event of a counterparty default. These transactions create leverage risks.

Foreign Exchange Contracts

In order to convert U.S. dollars into the currency needed to buy a foreign security, or to convert foreign currency received from the sale of a foreign security into U.S. dollars, the Funds may enter into spot currency trades. In a spot trade, a Fund agrees to exchange one currency for another at the current exchange rate. The Funds may also enter into derivative contracts in which a foreign currency is an underlying asset. The exchange rate for currency derivative contracts may be higher or lower than the spot exchange rate. Use of these derivative contracts may increase or decrease the Funds’ exposure to currency risks.

To Be Announced Securities (TBAs)

As with other delayed delivery transactions, a seller agrees to issue a TBA security at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Funds agree to accept any security that meets specified terms. For example, in a TBA mortgage backed transaction, the Funds and the seller would agree upon the issuer, interest rate and terms of the underlying mortgages. The seller would not identify the specific underlying mortgages until it issues the security. TBA mortgage backed securities increase interest rate risks because the underlying mortgages may be less favorable than anticipated by the Funds.

Dollar Rolls

Dollar rolls are transactions where a Fund sells mortgage backed securities with a commitment to buy similar, but not identical, mortgage backed securities on a future date at a lower price. Normally, one or both securities involved are TBA mortgage backed securities. Dollar rolls are subject to interest rate risks and credit risks.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Funds may invest in other investment companies, both domestic and foreign (which may or may not be available for general investment by the public), and that are advised by the Adviser or an affiliate of the Adviser. These other investment companies are managed independently of the Funds and may incur additional administrative expenses. Therefore, any such investment by the Funds may be subject to duplicate expenses. However, the Adviser believes that the benefits and efficiencies of this approach should outweigh the potential additional expenses. The Funds may also invest in such securities directly.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determine whether a security is investment grade based upon the credit ratings given by one or more nationally recognized statistical rating organizations (NRSROs). For example, Standard & Poor’s, a rating service, assigns ratings to investment grade securities (AAA, AA, A, and BBB) based on their assessment of the likelihood of the issuer’s inability to pay interest or principal (default) when due on each security. Lower credit ratings correspond to higher credit risk. If a security has not received a rating, the Funds must rely entirely upon the Adviser’s credit assessment that the security is comparable to investment grade.

If a security is downgraded below the minimum quality discussed above, the Adviser will reevaluate the security, but will not be required to sell it.

What are the Specific Risks of Investing in the Funds?

STOCK MARKET RISKS

The value of equity securities in each Fund’s portfolio will rise and fall. These fluctuations could be a sustained trend or a drastic movement. A Fund’s portfolio will reflect changes in prices of individual portfolio stocks or general changes in stock valuations. Consequently, a Fund’s share price may decline.

The Adviser attempts to manage market risk by limiting the amount each Fund invests in each company. However, diversification will not protect a Fund against widespread or prolonged declines in the stock market.

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the interest rate paid by similar securities. Generally, when interest rates rise, prices of fixed income securities fall. However, market factors, such as the demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged.

Interest rate changes have a greater effect on the price of fixed income securities with longer durations. Duration measures the price sensitivity of a fixed income security to changes in interest rates.

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by failing to pay interest or principal when due. If an issuer defaults, the Funds will lose money.

Many fixed income securities receive credit ratings from services such as S&P and Moody’s Investors Service. These services assign ratings to securities by assessing the likelihood of issuer default. Lower credit ratings correspond to higher credit risk. If a security has not received a rating, the Funds must rely entirely upon the Adviser’s credit assessment.

Fixed income securities generally compensate for greater credit risk by paying interest at a higher rate. The difference between the yield of a security and the yield of a U.S. Treasury security with a comparable maturity (the spread) measures the additional interest paid for risk. Spreads may increase generally in response to adverse economic or market conditions. A security’s spread may also increase if the security’s rating is lowered, or the security is perceived to have an increased credit risk. An increase in the spread will cause the price of the security to decline.

Credit risk includes the possibility that a party to a transaction involving a Fund will fail to meet its obligations. This could cause the Fund to lose the benefit of the transaction or prevent the Fund from selling or buying other securities to implement its investment strategy.

CURRENCY RISKS

Exchange rates for currencies fluctuate daily. The combination of currency risk and market risk tends to make securities traded in foreign markets more volatile than securities traded exclusively in the United States.

The Adviser attempts to manage currency risk by limiting the amount the Funds invest in securities denominated in a particular currency. However, diversification will not protect the Funds against a general increase in the value of the U.S. dollar relative to other currencies.

CALL AND PREPAYMENT RISKS

Call risk is the possibility that an issuer may redeem a fixed income security before maturity (a call) at a price below its current market price. An increase in the likelihood of a call may reduce the security’s price.

If a fixed income security is called, the Funds may have to reinvest the proceeds in other fixed income securities with lower interest rates, higher credit risks, or other less favorable characteristics.

Unlike traditional fixed income securities, which pay a fixed rate of interest until maturity (when the entire principal amount is due) payments on mortgage backed securities include both interest and a partial payment of principal. Partial payment of principal may be composed of scheduled principal payments as well as unscheduled payments from the voluntary prepayment, refinancing, or foreclosure of the underlying loans. These unscheduled prepayments of principal create risks that can adversely affect a Fund holding mortgage backed securities.

For example, when interest rates decline, the values of mortgage backed securities generally rise. However, when interest rates decline, unscheduled prepayments can be expected to accelerate, and the Funds would be required to reinvest the proceeds of the prepayments at the lower interest rates then available. Unscheduled prepayments would also limit the potential for capital appreciation on mortgage backed securities.

Conversely, when interest rates rise, the values of mortgage backed securities generally fall. Since rising interest rates typically result in decreased prepayments, this could lengthen the average lives of mortgage backed securities, and cause their value to decline more than traditional fixed income securities.

Generally, mortgage backed securities compensate for the increased risk associated with prepayments by paying a higher yield. The additional interest paid for risk is measured by the difference between the yield of a mortgage backed security and the yield of a U.S. Treasury security with a comparable maturity (the spread). An increase in the spread will cause the price of the mortgage backed security to decline. Spreads generally increase in response to adverse economic or market conditions. Spreads may also increase if the security is perceived to have an increased prepayment risk or is perceived to have less market demand.

SECTOR RISKS

Companies with similar characteristics may be grouped together in broad categories called sectors. Sector risk is the possibility that a certain sector may underperform other sectors or as the market as a whole. As the Adviser allocates more of a Fund’s portfolio holdings to a particular sector, a Fund’s performance will be more susceptible to any economic, business or other developments which generally affect that sector.

LIQUIDITY RISKS

Trading opportunities for equity securities in which the Funds invest may be less readily available and may be subject to greater fluctuation in price than other securities. Trading opportunities are more limited for securities that are not widely held, for fixed income securities that have not received any audit ratings or have received ratings below investment grade and for CMOs that have complex terms. This may make it more difficult to sell or buy a security at a favorable price or time. Consequently, a Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund’s performance. Infrequent trading of securities may also lead to an increase in their price volatility.

Liquidity risk also refers to the possibility that a Fund may not be able to sell a security or close out a derivative contract when it wants to. If this happens, a Fund will be required to continue to hold the security or keep the position open, and a Fund could incur losses. OTC derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Market capitalization is determined by multiplying the number of its outstanding shares by the current market price per share.

Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base and limited access to capital. These factors also increase risks and make these companies more likely to fail than companies with larger market capitalizations.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, generally entail greater market, credit and liquidity risks than investment grade securities. For example, their prices are more volatile, economic downturns and financial setbacks may affect their prices more negatively, and their trading market may be more limited.

RISKS OF INVESTING IN EMERGING MARKET COUNTRIES

Securities issued in emerging markets generally entail greater risks than securities issued or traded in developed markets. For example, the prices of such securities may be significantly more volatile than prices of securities in developed countries. Emerging market economies may also experience more severe downturns (with corresponding currency devaluations) than developed economies.

Emerging market countries may have relatively unstable governments and may present the risk of nationalization of businesses, expropriation, confiscatory taxation or, in certain instances, reversion to closed market, centrally planned economies.

RISKS OF FOREIGN INVESTING

Foreign securities pose additional risks because foreign economic or political conditions may be less favorable that those of the United States. Foreign financial markets may also have fewer investor protections. Securities in foreign markets may also be subject to taxation policies that reduce returns for U.S. investors.

Foreign companies may not provide information (including financial statements) as frequently or to as great an extent as companies in the United States. Foreign companies may also receive less coverage than U.S. companies by market analysts and the financial press. In addition, foreign countries may lack uniform accounting, auditing and financial reporting standards or regulatory requirements comparable to those applicable to U.S. companies. These factors may prevent a Fund and its Adviser from obtaining information concerning foreign companies that is as frequent, extensive and reliable as the information available concerning companies in the United States. In addition, foreign countries may have restrictions on foreign ownership or may impose exchange controls, capital flow restrictions or repatriation restrictions that could adversely affect a Fund’s investments.

The foreign sovereign debt securities a Fund purchases involve specific risks, including that: (i) the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or interest when it becomes due because of political constraints, cash flow problems and other national economic factors; (ii) governments may default on their sovereign debt, which may require holders of such sovereign debt to participate in debt rescheduling or additional lending to defaulting governments; and (iii) there is no bankruptcy proceedings by which defaulted sovereign debt may be collected in whole or in part.

Legal remedies available to investors in certain foreign countries may be more limited than those available with respect to investments in the United States or in other foreign countries. The laws of some foreign countries may limit a Fund’s ability to invest in securities of certain issuers organized under the laws of those foreign countries.

RISKS OF INVESTING IN DERIVATIVES CONTRACTS

The Fund’s use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts in which the Funds invest may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts may be mispriced or improperly valued and, as a result, a Fund may need to make increased cash payments to the counterparty. Finally, derivative contracts may cause a Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts may also involve other risks described in this prospectus, such as stock market, credit, liquidity and leverage risks.

RISKS OF INVESTING IN AMERICAN DEPOSITARY RECEIPTS

Because a Fund may invest in American Depositary Receipts issued by foreign companies, a Fund’s Share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards, than would otherwise be the case.

What Do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is open. When a Fund receives your transaction request in proper form (as described in this prospectus), it is processed at the next calculated net asset value (NAV). If a Fund purchases foreign securities that trade in foreign markets on days the NYSE is closed, the value of a Fund’s assets may change on days you cannot purchase or redeem Shares. The Funds do not charge a front-end sales charge. NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The Funds’ current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

The Funds generally value 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).

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The Fund generally values fixed income securities according to prices furnished by an independent pricing service, except that fixed income securities with remaining maturities of less than 60 days at the time of purchase may be valued at amortized cost. For mortgage-backed securities, prices furnished by the independent pricing service are based on the aggregate investment value of the projected cash flows to be generated by the security. For other fixed income securities, prices furnished by an independent pricing service are intended to be indicative of the mean between the bid and asked prices currently offered to institutional investors for the securities.

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Futures contracts and options are generally valued at market values established by the exchanges on which they are traded at the close of trading on such exchanges. If prices are not available from an independent pricing service, securities and derivatives contracts traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board. The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Fund’s adviser determines that the quotation or price for a portfolio security provided by a dealer or independent pricing services is inaccurate.

Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. For domestic fixed income securities, such events may occur where the cut-off time for the market information used by the independent pricing service is earlier than the end of regular trading on the NYSE. For securities normally priced at their last sale price in a foreign market, such events can occur between the close of trading in the foreign market and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events. For securities of foreign issuers, such events could also include political or other developments affecting the economy or markets in which the issuer conducts its operations or its securities are traded.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing service, or based on market quotations.

The required minimum initial investment for each Fund is $25,000. There is no required minimum subsequent investment amount. 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 is calculated by combining all accounts it maintains with a Fund. Accounts established through investment professionals may be subject to a smaller minimum investment amount. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

How are the Funds Sold?

The Funds offers two Share classes: Institutional Shares and Select Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Institutional Shares. All Share classes have different expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other class.

The Funds’ Distributor, Federated Securities Corp., markets the Shares described in this prospectus to individuals and financial institutions, directly or through investment professionals.

The Distributor and its affiliates may pay out of their assets other amounts (including items of material value) to investment professionals for marketing and servicing Shares. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

SERVICE FEES

The Fund may pay fees (“Service Fees”) to financial institutions or to Federated Shareholder Services Company (“FSSC”), a subsidiary of Federated Investors, Inc., for providing services to shareholders and maintaining shareholder accounts. Under certain agreements, rather than paying financial institutions directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial institutions.

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial institutions that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial institution or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Adviser). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial institution sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial institution. These payments may be in addition to payments made by the Fund to the financial institution under the Service Fees arrangement. You can ask your financial institution for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the Funds. The Funds reserve the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Funds on the same day and the Funds receive payment within one business day. You will become the owner of Shares and receive dividends when the Funds receive your payment.

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Investment professionals should send payments according to the instructions in the sections “By Wire” or “By Check.”

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DIRECTLY FROM THE FUNDS

Establish your account with a Fund by submitting a completed New Account Form; and
Send your payment to a Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next calculated NAV after the Funds receive your wire or your check. If your check does not clear, your purchase will be canceled and you could be liable for any losses or fees incurred by the Funds or State Street Bank and Trust Company, the Funds’ transfer agent.

An institution may establish an account and place an order by calling a Fund and the Shares will be priced at the next calculated NAV after the Funds receive the order.

By Wire

Send your wire to:

State Street Bank and Trust Company Boston, MA Dollar Amount of Wire ABA Number 011000028 Attention: EDGEWIRE Wire Order Number, Dealer Number or Group Number Nominee/Institution Name Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are restricted.

By Check

Make your check payable to The Federated Funds, note your account number on the check, and send it to:

The Federated Funds P.O. Box 8600 Boston, MA 02266-8600

If you send your check by a private courier or overnight delivery service that requires a street address, send it to:

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The Federated Funds 66 Brooks Drive Braintree, MA 02184

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Payment should be made in U.S. dollars and drawn on a U.S. bank. The Funds reserve the right to reject any purchase request. For example, to protect against check fraud the Funds may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional Shares on a regular basis by completing the Systematic Investment Program (SIP) section of the New Account Form or by contacting the Funds or your investment professional. The minimum investment amount for SIPs is $50.

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a depository institution that is an ACH member. This purchase option can be established by completing the appropriate sections of the New Account Form.

How to Redeem Shares

You should redeem Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Funds if you purchased Shares directly from the Funds.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption amount you will receive is based upon the next calculated NAV after the Funds receive the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by simply calling the Funds at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive a redemption amount based on that day’s NAV.

By Mail

You may redeem Shares by mailing a written request to the Funds.

You will receive a redemption amount based on the next calculated NAV after the Funds receive your written request in proper form.

Send requests by mail to:

The Federated Funds P.O. Box 8600 Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds 66 Brooks Drive Braintree, MA 02184

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All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed; and
signatures of all shareholders exactly as registered.

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Call your investment professional or the Funds if you need special instructions.

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Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days; or
a redemption is payable to someone other than the shareholder(s) of record.

A Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion signature guarantee from a bank or trust company, savings association, credit union or broker, dealer, or securities exchange member. A notary public cannot provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The following payment options are available if you complete the appropriate section of the New Account Form or an Account Service Options Form. These payment options require a signature guarantee if they were not established when the account was opened:

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

Although each Fund intends to pay Share redemptions in cash, it reserves the right to pay the redemption price in whole or in part by a distribution of the Fund’s portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after receiving a request in proper form. Payment may be delayed up to seven days:

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder’s trade activity or amount adversely impacts a Fund’s ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a Fund if those checks are undeliverable and returned to a Fund.

SYSTEMATIC WITHDRAWAL PROGRAM

You may automatically redeem Shares in a minimum amount of $100 on a regular basis. Complete the appropriate section of the New Account Form or an Account Service Options Form or contact your investment professional or the Funds. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Payments should not be considered yield or income.

ADDITIONAL CONDITIONS

Telephone Transactions

The Funds will record your telephone instructions. If the Funds do not follow reasonable procedures, they may be liable for losses due to unauthorized or fraudulent telephone instructions.

Share Certificates

The Funds no longer issue share certificates. If you are redeeming Shares represented by certificates previously issued by the Funds, you must return the certificates with your written redemption request. For your protection, send your certificates by registered or certified mail, but do not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions (except for systematic transactions). In addition, you will receive periodic statements reporting all account activity, including systematic transactions, dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

Each Fund declares and pays any dividends quarterly to shareholders. Dividends are paid to all shareholders invested in a Fund on the record date. The record date is the date on which a shareholder must officially own Shares in order to earn a dividend.

In addition, the Funds pay any capital gains at least annually. Your dividends and capital gains distributions will be automatically reinvested in additional Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before the record date dividend or capital gain distribution, you will pay the full price for the Shares and then receive a portion of the price back in the form of a taxable distribution, whether or not you reinvest the distribution in Shares. Therefore, you should consider the tax implications of purchasing Shares shortly before the record date dividend or capital gain. Contact your investment professional or the Funds for information concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts may be closed if redemptions cause the account balance to fall below the minimum initial investment amount. Before an account is closed, you will be notified and allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Funds send an annual statement of your account activity to assist you in completing your federal, state and local tax returns. Fund distributions of dividends and capital gains are taxable to you whether paid in cash or reinvested in the Funds. Dividends are taxable as ordinary income; capital gains are taxable at different rates depending upon the length of time a Fund holds its assets.

Fund distributions are expected to be both dividends and capital gains. Redemptions are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

FREQUENT TRADING POLICIES

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Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund’s fair valuation procedures are intended in part to discourage short-term trading by reducing the potential for such strategies to succeed. See “What Do Shares Cost?” The Fund also monitors trading in Fund Shares in an effort to identify potential disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares.

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Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Adviser may determine from the amount, frequency or pattern of purchases and redemptions that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

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The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

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PORTFOLIO HOLDINGS INFORMATION

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Information concerning the Fund’s portfolio holdings is available in the “Products” section of the Federated Investors website at www.federatedinvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month (except for recent purchase and sale transaction information, which is updated quarterly) is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten issuer exposures and percentage breakdowns of the portfolio by effective maturity range, type of security and sector.

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To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Funds’ fiscal quarters. The Fund’s annual and semiannual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Funds?

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The Board of Trustees (the “Board”) governs the Funds. The Board selects and oversees the Adviser, Federated Equity Management Company of Pennsylvania. The Adviser manages the Funds’ assets, including buying and selling portfolio securities. Federated Advisory Services Company (FASC), an affiliate of the Adviser, provides research, quantitative analysis, equity trading and transaction settlement and certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund. The address of the Adviser and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Adviser has delegated daily management of some of the Funds’ assets to the Sub-Adviser, Federated Investment Management Company, which is paid by the Adviser and not by the Funds. The Sub-Adviser’s address is 175 Water Street, New York, NY 10038-4965.

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The Adviser, Sub-Adviser and other subsidiaries of Federated advise approximately 133 equity, fixed-income and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $179 billion in assets as of December 31, 2004. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,385 employees. Federated provides investment products to more than 5,700 investment professionals and institutions.

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THE FUNDS’ PORTFOLIO MANAGERS ARE:

The portfolio managers for the Funds’ individual asset categories are as follows:

Name (Portfolio Manager Since)	Asset Category Managed	Biography

John W. Harris (December 1998)	Overall Allocation and Domestic Large Company Stocks	John W. Harris is a Portfolio Manager for the Funds and performs the overall asset allocation of the Funds’ assets among the various asset categories. In addition, Mr. Harris is a manager of the U.S. large company stocks asset category. He has performed these duties since December 1998. In allocating the Funds’ assets, Mr. Harris evaluates the market environment and economic outlook, utilizing the services of the Adviser’s Investment Strategy Committee. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Funds’ Adviser in December 1998. In January 2000, Mr. Harris became Vice President of the Funds’ Adviser. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh.


David P. Gilmore (January 2003)	Domestic Large Company Stocks	David P. Gilmore has been the Funds’ Portfolio Manager since January 2003. Mr. Gilmore joined Federated in August 1997 as an Investment Analyst. He was promoted to Senior Investment Analyst in July 1999 and became an Assistant Vice President of the Funds’ Adviser in July 2000. Mr. Gilmore was a Senior Associate with Coopers & Lybrand from January 1992 to May 1995. Mr. Gilmore is a Chartered Financial Analyst and attended the University of Virginia, where he earned his M.B.A., from September 1995 to May 1997. Mr. Gilmore has a B.S. from Liberty University.


Joseph M. Balestrino (Inception)	U.S. Treasury Securities and Investment- Grade Corporate Bonds	Mr. Balestrino joined Federated in 1986 and has been a Senior Portfolio Manager and Senior Vice President of the Funds’ Adviser since 1998. He was a Portfolio Manager and a Vice President of the Funds’ Adviser from 1995 to 1998. Mr. Balestrino served as a Portfolio Manager and an Assistant Vice President of the Funds’ Adviser from 1993 to 1995. Mr. Balestrino is a Chartered Financial Analyst and received his Master’s Degree in Urban and Regional Planning from the University of Pittsburgh.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.75% of each Fund’s average daily net assets. The Adviser may voluntarily waive a portion of its fee or reimburse a Fund for certain operating expenses.

Legal Proceedings

Like many other mutual fund companies, in September 2003, Federated Investors, Inc., the parent company of the Federated funds’ advisers and distributor (collectively, “Federated”), received detailed requests for information on shareholder trading activities in the Federated funds (“Funds”) from the SEC, the New York State Attorney General, and the National Association of Securities Dealers. Since that time, Federated has received additional inquiries from regulatory authorities on these and related matters, and more such inquiries may be received in the future.

As a result of these inquiries, Federated and the Funds have conducted an internal investigation of the matters raised, which revealed instances in which a few investors were granted exceptions to Federated’s internal procedures for limiting frequent transactions and that one of these investors made an additional investment in another Federated fund. The investigation has also identified inadequate procedures which permitted a limited number of investors (including several employees) to engage in undetected frequent trading activities and/or the placement and acceptance of orders to purchase shares of fluctuating net asset value funds after the funds’ closing times. Federated has issued a series of press releases describing these matters in greater detail and emphasizing that it is committed to compensating the Funds for any detrimental impact these transactions may have had on them. In that regard, on February 3, 2004, Federated and the independent directors of the Funds announced the establishment by Federated of a restoration fund that is intended to cover any such detrimental impact. The press releases and related communications are available in the “About Us” section of Federated’s website at www.federatedinvestors.com, and any future press releases on this subject will also be posted there.

Shortly after Federated’s first public announcement concerning the foregoing matters, and notwithstanding Federated’s commitment to taking remedial actions, Federated and various Funds were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders.

Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and rule 12b-1 fees, and seeking damages of unspecified amounts.

The Board of the Funds has retained the law firm of Dickstein, Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund’s Institutional Share financial performance for the Funds’ past five fiscal years. Some of the information is presented on a per share basis. Total returns represent the rate an investor would have earned (or lost) on an investment in the Fund’s Institutional Shares, assuming reinvestment of any dividends and capital gains.

This information has been audited by Deloitte & Touche LLP, whose report, along with the Funds’ audited financial statements, is included in the Annual Report.

Federated Conservative Allocation Fund

Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended November 30	2004		2003		2002		2001		2000

Net Asset Value, Beginning of Period	$10.50		$ 9.70		$10.22		$11.19		$11.82

Income From Investment Operations:

Net investment income	0.24		0.24	¹	0.31	²	0.35		0.48	¹

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts	0.48		0.81		(0.57	)²	(0.43	)	(0.40	)

TOTAL FROM INVESTMENT OPERATIONS	0.72		1.05		(0.26	)	(0.08	)	0.08

Less Distributions:

Distributions from net investment income	(0.31	)	(0.25	)	(0.26	)	(0.37	)	(0.45	)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts	--		--		--		(0.52	)	(0.26	)

TOTAL DISTRIBUTIONS	(0.31	)	(0.25	)	(0.26	)	(0.89	)	(0.71	)

Net Asset Value, End of Period	$10.91		$10.50		$ 9.70		$10.22		$11.19

Total Return³	7.00	%	10.99	%	(2.56	)%	(0.75	)%	0.60	%


Ratios to Average Net Assets:

Expenses	1.04	%	1.23	%	1.15	%	1.13	%	1.06	%

Net investment income	2.18	%	2.39	%	3.01	%²	3.62	%	4.11	%

Expense waiver/reimbursement⁴	0.41	%	0.21	%	0.20	%	0.20	%	0.20	%

Supplemental Data:

Net assets, end of period (000 omitted)	$67,497		$74,512		$76,842		$110,413		$121,563

Portfolio turnover	28	%	103	%	11	%	20	%	43	%

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1 Based on average shares outstanding.

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2 Effective December 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $0.02, increase net realized gain (loss) per share by $0.02, and decrease the ratio of net investment income to average net assets from 3.12% to 3.01%. Per share, ratios and supplemental data for periods prior to December 1, 2001 have not been restated to reflect this change in presentation.

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3 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

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4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Federated Moderate Allocation Fund

Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended November 30	2004		2003		2002		2001		2000

Net Asset Value, Beginning of Period	$11.17		$ 9.99		$10.91		$12.33		$13.55

Income From Investment Operations:

Net investment income	0.19		0.17		0.22	¹	0.29		0.39	²

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts	0.72		1.18		(0.95	⁾¹	(0.89	)	(0.64	)

TOTAL FROM INVESTMENT OPERATIONS	0.91		1.35		(0.73	)	(0.60	)	(0.25	)

Less Distributions:

Distributions from net investment income	(0.24	)	(0.17	)	(0.19	)	(0.30	)	(0.36	)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts	--		--		--		(0.52	)	(0.61	)

TOTAL DISTRIBUTIONS	(0.24	)	(0.17	)	(0.19	)	(0.82	)	(0.97	)

Net Asset Value, End of Period	$11.84		$11.17		$ 9.99		$10.91		$12.33

Total Return³	8.24	%⁴	13.68	%	(6.76	)%	(5.17	)%	(2.19	)%


Ratios to Average Net Assets:

Expenses	1.03	%	1.20	%	1.09	%	1.09	%	1.07	%

Net investment income	1.64	%	1.69	%	2.16	%¹	2.70	%	2.89	%

Expense waiver/reimbursement⁵	0.37	%	0.20	%	0.20	%	0.20	%	0.20	%

Supplemental Data:

Net assets, end of period (000 omitted)	$88,612		$91,789		$95,288		$125,741		$161,366

Portfolio turnover	24	%	121	%	23	%	36	%	72	%

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1 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain/loss per share by $0.01, and decrease the ratio of net investment income to average net assets from 2.25% to 2.16%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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2 Based on average shares outstanding.

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4 During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on the total return. See Notes to Financial Statements (Note 5).

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5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Federated Growth Allocation Fund

Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended November 30	2004		2003		2002		2001		2000

Net Asset Value, Beginning of Period	$11.30		$ 9.93		$11.39		$13.42		$15.17

Income From Investment Operations:

Net investment income	0.10		0.08	¹	0.12	²	0.18		0.27	¹

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts	0.93		1.36		(1.47	)²	(1.39	)	(1.02	⁾

TOTAL FROM INVESTMENT OPERATIONS	1.03		1.44		(1.35	)	(1.21	)	(0.75	)

Less Distributions:

Distributions from net investment income	(0.04	)	(0.07	)	(0.11	)	(0.18	)	(0.22	)

Distributions from paid in capital³	--		--		--		(0.03	)	--

Distributions from net realized gain on investments, foreign currency transactions and futures contracts	--		--		--		(0.61	)	(0.78	)

TOTAL DISTRIBUTIONS	(0.04	)	(0.07	)	(0.11	)	(0.82	)	(1.00	)

Net Asset Value, End of Period	$12.29		$11.30		$ 9.93		$11.39		$13.42

Total Return⁴	9.11	%⁵	14.56	%	(11.95	)%	(9.55	)%	(5.48	)%


Ratios to Average Net Assets:

Expenses	1.30	%	1.41	%	1.28	%⁶	1.27	%	1.16	%

Net investment income	0.78	%	0.78	%	0.98	%²	1.52	%	1.81	%

Expense waiver/reimbursement⁷	0.36	%	0.22	%	0.20	%	0.20	%	0.20	%

Supplemental Data:

Net assets, end of period (000 omitted)	$43,261		$46,069		$48,840		$69,632		$83,495

Portfolio turnover	20	%	145	%	14	%	43	%	86	%

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1 Based on average shares outstanding.

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2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. For the year ended November 30, 2002, this change had no effect on net investment income per share or net realized and unrealized gain (loss) on investments per share, but decreased the ratio of net investment income to average net assets from 1.01% to 0.98%. Per share, ratios and supplemental data for periods prior to December 1, 2001 have not been restated to reflect this change in presentation.

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3 Represents a return of capital for federal income tax purposes.

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4 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year are not annualized.

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5 During the period, the Fund was reimbursed by the Adviser, which had an impact of less than 0.01% on the total return. See Notes to Financial Statements (Note 5).

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6 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements.

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7 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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A Statement of Additional Information (SAI) dated January 31, 2005, is incorporated by reference into this prospectus. Additional information about the Funds and their investments is contained in the Funds’ SAI and Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report’s Management’s Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Funds’ performance during its last fiscal year. The SAI contains a description of the Funds’ policies and procedures with respect to the disclosure of their portfolio securities. To obtain the SAI, Annual Reports, Semi-Annual Reports and other information without charge, and to make inquiries, call your investment professional or the Funds at 1-800-341-7400.

These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at www.federatedinvestors.com.

You can obtain information about the Funds (including the SAI) by writing to or visiting the SEC’s Public Reference Room in Washington, DC. You may also access Fund information from the EDGAR Database on the SEC’s Internet site at http://www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC’s Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room’s operations and copying fees.

Federated Investors
World-Class Investment Manager

Federated Managed Allocation Portfolios
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-7129

Federated is a registered mark of Federated Investors, Inc.
2005 ©Federated Investors, Inc.

Cusip 314212408
Cusip 314212200
Cusip 314212606

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G00873-03-IS (1/05)

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Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Managed Allocation Portfolios

PROSPECTUS

January 31, 2005

Federated Conservative Allocation Fund
Federated Moderate Allocation Fund
Federated Growth Allocation Fund

SELECT SHARES

Not FDIC Insured * May Lose Value * No Bank Guarantee

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Risk/Return Summary		1
What are the Fund’s Fees and Expenses?		10
What are the Funds’ Investment Strategies?		15
What are the Principal Securities in Which the Funds Invest?		17
What are the Specific Risks of Investing in the Funds?		25
What Do Shares Cost?		29
How are the Funds Sold?		31
How to Purchase Shares		33
How to Redeem Shares		34
Account and Share Information		37
Who Manages the Funds?		40
Legal Proceedings		42
Financial Information		43

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Risk/Return Summary

WHAT IS EACH FUND’S INVESTMENT OBJECTIVE?

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Fund		Objective

Federated Conservative Allocation Fund (“FCAF”)		To seek total return with an emphasis on income and capital appreciation

Federated Moderate Allocation Fund (“FMAF”)		To seek capital appreciation with income as a secondary objective

Federated Growth Allocation Portfolio (“FGAF”)		To seek capital appreciation

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While there is no assurance that a Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUNDS’ MAIN INVESTMENT STRATEGIES?

	Equity Neutral Position	Fixed Income Neutral Position

Federated Conservative Allocation Fund	40%	60%

Federated Moderate Allocation Fund	60%	40%

Federated Growth Allocation Fund	80%	20%

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Funds. The primary factors that may reduce the Funds’ returns include:

Stock Market Risks. The value of equity securities in a Fund’s portfolio will fluctuate and, as a result, a Fund’s share price may decline suddenly or over a sustained period of time.
Interest Rate Risks. Prices of fixed income securities generally fall when interest rates rise. Interest rate changes have a greater effect on the price of fixed income securities with longer durations.
Credit Risks. There is a possibility that issuers of securities in which a Fund may invest may default in the payment of interest or principal on the securities when due, which could cause a Fund to lose money.
Currency Risks. The exchange rates for currencies fluctuate daily; therefore, prices of the foreign securities in which a Fund invests are more volatile than prices of securities traded exclusively in the U.S.
Prepayment Risks. When homeowners prepay their mortgages in response to lower interest rates, the Funds will be required to reinvest the proceeds at the lower interest rates available. Also, when interest rates fall, the price of mortgage backed securities may not rise to as great an extent as that of other fixed income securities.
Call Risks. A Fund’s performance may be adversely affected by the possibility that an issuer of a security held by a Fund may redeem the security prior to maturity at a price below its current market value.
Sector Risks. The Funds may allocate relatively more assets to certain industry sectors than to others; therefore, the Funds’ performance may be more susceptible to any developments which affect those sectors emphasized by the Funds.
Liquidity Risks. The noninvestment grade securities and complex collateralized mortgage obligations in which the Funds may invest may not be readily marketable and may be subject to greater fluctuations in price than other securities. Additionally certain equity securities in which the Funds invest may be less readily marketable and may be subject to greater fluctuation in price than other securities.
Risks Related to Company Size. The Funds may invest in smaller companies which may have unproven track records, a limited product or service base and limited access to capital and may, therefore, be more likely to fail than larger companies.
Risks Associated with Noninvestment Grade Securities. A Fund may invest a portion of its assets in securities rated below investment grade which may be subject to greater interest rate, credit and liquidity risks than investment grade securities.
Risks of Foreign Investing. The Funds invest in securities issued by foreign companies; therefore, a Fund’s share price may be affected by foreign economic and political conditions, taxation policies and accounting and auditing standards.
Risks of Investing in Emerging Market Countries. Securities issued or traded in emerging markets generally entail greater risks than securities issued or traded in developed markets. Emerging market economies may also experience more severe downturns (with corresponding currency devaluations) than developed economies.
Risks of Investing in Derivative Contracts. Changes in the value of the derivative contracts in which the Fund invests may not be correlated with changes in the value of the underlying asset or, if they are correlated, may move in the opposite direction than originally anticipated. Also, derivative contracts may involve other risks described in this prospectus, such as stock market, interest rate, credit, liquidity and leverage risks.
Risks of Investing in American Depositary Receipts. Because the Fund may invest in American Depositary Receipts issued by foreign companies, the Fund’s Share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards, than would otherwise be the case.

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Risk/Return Bar Chart and Table

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The performance information shown below will help you analyze the Fund’s investment risks in light of its historical returns. The bar chart shows the variability of the Fund’s Select Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund’s performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

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The Fund’s Select Shares are sold without a sales charge (load). The total returns in the bar chart above are based upon net asset value.

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Within the period shown in the bar chart, the Fund’s Select Shares highest quarterly return was 8.77% (quarter ended June 30, 2003). Its lowest quarterly return was (5.46)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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Return Before Taxes is shown for the Fund’s Select Shares. In addition, Return After Taxes is shown for Select Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend upon each investor’s personal tax situation, and are likely to differ from those shown. The table also shows returns for the Standard & Poor’s 500 Index (S&P 500) and the Lehman Brothers Aggregate Bond Index (LBAB), each a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund’s performance. Indexes are unmanaged, and it is not possible to invest directly in an index.

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years

Institutional Shares:

Return Before Taxes	5.45%	2.18%	6.24%

Return After Taxes on Distributions¹	4.85%	1.10%	4.53%

Return After Taxes on Distributions and Sale of Fund Shares¹	3.53%	1.25%	4.40%

S&P 500	10.88%	(2.30)%	12.07%

LBAB	4.34%	7.71%	7.72%

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Risk/Return Bar Chart and Table

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The Fund’s Select Shares are sold without a sales charge (load). The total returns in the bar chart above are based upon net asset value.

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Within the period shown in the bar chart, the Fund’s Select Shares highest quarterly return was 12.48% (quarter ended June 30, 2003). Its lowest quarterly return was (9.61)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years

Institutional Shares:

Return Before Taxes	6.34%	0.11%	6.76%

Return After Taxes on Distributions¹	5.98%	(0.59)%	5.26%

Return After Taxes on Distributions and Sale of Fund Shares¹	4.11%	(0.28)%	5.04%

S&P 500	10.88%	(2.30)%	12.07%

LBAB	4.34%	7.71%	7.72%

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Risk/Return Bar Chart and Table

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The Fund’s Select Shares are sold without a sales charge (load). The total returns in the bar chart above are based upon net asset value.

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Within the period shown in the bar chart, the Fund’s Select Shares highest quarterly return was 15.52% (quarter ended December 31, 1998). Its lowest quarterly return was (14.25)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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(For the periods ended December 31, 2004)

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	1 Year	5 Years	10 Years

Institutional Shares:

Return Before Taxes	6.85%	(2.54)%	6.20%

Return After Taxes on Distributions¹	6.74%	(2.88)%	5.09%

Return After Taxes on Distributions and Sale of Fund Shares¹	4.45%	(2.28)%	4.82%

S&P 500	10.88%	(2.30)%	12.07%

LBAB	4.34%	7.71%	7.72%

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What are the Fund’s Fees and Expenses?

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FEDERATED CONSERVATIVE ALLOCATION FUND

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FEES AND EXPENSES

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This table describes the fees and expenses that you may pay if you buy and hold the Fund’s Select Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waivers and Reimbursements)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.75%
Distribution (12b-1) Fee³		0.75%
Shareholder Services Fees⁴		0.25%
Other Expenses⁵		0.45%
Estimated Indirect Expenses of Underlying Funds⁶		0.30%
Total Annual Fund Operating Expenses		2.50%


1 The percentages shown are based on the expenses for the entire fiscal year ended November 30, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the distributor, shareholder services provider and administrator waived and/or reimbursed certain amounts. The adviser has agreed to reimburse certain investment adviser fees as a result of investment in other funds which are managed by the adviser or an affiliate of the adviser. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers and Reimbursements of Fund Expenses		0.46%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursements)		2.04%
2 The adviser voluntarily reimbursed a portion of the management fee. The management fee paid by the Fund (after the voluntary reimbursement) was 0.60% for the fiscal year ended November 30, 2004.
3 A portion of the distribution (12b-1) fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The distribution (12b-1) fee paid by the Fund’s Select Shares (after the voluntary waiver) was 0.50% for the fiscal year ended November 30, 2004.
4 A portion of the shareholder services fee has been voluntarily waived and reimbursed. This voluntary waiver and reimbursement can be terminated at any time. The shareholder services fee paid by the Fund’s Select Shares (after the voluntary waiver and reimbursement) was 0.23% for the fiscal year ended November 30, 2004.
5 The administrator voluntarily waived certain operating expenses of the Fund. This voluntary waiver can be terminated at any time. Total other operating expenses paid by the Fund (after the voluntary waiver) were 0.41% for the fiscal year ended November 30, 2004.
6 The Fund’s shareholders indirectly bear the expenses of the underlying funds in which the Fund invests. The Fund’s estimated indirect expense from investing in the underlying funds is based upon the average allocation of the Fund’s investment in the underlying funds and upon the actual total operating expenses of the underlying funds (including any current waivers and expense limitations) for the fiscal year ended November 30, 2004. Actual underlying fund expenses incurred by the Fund may vary with changes in the allocation of Fund assets among the underlying funds and with other events that directly affect the expenses of the underlying funds.

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EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund’s Select Shares with the cost of investing in other mutual funds.

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The Example assumes that you invest $10,000 in the Fund’s Select Shares for the time periods indicated and then redeem all of your Shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s Select Shares operating expenses are before waivers and reimbursements as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

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1 Year		$253

3 Years		$779

5 Years		$1,331

10 Years		$2,836

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What are the Fund’s Fees and Expenses?

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FEDERATED MODERATE ALLOCATION FUND

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FEES AND EXPENSES

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This table describes the fees and expenses that you may pay if you buy and hold the Fund’s Select Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waivers and Reimbursements)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.75%
Distribution (12b-1) Fee³		0.75%
Shareholder Services Fees⁴		0.25%
Other Expenses⁵		0.40%
Estimated Indirect Expenses of Underlying Funds⁶		0.27%
Total Annual Fund Operating Expenses		2.42%


1 The percentages shown are based on the expenses for the entire fiscal year ended November 30, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the distributor, shareholder services provider and administrator waived and/or reimbursed certain amounts. The adviser has agreed to reimburse certain investment adviser fees as a result of investment in other funds which are managed by the adviser or an affiliate of the adviser. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers and Reimbursements of Fund Expenses		0.42%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursements)		2.00%
2 The adviser voluntarily reimbursed a portion of the management fee. The management fee paid by the Fund (after the voluntary reimbursement) was 0.63% for the fiscal year ended November 30, 2004.
3 A portion of the distribution (12b-1) fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The distribution (12b-1) fee paid by the Fund’s Select Shares (after the voluntary waiver) was 0.50% for the fiscal year ended November 30, 2004.
4 A portion of the shareholder services fee has been voluntarily waived and reimbursed. This voluntary waiver and reimbursement can be terminated at any time. The shareholder services fee paid by the Fund’s Select Shares (after the voluntary waiver and reimbursement) was 0.23% for the fiscal year ended November 30, 2004.
5 The administrator voluntarily waived certain operating expenses of the Fund. This voluntary waiver can be terminated at any time. Total other operating expenses paid by the Fund (after the voluntary waiver) were 0.37% for the fiscal year ended November 30, 2004.
6 The Fund’s shareholders indirectly bear the expenses of the underlying funds in which the Fund invests. The Fund’s estimated indirect expense from investing in the underlying funds is based upon the average allocation of the Fund’s investment in the underlying funds and upon the actual total operating expenses of the underlying funds (including any current waivers and expense limitations) for the fiscal year ended November 30, 2004. Actual underlying fund expenses incurred by the Fund may vary with changes in the allocation of Fund assets among the underlying funds and with other events that directly affect the expenses of the underlying funds.

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EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund’s Select Shares with the cost of investing in other mutual funds.

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1 Year		$245

3 Years		$755

5 Years		$1,291

10 Years		$2,756

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What are the Fund’s Fees and Expenses?

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FEDERATED GROWTH ALLOCATION FUND

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FEES AND EXPENSES

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This table describes the fees and expenses that you may pay if you buy and hold the Fund’s Select Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waivers and Reimbursements)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.75%
Distribution (12b-1) Fee³		0.75%
Shareholder Services Fees⁴		0.25%
Other Expenses⁵		0.66%
Estimated Indirect Expenses of Underlying Funds⁶		0.24%
Total Annual Fund Operating Expenses		2.65%


1 The percentages shown are based on the expenses for the entire fiscal year ended November 30, 2004. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the distributor, shareholder services provider and administrator waived and/or reimbursed certain amounts. The adviser has agreed to reimburse certain investment adviser fees as a result of investment in other funds which are managed by the adviser or an affiliate of the adviser. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended November 30, 2004.
Total Waivers and Reimbursements of Fund Expenses		0.41%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursements)		2.24%
2 The adviser voluntarily reimbursed a portion of the management fee. The management fee paid by the Fund (after the voluntary reimbursement) was 0.66% for the fiscal year ended November 30, 2004.
3 A portion of the distribution (12b-1) fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The distribution (12b-1) fee paid by the Fund’s Select Shares (after the voluntary waiver) was 0.50% for the fiscal year ended November 30, 2004.
4 A portion of the shareholder services fee has been voluntarily waived and reimbursed. This voluntary waiver and reimbursement can be terminated at any time. The shareholder services fee paid by the Fund’s Select Shares (after the voluntary waiver and reimbursement) was 0.22% for the fiscal year ended November 30, 2004.
5 The administrator voluntarily waived certain operating expenses of the Fund. This voluntary waiver can be terminated at any time. Total other operating expenses paid by the Fund (after the voluntary waiver) were 0.62% for the fiscal year ended November 30, 2004.
6 The Fund’s shareholders indirectly bear the expenses of the underlying funds in which the Fund invests. The Fund’s estimated indirect expense from investing in the underlying funds is based upon the average allocation of the Fund’s investment in the underlying funds and upon the actual total operating expenses of the underlying funds (including any current waivers and expense limitations) for the fiscal year ended November 30, 2004. Actual underlying fund expenses incurred by the Fund may vary with changes in the allocation of Fund assets among the underlying funds and with other events that directly affect the expenses of the underlying funds.

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EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund’s Select Shares with the cost of investing in other mutual funds.

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1 Year		$268

3 Years		$823

5 Years		$1,405

10 Years		$2,983

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What are the Funds’ Investment Strategies?

	Equity Neutral Position	Fixed Income Neutral Position

Federated Conservative Allocation Fund	40%	60%

Federated Moderate Allocation Fund	60%	40%

Federated Growth Allocation Fund	80%	20%

Exposure gained through use of derivatives will be counted for purposes of calculating the percentage of a Fund’s portfolio dedicated to either equity or fixed income securities.

The Adviser anticipates that it will primarily utilize other funds advised by the Adviser or its affiliates to gain exposure to equity and fixed income securities. However the Adviser may invest directly in such securities. The funds in which the Adviser invests may include funds which are not available for general investment by the public. The investment companies in which the Funds invest are managed independently of the Funds and may incur additional administrative expenses. Therefore, any investment by the Funds in other funds may be subject to duplicate expenses. However, the Adviser believes that the benefits and efficiencies of this approach should outweigh the potential additional expenses.

HEDGING

PORTFOLIO TURNOVER

What are the Principal Securities in Which the Funds Invest?

EQUITY SECURITIES

Common Stocks

FOREIGN SECURITIES

Foreign equity securities are equity securities of issuers based outside the United States. The Funds consider an issuer to be based outside the United States if:

it is organized under the laws of, or has a principal office located in, another country;
the principal trading market for its securities is in another country; or
it (or its subsidiaries) derived in its most current fiscal year at least 50% of its total assets, capitalization, gross revenue or profit from goods produced, services performed, or sales made in another country.

Foreign securities are often denominated in foreign currencies. Along with the risks normally associated with domestic equity securities, foreign equity securities are subject to currency risks and risks of foreign investing. Trading in certain foreign markets is also subject to liquidity risks.

Depositary Receipts

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Funds principally invest:

Treasury Securities

Treasury securities are direct obligations of the federal government of the United States. Treasury securities are generally regarded as having the lowest credit risks.

Agency Securities

Although such a guarantee protects against credit risks, it does not reduce market and prepayment risks.

Corporate Debt Securities

FOREIGN GOVERNMENT SECURITIES

Foreign Corporate Debt Securities

MORTGAGE BACKED SECURITIES

Mortgage backed securities come in a variety of forms. Many have extremely complicated terms. The simplest form of mortgage backed securities is pass-through certificates. An issuer of pass-through certificates gathers monthly payments from an underlying pool of mortgages. Then, the issuer deducts its fees and expenses and passes the balance of the payments onto the certificate holders once a month. Holders of pass-through certificates receive a pro data share of all payments and pre-payments from the underlying mortgages. As a result, the holders assume all the prepayment risks of the underlying mortgages.

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Collateralized Mortgage Obligations (CMOS)

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SEQUENTIAL CMOS

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PACS, TACS AND COMPANION CLASSES

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IOS AND POS

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FLOATERS AND INVERSE FLOATERS

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Z CLASSES

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DERIVATIVE CONTRACTS

A Fund may trade in the following types of derivative contracts.

Futures Contracts

Options

SPECIAL TRANSACTIONS

Delayed Delivery Transactions

Foreign Exchange Contracts

To Be Announced Securities (TBAs)

DOLLAR ROLLS

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

If a security is downgraded below the minimum quality discussed above, the Adviser will reevaluate the security, but will not be required to sell it.

What are the Specific Risks of Investing in the Funds?

STOCK MARKET RISKS

INTEREST RATE RISKS

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by failing to pay interest or principal when due. If an issuer defaults, the Funds will lose money.

CURRENCY RISKS

CALL AND PREPAYMENT RISKS

SECTOR RISKS

LIQUIDITY RISKS

RISKS RELATED TO COMPANY SIZE

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

RISKS OF INVESTING IN EMERGING MARKET COUNTRIES

RISKS OF FOREIGN INVESTING

RISKS OF INVESTING IN DERIVATIVES CONTRACTS

RISKS OF INVESTING IN AMERICAN DEPOSITARY RECEIPTS

What Do Shares Cost?

The Funds’ current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

The Funds generally value 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).

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The required minimum initial investment for each Fund is $1,500. There is no required minimum subsequent investment amount. An institutional investor’s minimum investment is calculated by combining all accounts it maintains with a Fund. Accounts established through investment professionals may be subject to a smaller minimum investment amount. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

How are the Funds Sold?

The Funds offers two Share classes: Institutional Shares and Select Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Select Shares. All Share classes have different expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other class.

The Funds’ Distributor, Federated Securities Corp., markets the Shares described in this prospectus to retail and private banking customers of financial institutions or to individuals directly or through investment professionals.

When the Distributor receives marketing fees, it may pay some or all of them to investment professionals. The Distributor and its affiliates may pay out of their assets other amounts (including items of material value) to investment professionals for marketing and servicing Shares. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to the Distributor and investment professionals for the sale, distribution, administration and customer servicing of the Funds’ Select Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different marketing fees.

SERVICE FEES

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the Funds. The Funds reserve the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Funds on the same day and the Funds receive payment within one business day. You will become the owner of Shares and receive dividends when the Funds receive your payment.

Investment professionals should send payments according to the instructions in the sections “By Wire” or “By Check.”

DIRECTLY FROM THE FUNDS

Establish your account with a Fund by submitting a completed New Account Form; and
Send your payment to a Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling a Fund and the Shares will be priced at the next calculated NAV after the Funds receive the order.

By Wire

Send your wire to:

State Street Bank and Trust Company Boston, MA Dollar Amount of Wire ABA Number 011000028 Attention: EDGEWIRE Wire Order Number, Dealer Number or Group Number Nominee/Institution Name Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are restricted.

By Check

Make your check payable to The Federated Funds, note your account number on the check, and send it to:

The Federated Funds P.O. Box 8600 Boston, MA 02266-8600

If you send your check by a private courier or overnight delivery service that requires a street address, send it to:

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The Federated Funds 66 Brooks Drive Braintree, MA 02184

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Payment should be made in U.S. dollars and drawn on a U.S. bank. The Funds reserve the right to reject any purchase request. For example, to protect against check fraud the Funds may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

BY SYSTEMATIC INVESTMENT PROGRAM

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Funds if you purchased Shares directly from the Funds.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by simply calling the Funds at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive a redemption amount based on that day’s NAV.

By Mail

You may redeem Shares by mailing a written request to the Funds.

You will receive a redemption amount based on the next calculated NAV after the Funds receive your written request in proper form.

Send requests by mail to:

The Federated Funds P.O. Box 8600 Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds 66 Brooks Drive Braintree, MA 02184

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All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed; and
signatures of all shareholders exactly as registered.

Call your investment professional or the Funds if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days; or
a redemption is payable to someone other than the shareholder(s) of record.

PAYMENT METHODS FOR REDEMPTIONS

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

Although each Fund intends to pay Share redemptions in cash, it reserves the right to pay the redemption price in whole or in part by a distribution of the Fund’s portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after receiving a request in proper form. Payment may be delayed up to seven days:

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder’s trade activity or amount adversely impacts a Fund’s ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from a Fund if those checks are undeliverable and returned to a Fund.

SYSTEMATIC WITHDRAWAL PROGRAM

ADDITIONAL CONDITIONS

Telephone Transactions

The Funds will record your telephone instructions. If the Funds do not follow reasonable procedures, they may be liable for losses due to unauthorized or fraudulent telephone instructions.

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be both dividends and capital gains. Redemptions are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Such trading may also seek to profit by estimating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund’s fair valuation procedures are intended in part to discourage short-term trading by reducing the potential for such strategies to succeed. See “What do Shares Cost?” The Fund also monitors trading in Fund Shares in an effort to identify potential disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares.

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PORTFOLIO HOLDINGS INFORMATION

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Who Manages the Funds?

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THE FUNDS’ PORTFOLIO MANAGERS ARE:

The portfolio managers for the Funds’ individual asset categories are as follows:

Name (Portfolio Manager Since)	Asset Category Managed	Biography

John W. Harris (December 1998)	Overall Allocation and Domestic Large Company Stocks	John W. Harris is a Portfolio Manager for the Funds and performs the overall asset allocation of the Funds’ assets among the various asset categories. In addition, Mr. Harris is a manager of the U.S. large company stocks asset category. He has performed these duties since December 1998. In allocating the Funds’ assets, Mr. Harris evaluates the market environment and economic outlook, utilizing the services of the Adviser’s Investment Strategy Committee. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Funds’ Adviser in December 1998. In January 2000, Mr. Harris became Vice President of the Funds’ Adviser. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh.

David P. Gilmore (January 2003)	Domestic Large Company Stocks	David P. Gilmore has been the Funds’ Portfolio Manager since January 2003. Mr. Gilmore joined Federated in August 1997 as an Investment Analyst. He was promoted to Senior Investment Analyst in July 1999 and became an Assistant Vice President of the Funds’ Adviser in July 2000. Mr. Gilmore was a Senior Associate with Coopers & Lybrand from January 1992 to May 1995. Mr. Gilmore is a Chartered Financial Analyst and attended the University of Virginia, where he earned his M.B.A., from September 1995 to May 1997. Mr. Gilmore has a B.S. from Liberty University.

Joseph M. Balestrino (Inception)	U.S. Treasury Securities and Investment-Grade Corporate Bonds	Mr. Balestrino joined Federated in 1986 and has been a Senior Portfolio Manager and Senior Vice President of the Funds’ Adviser since 1998. He was a Portfolio Manager and a Vice President of the Funds’ Adviser from 1995 to 1998. Mr. Balestrino served as a Portfolio Manager and an Assistant Vice President of the Funds’ Adviser from 1993 to 1995. Mr. Balestrino is a Chartered Financial Analyst and received his Master’s Degree in Urban and Regional Planning from the University of Pittsburgh.

ADVISORY FEES

Legal Proceedings

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund’s Select Share financial performance for the Funds’ past five fiscal years. Some of the information is presented on a per share basis. Total returns represent the rate an investor would have earned (or lost) on an investment in the Fund’s Select Shares, assuming reinvestment of any dividends and capital gains.

This information has been audited by Deloitte & Touche LLP, whose report, along with the Funds’ audited financial statements, is included in the Annual Report.

Federated Conservative Allocation Fund

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Financial Highlights–Select Shares

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(For a Share Outstanding Throughout Each Period)

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Year Ended November 30	2004		2003		2002		2001		2000

Net Asset Value, Beginning of Period	$10.49		$9.69		$10.22		$11.17		$11.80

Income From Investment Operations:

Net investment income	0.16		0.17	¹	0.23	²	0.34		0.40	¹

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts	0.49		0.81		(0.57	)²	(0.48	)	(0.40	)

TOTAL FROM INVESTMENT OPERATIONS	0.65		0.98		(0.34	)	(0.14	)	--

Less Distributions:

Distributions from net investment income	(0.24	)	(0.18	)	(0.19	)	(0.29	)	(0.37	)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts	--		--		--		(0.52	)	(0.26	)

TOTAL DISTRIBUTIONS	(0.24	)	(0.18	)	(0.19	)	(0.81	)	(0.63	)

Net Asset Value, End of Period	$10.90		$10.49		$9.69		$10.22		$11.17

Total Return³	6.26	%	10.22	%	(3.31	)%	(1.33	)%	(0.11	)%


Ratios to Average Net Assets:

Expenses	1.74	%	1.93	%	1.85	%	1.83	%	1.76	%

Net investment income	1.48	%	1.68	%	2.31	%²	2.92	%	3.42	%

Expense waiver/reimbursement⁴	0.46	%	0.26	%	0.25	%	0.25	%	0.25	%

Supplemental Data:

Net assets, end of period (000 omitted)	$37,939		$38,975		$38,481		$50,413		$55,004

Portfolio turnover	28	%	103	%	11	%	20	%	43	%

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1 Based on average shares outstanding.

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2 Effective December 1, 2001, the Fund adopted the provisions of the American Institute of Certified Public Accountants (AICPA) Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the year ended November 30, 2002 was to decrease net investment income per share by $0.02, increase net realized gain (loss) per share by $0.02, and decrease the ratio of net investment income to average net assets from 2.42% to 2.31%. Per share, ratios and supplemental data for periods prior to December 1, 2001 have not been restated to reflect this change in presentation.

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4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Federated Moderate Allocation Fund

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Financial Highlights–Select Shares

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(For a Share Outstanding Throughout Each Period)

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Year Ended November 30	2004		2003		2002		2001		2000

Net Asset Value, Beginning of Period	$11.15		$ 9.96		$10.87		$12.29		$13.51

Income From Investment Operations:

Net investment income	0.11		0.10		0.15	¹	0.23		0.30	²

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts	0.72		1.19		(0.94	)¹	(0.91	)	(0.64	)

TOTAL FROM INVESTMENT OPERATIONS	0.83		1.29		(0.79	)	(0.68	)	(0.34	)

Less Distributions:

Distributions from net investment income	(0.16	)	(0.10	)	(0.12	)	(0.22	)	(0.27	)

Distributions from net realized gain on investments, foreign currency transactions and futures contracts	--		--		--		(0.52	)	(0.61	)

TOTAL DISTRIBUTIONS	(0.16	)	(0.10	)	(0.12	)	(0.74	)	(0.88	)

Net Asset Value, End of Period	$11.82		$11.15		$ 9.96		$10.87		$12.29

Total Return³	7.50	%⁴	13.03	%	(7.36	)%	(5.89	)%	(2.87)	%


Ratios to Average Net Assets:

Expenses	1.73	%	1.90	%	1.79	%	1.79	%	1.77	%

Net investment income	0.94	%	0.99	%	1.46	%¹	2.00	%	2.19	%

Expense waiver/reimbursement⁵	0.42	%	0.25	%	0.25	%	0.25	%	0.25	%

Supplemental Data:

Net assets, end of period (000 omitted)	$55,954		$56,747		$58,706		$76,065		$89,725

Portfolio turnover	24	%	121	%	23	%	36	%	72	%

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1 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. The effect of this change for the fiscal year ended November 30, 2002 was to decrease net investment income per share by $0.01, increase net realized and unrealized gain/loss per share by $0.01, and decrease the ratio of net investment income to average net assets from 1.55% to 1.46%. Per share, ratios and supplemental data for periods prior to November 30, 2002 have not been restated to reflect this change in presentation.

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2 Based on average shares outstanding.

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4 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.09% on the total return. See Notes to Financial Statements (Note 5).

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5 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Federated Growth Allocation Fund

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Financial Highlights–Select Shares

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(For a Share Outstanding Throughout Each Period)

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Year Ended November 30	2004		2003		2002		2001		2000

Net Asset Value, Beginning of Period	$11.28		$ 9.92		$11.38		$13.40		$15.15

Income From Investment Operations:

Net investment income	0.01		0.01	¹	0.03	²	0.10		0.17	¹

Net realized and unrealized gain (loss) on investments, foreign currency transactions and futures contracts	0.93		1.36		(1.46	)²	(1.39	)	(1.02	)

TOTAL FROM INVESTMENT OPERATIONS	0.94		1.37		(1.43	)	(1.29	)	(0.85	)

Less Distributions:

Distributions from net investment income	(0.00	)	(0.01	)	(0.03	)	(0.10	)	(0.12	)

Distributions from paid in capital³	--		--		--		(0.02	)	--

Distributions from net realized gain on investments, foreign currency transactions and futures contracts	--		--		--		(0.61	)	(0.78	)

TOTAL DISTRIBUTIONS	(0.00	)	(0.01	)	(0.03	)	(0.73	)	(0.90	)

Net Asset Value, End of Period	$12.22		$11.28		$ 9.92		$11.38		$13.40

Total Return⁴	4.26	%⁵	13.81	%	(12.60	)%	(10.18	)%	(6.15	)%


Ratios to Average Net Assets:

Expenses	2.00	%	2.11	%	1.98	%⁶	1.97	%	1.86	%

Net investment income	0.10	%	0.08	%	0.28	%²	0.82	%	1.13	%

Expense waiver/reimbursement⁷	0.41	%	0.27	%	0.25	%	0.25	%	0.25	%

Supplemental Data:

Net assets, end of period (000 omitted)	$38,684		$38,481		$38,719		$59,463		$72,377

Portfolio turnover	20	%	145	%	14	%	43	%	86	%

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1 Based on average shares outstanding.

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2 Effective December 1, 2001, the Fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began accreting discount/amortizing premium on long-term debt securities. For the year ended November 30, 2002, this change had no effect on net investment income per share or net realized and unrealized gain (loss) on investments per share, but decreased the ratio of net investment income to average net assets from 0.31% to 0.28%. Per share, ratios and supplemental data for periods prior to December 1, 2001 have not been restated to reflect this change in presentation.

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3 Represents a return of capital for federal income tax purposes.

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5 During the period, the Fund was reimbursed by the Adviser, which had an impact of 0.09% on the total return. See Notes to Financial Statements (Note 5).

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6 The expense ratio is calculated without the reduction for fees paid indirectly for directed brokerage arrangements.

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7 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated November 30, 2004, which can be obtained free of charge.

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Federated Investors
World-Class Investment Manager

Federated Managed Allocation Portfolios
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-7129

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Cusip 314212309
Cusip 314212101
Cusip 314212507

G00873-03-SEL (1/05)

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FEDERATED MANAGED ALLOCATION PORTFOLIOS

Federated Conservative Allocation Fund
Federated Moderate Allocation Fund
Federated Growth Allocation Fund

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Statement of Additional Information
January 31, 2005

Institutional Shares
Select Shares

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This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Managed Allocation
Portfolios (Funds), dated January 31, 2005.

This SAI incorporates by reference the Funds' Annual Reports. Obtain the
prospectuses or the Annual Reports without charge by calling 1-800-341-7400.

How are the Funds Organized?..........
Securities in Which the Funds' Invest........................
-------------------------------------
What Do Shares Cost?.........................................
--------------------
How are the Funds Sold?......................................
-----------------------
Exchanging Securities for Shares.............................
--------------------------------
Subaccounting Services.......................................
----------------------
Redemption in Kind...........................................
------------------
Massachusetts Partnership Law................................
-----------------------------
Account and Share Information................................
-----------------------------
Tax Information..............................................
---------------
Who Manages and Provides Services to the
-----------------------------------------
Funds?.......................................................
------
How Do the Funds Measure Performance?........................
-------------------------------------
Who is Federated Investors, Inc.?..........................29
---------------------------------
Financial Information........................................
---------------------
Investment Ratings...........................................
------------------
Addresses....................................................
---------

Appendix

HOW ARE THE FUNDS ORGANIZED?

Each Fund is a diversified portfolio of Federated Managed Allocation Portfolios
(Trust). The Trust is an open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on November 15,
1993. The Trust may offer separate series of shares representing interests in
separate portfolios of securities. The Trust changed its name from Managed
Series Trust to Federated Managed Allocation Portfolios on January 31, 2000. The
Funds changed their names from Federated Managed Conservative Portfolio,
Federated Managed Moderate Growth Portfolio and Federated Managed Growth
Portfolio to Federated Conservative Allocation Fund, Federated Moderate
Allocation Fund and Federated Growth Allocation Fund on October 6, 2003,
respectively.
The Board of Trustees (the "Board") has established two classes of shares of
each Fund, known as Institutional Shares and Select Shares (Shares). This SAI
relates to both classes of Shares. The Fund's investment adviser is Federated
Equity Management Company of Pennsylvania (Adviser). Prior to January 1, 2004,
Federated Investment Management Company was the adviser to the Fund. Both the
current Adviser and the former Adviser are wholly owned subsidiaries of
Federated Investors, Inc. (Federated).

SECURITIES IN WHICH THE FUNDS INVEST
In pursuing its investment strategy, each Fund may invest in the following
securities for any purpose that is consistent with its investment objective.
Following is a table that indicates which types of securities are a: o" P =
Principal investment of a Fund; (bold in chart) o" A = Acceptable (but not
principal) investment of a Fund; or o" N = Not an acceptable investment of a
Fund.
Conservative Moderate Growth
Allocation Allocation Allocation
Securities Fund Fund Fund
Common Stocks P P P
Preferred Stocks A A A
Interests in Other Limited
Liability Companies A A A
Real Estate Investment Trusts A A A
Warrants A A A
Treasury Securities P P P
Agency Securities P P P
Corporate Debt Securities P P P
High- Yield Corporate Debt Securities P P P
Mortgage Backed Securities P P P
Collateralized Mortgage Obligations P P P
Asset Backed Securities A A A
Zero Coupon Securities A A A
Credit Enhancement A A A
Convertible Securities A A A
Foreign Securities P P P
Depositary Receipts P P P
Foreign Exchange Contracts P P P
To Be Announced Securities P P P
Dollar Rolls P P P
Foreign Government Securities P P P
Foreign Corporate Debt Securities P P P
Derivative Contracts P P P
Futures Contracts P P P
Options P P P
Swaps A A A
Hybrid Instruments A A A
Repurchase Agreements A A A
Reverse Repurchase Agreements A A A
Delayed Delivery Transactions 1 P P P
Securities Lending A A A
Asset Coverage A A A
Investing in Securities of Other Investment Companies P P P
Inter-Fund Borrowing and Lending Arrangements A A A
Municipal Securities A A A
1 The Funds do not intend to engage in such transactions to an extent that would cause the segregation
of more than 20% of the total value of a Fund's assets.
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SECURITIES DESCRIPTIONS AND TECHNIQUES
In pursuing its investment strategy, a Fund may invest in the following
securities for any purpose that is consistent with its investment objective:

Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Funds cannot predict the income they will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business.
The following describes the types of equity securities in which the Funds
invest:

Preferred Stocks
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Funds may also treat
such redeemable preferred stock as a fixed income security.

Interests in Other Limited Liability Companies
Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.

REAL ESTATE INVESTMENT TRUSTS (REITs)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.

Warrants
Warrants give a Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which the
Funds invest:

Asset backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial debts
with maturities of less than ten years. However, almost any type of fixed income
assets (including other fixed income securities) may be used to create an asset
backed security. Asset backed securities may take the form of commercial paper,
notes, or pass-through certificates. The Funds may also purchase
mortgage-related asset backed securities such as home equity loans, second
mortgages and manufactured housing obligations. Asset backed securities have
prepayment risks.
Like mortgage backed securities, asset backed securities may be issued by a
private entity and, although these securities must be investment grade, they can
present a credit risk.

Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security. A zero
coupon step-up security converts to a coupon security before final maturity.
There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in-kind or PIK securities.

Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security after the issuer defaults. In some cases
the company providing credit enhancement makes all payments directly to the
security holders and receives reimbursement from the issuer. Normally, the
credit enhancer has greater financial resources and liquidity than the issuer.
For this reason, the Adviser usually evaluates the credit risk of a fixed income
security based solely upon its credit enhancement.
Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to security's
holders. Either form of credit enhancement reduces credit risks by providing
another source of payment for a fixed income security.

Convertible Securities
Convertible securities are fixed income securities that the Funds have the
option to exchange for equity securities at a specified conversion price. The
option allows the Funds to realize additional returns if the market price of the
equity securities exceeds the conversion price. For example, a Fund may hold
fixed income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, a Fund could realize an additional $2 per share by converting
its fixed income securities.
Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Funds to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.
The Funds treat convertible securities as both fixed income and equity
securities for purposes of their investment policies and limitations, because of
their unique characteristics.

Foreign Securities
Foreign securities are securities of issuers based outside the United States.
The Funds consider an issuer to be based outside the United States if: o it is
organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o it (or its subsidiaries) derived in its most current fiscal year
at least 50% of its total
assets, capitalization, gross revenue or profit from goods produced,
services performed or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.

Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges.
In this case, the exchange sets all the terms of the contract except for the
price. Investors make payments due under their contracts through the exchange.
Most exchanges require investors to maintain margin accounts through their
brokers to cover their potential obligations to the exchange. Parties to the
contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to close out their contracts by entering into offsetting
contracts.
For example, the Funds could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Funds realizes a gain; if it is less, the Funds realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Funds will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Funds by preventing it from disposing
of or trading any assets it has been using to secure its obligations under the
contract.
The Funds may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Funds uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Funds' exposure to interest
rate and currency risks, and may also expose the Fund to liquidity and leverage
risks. OTC contracts also expose the Funds to credit risks in the event that a
counterparty defaults on the contract.
The Funds may trade in the following types of derivative contracts.

Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. The Funds has claimed an exclusion
from the definition of the term "commodity pool operator" under the Commodity
Exchange Act and, therefore, is not subject to registration or regulation as a
commodity pool operator under that Act. Futures contracts traded OTC are
frequently referred to as forward contracts. The Funds can buy or sell financial
futures, index futures and foreign currency forward contracts.

Options
Options are rights to buy or sell an underlying asset or instrument for a
specified price (the exercise price) during, or at the end of, a specified
period. The seller (or writer) of the option receives a payment, or premium,
from the buyer, which the writer keeps regardless of whether the buyer uses (or
exercises) the option. Options can trade on exchanges or in the OTC market and
may be bought or sold on a wide variety of underlying assets or instruments,
including financial indices, individual securities, and other derivative
instruments, such as futures contracts. Options that are written on futures
contracts will be subject to margin requirements similar to those applied to
futures contracts.
The Funds may buy and sell the following types of options: foreign currencies,
foreign currency futures, securities and securities indexes to manage interest
rate and currency risks. The Funds may write call options on securities which
they own to generate income.

Call Options
A call option gives the holder (buyer) the right to buy the underlying asset
from the seller (writer) of the option. The Funds may use call options in the
following ways: o Buy call options on indices, individual securities, index
futures, currencies (both foreign and
U.S. dollar) and financial futures in anticipation of an increase in
the value of the underlying asset or instrument; and
o Write call options on indices, portfolio securities, index futures,
currencies (both foreign and U.S. dollar) and financial futures to
generate income from premiums, and in anticipation of a decrease or
only limited increase in the value of the underlying asset. If a call
written by a Fund is exercised, a Fund foregoes any possible profit
from an increase in the market price of the underlying asset over the
exercise price plus the premium received.

Put Options
A put option gives the holder the right to sell the underlying asset to the
writer of the option. The Funds may use put options in the following ways:
Buy put options on indices, individual securities, index futures, currencies
(both foreign and U.S. dollar) and financial futures in anticipation of a
decrease in the value of the underlying asset; and
Write put options on indices, portfolio securities, index futures, currencies
(both foreign and U.S. dollar) and financial futures to generate income from
premiums, and in anticipation of an increase or only limited decrease in the
value of the underlying asset. In writing puts, there is a risk that a Fund may
be required to take delivery of the underlying asset when its current market
price is lower than the exercise price.
The Funds may also buy or write options, as needed, to close out existing
option positions.

Swaps
Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party, and
the parties might not own the assets underlying the swap. The payments are
usually made on a net basis so that, on any given day, the Funds would receive
(or pay) only the amount by which its payment under the contract is less than
(or exceeds) the amount of the other party's payment. Swap agreements are
sophisticated instruments that can take many different forms, and are known by a
variety of names including caps, floors and collars. Common swap agreements that
the Funds may use include:

Interest Rate Swaps
Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount of fixed income securities, in return for payments equal to a different
fixed or floating rate times the same principal amount, for a specific period.
For example, a $10 million LIBOR swap would require one party to pay the
equivalent of the London Interbank Offer Rate of interest (which fluctuates) on
$10 million principal amount in exchange for the right to receive the equivalent
of a stated fixed rate of interest on $10 million principal amount.

Total Rate of Return Swaps
Total rate of return swaps are contracts in which one party agrees to make
payments of the total return from the underlying asset during the specified
period, in return for payments equal to a fixed or floating rate of interest or
the total return from another underlying asset.

Credit Default Swaps
A credit default swap is an agreement between two parties (the "Counterparties")
whereby one party (the "Protection Buyer") agrees to make payments over the term
of the CDS to another party (the "Protection Seller"), provided that no
designated event of default (an "Event of Default") occurs on an underlying bond
(the "Reference Bond") has occurred. If an Event of Default occurs, the
Protection Seller must pay the Protection Buyer the full notional value, or "par
value," of the Reference Bond in exchange for the Reference Bond or another
similar bond issued by the issuer of the Reference Bond (the "Deliverable
Bond"). The Counterparties agree to the characteristics of the Deliverable Bond
at the time that they enter into the CDS. The Fund may be either the Protection
Buyer or the Protection Seller in a CDS. Under normal circumstances, the Fund
will enter into a CDS for hedging purposes (as Protection Buyer) or to generate
additional income (as Protection Seller). If the Fund is a Protection Buyer and
no Event of Default occurs, the Fund will lose its entire investment in the CDS
(i.e., an amount equal to the payments made to the Protection Seller). However,
if an Event of Default occurs, the Fund (as Protection Buyer) will deliver the
Deliverable Bond and receive a payment equal to the full notional value of the
Reference Bond, even though the Reference Bond may have little or no value. If
the Fund is the Protection Seller and no Event of Default occurs, the Fund will
receive a fixed rate of income throughout the term of the CDS. However, if an
Event of Default occurs, the Fund (as Protection Seller) will pay the Protection
Buyer the full notional value of the Reference Bond and receive the Deliverable
Bond from the Protection Buyer. A CDS may involve greater risks than if the Fund
invested directly in the Reference Bond. For example, a CDS may increase credit
risk since the Fund has exposure to both the issuer of the Reference Bond and
the Counterparty to the CDS.

Caps And Floors
Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level in
return for a fee from the other party.

Special Transactions

Repurchase Agreements
Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Funds' return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Funds will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.
The Funds' custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.

Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which a Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Funds. Reverse repurchase agreements are subject
to credit risks. In addition, reverse repurchase agreements create leverage
risks because the Funds must repurchase the underlying security at a higher
price, regardless of the market value of the security at the time of repurchase.

Securities Lending
The Funds may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Funds receive cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay a
Fund the equivalent of any dividends or interest received on the loaned
securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Funds. However, the Funds must pay interest to the
borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower.
The Funds will not have the right to vote on securities while they are on loan,
but they will terminate a loan in anticipation of any important vote. The Funds
may pay administrative and custodial fees in connection with a loan and may pay
a negotiated portion of the interest earned on the cash collateral to a
securities lending agent or broker.
Securities lending activities are subject to interest rate risks and credit
risks. These transactions create leverage risks.

Hybrid Instruments
Hybrid instruments combine elements of two different kinds of underlying
investments. Hybrid instruments can take on may forms including, but not limited
to, the following three forms: First, a common form of a hybrid instrument
combines elements of derivative contracts with those of another security
(typically a fixed-income security). In this case all or a portion of the
interest or principal payable on a hybrid security is determined by reference to
changes in the price of an underlying asset or by reference to another benchmark
(such as interest rates, currency exchange rates or indices). Secondly, a hybrid
instrument may also combine elements of a fixed-income security and an equity
security. Lastly, hybrid instruments may include convertible securities with
conversion terms related to an underlying asset or benchmark. Depending on the
type of hybrid instrument the risks of investing in hybrid instruments may
reflect a combination of the risks of investing in securities, options, futures
and currencies, and depend upon the terms of the instrument. Thus, an investment
in a hybrid instrument may entail significant risks in addition to those
associated with traditional fixed-income, equity or convertible securities.
Hybrid instruments are also potentially more volatile and carry greater interest
rate risks than traditional instruments. Moreover, depending on the structure of
the particular hybrid, it may expose the Fund to leverage risks or carry
liquidity risks.

Credit Linked Notes
A credit linked note ("CLN") is a type of hybrid instrument in which a special
purpose entity issues a structured note that is intended to replicate a
corporate bond or a portfolio of corporate bonds. The purchaser of the CLN (the
"Note Purchaser") invests a par amount and receives a payment during the term of
the note that equals a fixed or floating rate of interest equivalent to a high
rated funded asset (such as a bank CD) plus an additional premium that relates
to taking on the credit risk of a reference obligation. Upon maturity, the Note
Purchaser will receive a payment equal to (i) the original par amount paid to
the Note Seller, if there is not event of default with respect to the reference
obligation or (ii) the value of the underlying reference asset, if a designated
event of default or restructuring of the reference obligation has occurred.
Depending upon the terms of the CLN, it is also possible that the Note Purchaser
may be required to take physical delivery of any defaulted reference obligation.

Asset Coverage
In order to secure its obligations in connection with derivatives contracts or
special transactions, a Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Funds' obligations. Unless the Funds have other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

Investing in Securities of Other Investment Companies
Each Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its unvested cash. It
should be noted that investment companies incur certain expenses, such as
management fees, and, therefore, any investment by a Fund in shares of other
investment companies may be subject to such duplicate expenses.
The Funds may invest in mortgage backed and high yield securities primarily by
investing in another investment company (which is not available for general
investment by the public) that owns those securities and that is advised by an
affiliate of the Adviser. This other investment company is managed independently
of the Funds and may incur additional administrative expenses. Therefore, any
such investment by the Funds may be subject to duplicate expenses. However, the
Adviser believes that the benefits and efficiencies of this approach should
outweigh the potential additional expenses. The Funds may also invest in such
securities directly.

Inter-Fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain temporary
purposes directly to and from other Federated funds. Participation in this
inter-fund lending program is voluntary for both borrowing and lending Federated
funds, and an inter-fund loan is only made if it benefits each participating
Federated fund. Federated Investors, Inc. (Federated) administers the program
according to procedures approved by the Fund's Board, and the Board monitors the
operation of the program. Any inter-fund loan must comply with certain
conditions set out in the exemption, which are designed to assure fairness and
protect all participating Federated funds.
For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter-fund loans may be
made only when the rate of interest to be charged is more attractive to the
lending Federated fund than market-competitive rates on overnight repurchase
agreements (Repo Rate) and more attractive to the borrowing Federated fund than
the rate of interest that would be charged by an unaffiliated bank for
short-term borrowings (Bank Loan Rate), as determined by the Board. The interest
rate imposed on inter-fund loans is the average of the Repo Rate and the Bank
Loan Rate.

Municipal Securities
Municipal securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Funds may invest in taxable municipal securities.

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INVESTMENT RISKS
There are many factors which may affect an investment in the Funds. The Funds'
principal risks are described in their prospectuses. Additional risk factors are
outlined below.

Stock Market Risks
o The value of equity securities in each Fund's portfolio will rise and
fall. These fluctuations could be a sustained trend or a drastic
movement. A Fund's portfolio will reflect changes in prices of
individual portfolio stocks or general changes in stock valuations.
Consequently, a Fund's share price may decline.
o The Adviser attempts to manage market risk by limiting the amount each
Fund invests in each company. However, diversification will not protect
a Fund against widespread or prolonged declines in the stock market.

Interest Rate Risks
o Prices of fixed income securities rise and fall in response to changes
in the interest rate paid by similar securities. Generally, when
interest rates rise, prices of fixed income securities fall. However,
market factors, such as the demand for particular fixed income
securities, may cause the price of certain fixed income securities to
fall while the prices of other securities rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed
income securities with longer durations. Duration measures the price
sensitivity of a fixed income security to changes in interest rates.

Credit Risks
o Credit risk is the possibility that an issuer will default on a
security by failing to pay interest or principal when due. If an issuer
defaults, the Funds will lose money.
o Many fixed income securities receive credit ratings from services such
as Standard & Poor's and Moody's Investor Services, Inc. These services
assign ratings to securities by assessing the likelihood of issuer
default. Lower credit ratings correspond to higher credit risk. If a
security has not received a rating, the Funds must rely entirely upon
the Adviser's credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or
market conditions. A security's spread may also increase if the
security's rating is lowered, or the security is perceived to have an
increased credit risk. An increase in the spread will cause the price
of the security to decline.
o Credit risk includes the possibility that a party to a transaction
involving a Fund will fail to meet its obligations. This could cause
the Funds to lose the benefit of the transaction or prevent the Funds
from selling or buying other securities to implement its investment
strategy.

Currency Risks
o Exchange rates for currencies fluctuate daily. The combination of
currency risk and market risks tends to make securities traded in
foreign markets more volatile than securities traded exclusively in the
U.S.
o The Adviser attempts to manage currency risk by limiting the amount the
Funds invest in securities denominated in a particular currency.
However, diversification will not protect the Funds against a general
increase in the value of the U.S. dollar relative to other currencies.

Call and Prepayment Risks
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market
price. An increase in the likelihood of a call may reduce the
security's price.
o If a fixed income security is called, the Funds may have to reinvest
the proceeds in other fixed income securities with lower interest
rates, higher credit risks, or other less favorable characteristics.
o Unlike traditional fixed income securities, which pay a fixed rate of
interest until maturity (when the entire principal amount is due)
payments on mortgage backed securities include both interest and a
partial payment of principal. Partial payment of principal may be
comprised of scheduled principal payments as well as unscheduled
payments from the voluntary prepayment, refinancing or foreclosure of
the underlying loans. These unscheduled prepayments of principal create
risks that can adversely affect a Fund holding mortgage backed
securities.

o For example, when interest rates decline, the values of mortgage
backed securities generally rise. However, when interest rates
decline, unscheduled prepayments can be expected to accelerate, and
the Funds would be required to reinvest the proceeds of the
prepayments at the lower interest rates then available. Unscheduled
prepayments would also limit the potential for capital appreciation on
mortgage backed securities. Conversely, when interest rates rise, the
values of mortgage backed securities generally fall. Since rising
interest rates typically result in decreased prepayments, this could
lengthen the average lives of mortgage backed securities, and cause
their value to decline more than traditional fixed income securities.

o Generally, mortgage backed securities compensate for the increased risk
associated with prepayments by paying a higher yield. The additional
interest paid for risk is measured by the difference between the yield
of a mortgage backed security and the yield of a U.S. Treasury security
with a comparable maturity (the spread). An increase in the spread will
cause the price of the mortgage backed security to decline. Spreads
generally increase in response to adverse economic or market
conditions. Spreads may also increase if the security is perceived to
have an increased prepayment risk or is perceived to have less market
demand.

Sector Risks
o Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a
certain sector may underperform other sectors or as the market as a
whole. As the Adviser allocates more of a Fund's portfolio holdings to
a particular sector, a Fund's performance will be more susceptible to
any economic, business or other developments which generally affect
that sector.

Risks Related to Company Size
o Generally, the smaller the market capitalization of a company, the
fewer the number of shares traded daily, the less liquid its stock and
the more volatile its price. Market capitalization is determined by
multiplying the number of its outstanding shares by the current market
price per share.
o Companies with smaller market capitalizations also tend to have
unproven track records, a limited product or service base and limited
access to capital. These factors also increase risks and make these
companies more likely to fail than companies with larger market
capitalizations.

Risks Associated with Noninvestment Grade Securities
o Securities rated below investment grade, also known as junk bonds,
generally entail greater market, credit and liquidity risks than
investment grade securities. For example, their prices are more
volatile, economic downturns and financial setbacks may affect their
prices more negatively and their trading market may be more limited.

Risks of Foreign Investing
o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United
States. Securities in foreign markets may also be subject to taxation
policies that reduce returns for U.S. investors.

o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than
United States companies by market analysts and the financial press. In
addition, foreign countries may lack uniform accounting, auditing and
financial reporting standards or regulatory requirements comparable to
those applicable to U.S. companies. These factors may prevent the
Funds and their Adviser from obtaining information concerning foreign
companies that is as frequent, extensive and reliable as the
information available concerning companies in the United States.

o Foreign countries may have restrictions on foreign ownership of
securities or may impose exchange controls, capital flow restrictions
or repatriation restrictions which could adversely affect the liquidity
of a Fund's investments.

Leverage Risks
o Leverage risk is created when an investment exposes a Fund to a level
of risk that exceeds the amount invested. Changes in the value of such
an investment magnify a Fund's risk of loss and potential for gain.

Liquidity Risks
o Trading opportunities are more limited for securities that are not
widely held, for fixed income securities that have not received any
credit ratings or have received ratings below investment grade and for
CMOs that have complex terms. This may make it more difficult to sell
or buy a security at a favorable price or time. Consequently, a Fund
may have to accept a lower price to sell a security, sell other
securities to raise cash or give up an investment opportunity, any of
which could have a negative effect on the Funds' performance.
Infrequent trading of securities may also lead to an increase in their
price volatility.
o Liquidity risk also refers to the possibility that a Fund may not be
able to sell a security or close out a derivative contract when it
wants to. If this happens, a Fund will be required to continue to hold
the security or keep the position open, and a Fund could incur losses.
o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

Risks of Investing In Emerging Market Countries
o Securities issued or traded in emerging markets generally entail
greater risks than securities issued or traded in developed markets.
For example, the prices of such securities may be significantly more
volatile than prices of securities in developed countries. Emerging
market economies may also experience more severe downturns (with
corresponding currency devaluations) than developed economies. Emerging
market countries may have relatively unstable governments and may
present the risk of nationalization of businesses, expropriation,
confiscatory taxation or, in certain instances, reversion to closed
market, centrally planned economies.

Risks of Investing in Derivatives Contracts and Hybrid Instruments

o The Funds' use of derivative contracts involves risks different from,
or possibly greater than, the risks associated with investing directly
in securities and other traditional investments. First, changes in the
value of the derivative contracts and hybrid instruments in which the
Funds invest may not be correlated with changes in the value of the
underlying asset or if they are correlated, may move in the opposite
direction than originally anticipated. Second, while some strategies
involving derivatives may reduce the risk of loss, they may also
reduce potential gains or, in some cases, result in losses by
offsetting favorable price movements in portfolio holdings. Third,
there is a risk that derivatives contracts and hybrid instruments may
be mispriced or improperly valued and, as a result, the Funds may need
to make increased cash payments to the counterparty. Finally,
derivative contracts and hybrid instruments may cause the Funds to
realize increased ordinary income or short-term capital gains (which
are treated as ordinary income for Federal income tax purposes) and,
as a result, may increase taxable distributions to shareholders.
Derivative contracts and hybrid instruments may also involve other
risks described in this SAI or in the prospectus, such as stock
market, credit, liquidity and leverage risks.

Fundamental INVESTMENT Objective
Fund Objective
Federated To seek total return with an emphasis
Conservative on
Allocation Fund income and capital appreciation
Federated Moderate To seek capital appreciation with
Allocation Fund income
as a secondary objective
Federated Growth
Allocation Fund To seek capital appreciation
The investment objectives may not be changed by the Funds' Trustees without
shareholder approval.
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INVESTMENT LIMITATIONS

Diversification of Investments
With respect to securities comprising 75% of the value of its total assets, a
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
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 a Fund would own more than 10% of the
outstanding voting securities of that issuer.

Borrowing Money and Issuing Senior Securities
A Fund may borrow money, directly or indirectly, and issue senior securities to
the maximum extent permitted under the Investment Company Act of 1940, as
amended (1940 Act).

Investing in Real Estate
A Fund may not purchase or sell real estate, provided that this restriction does
not prevent a Fund from investing in issuers which invest, deal, or otherwise
engage in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein. A Fund may
exercise its rights under agreements relating to such securities, including the
right to enforce security interests and to hold real estate acquired by reason
of such enforcement until that real estate can be liquidated in an orderly
manner.

Investing in Commodities
The Funds may not purchase or sell physical commodities, provided that the Funds
may purchase securities of companies that deal in commodities.

Underwriting
A Fund may not underwrite the securities of other issuers, except that a Fund
may engage in transactions involving the acquisition, disposition or resale of
its portfolio securities, under circumstances where it may be considered to be
an underwriter under the Securities Act of 1933.

Lending Cash or Securities
A Fund may not make loans, provided that this restriction does not prevent a
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

Concentration of Investments
A Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments will not be
deemed to constitute an industry.
The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
1940 Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.

Pledging Assets
A Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

Buying on Margin
A Fund will not purchase securities on margin, provided that a Fund may obtain
short-term credits necessary for the clearance of purchases and sales of
securities and further provided that a Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, swap transactions and other financial contracts or
derivative instruments.

Investing in Illiquid Securities
A Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits that the
fund cannot dispose of within seven days, if immediately after and as a result,
the value of such securities would exceed, in the aggregate, 15% of a Fund's net
assets.
As a matter of non-fundamental policy, for purposes of the commodities policy,
investments in transactions involving futures contracts and options, forward
currency contracts, swap transactions and other financial contracts that settle
by payment of cash are not deemed to be investments in commodities.
For purposes of its policies and limitations, the Funds 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" and "bank
instruments". 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.
In applying a Fund's concentration restriction: (a) utility companies will be
divided according to their services, for example, gas, gas transmission,
electric and telephone will each be considered a separate industry; (b)
financial service companies will be classified according to the end users of
their services, for example, automobile finance, bank finance and diversified
finance will each be considered a separate industry; and (c) asset backed
securities will be classified according to the underlying assets securing such
securities. To conform to the current view of the SEC that only domestic bank
instruments may be excluded from industry concentration limitations, as a matter
of non-fundamental policy, a Fund will not exclude foreign bank instruments from
industry concentration limits as long as the policy of the SEC remains in
effect. In addition, investments in bank instruments, and investments in certain
industrial development bonds funded by activities in a single industry, will be
deemed to constitute investment in an industry, except when held for temporary
defensive purposes. The investment of more than 25% of the value of a Fund's
total assets in any one industry will constitute "concentration."

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DETERMINING MARKET VALUE OF SECURITIES
Market values of a Fund's portfolio securities are determined as follows:
o........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;
o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
o futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of
trading on such exchanges. Options traded in the over-the-counter
market are generally valued according to the mean between the last bid
and the last asked price for the option as provided by an investment
dealer or other financial institution that deals in the option. The
Board may determine in good faith that another method of valuing such
investments is necessary to appraise their fair market value;
o for fixed income securities, according to the mean between bid and
asked prices as furnished by an independent pricing service, except
that fixed income securities with remaining maturities of less than 60
days at the time of purchase may be valued at amortized cost; and
o for all other securities at fair value as determined in accordance with
procedures established by an under the general supervision of the
Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

</R>

Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Funds
value foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. 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 NYSE. 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 Funds' Board, although the actual
calculation may be done by others.

WHAT DO SHARES COST?

Each Fund's net asset value (NAV) per Share fluctuates and is based on the
market value of all securities and other assets of each Fund. The NAV for each
class of Shares may differ 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

<R>

HOW ARE THE FUNDS SOLD?

Under the Distributor's Contract with the Funds, the Distributor (Federated Securities Corp.) offers
Shares on a continuous, best efforts basis.

RULE 12B-1 PLAN (select shares)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor for activities principally intended to result in the sale of Shares
such as advertising and marketing of Shares (including printing and distributing
prospectuses and sales literature to prospective shareholders and financial
institutions) and providing incentives to investment professionals to sell
Shares. The Plan is also designed to cover the cost of administrative services
performed in conjunction with the sale of Shares, including, but not limited to,
shareholder services, recordkeeping services and educational services, as well
as the costs of implementing and operating the Plan. The Rule 12b-1 Plan allows
the Distributor to contract with investment professionals to perform activities
covered by the Plan. The Rule 12b-1 Plan is expected to benefit the Fund in a
number of ways. For example, it is anticipated that the Plan will help the Fund
attract and retain assets, thus providing cash for orderly portfolio management
and Share redemptions and possibly helping to stabilize or reduce other
operating expenses.

In addition, the Plan is integral to the multiple class structure of the Fund,
which promotes the sale of Shares by providing a range of options to investors.
The Fund's service providers that receive asset-based fees also benefit from
stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

Additional Payments to Financial Institutions
The Distributor may pay out of its own resources amounts (including items of
material value) to certain financial institutions. In some cases, such payments
may be made by, or funded from the resources of, companies affiliated with the
Distributor (including the Adviser). While NASD regulations limit the sales
charges that you may bear, there are no limits with regard to the amounts that
the Distributor may pay out of its own resources. In addition to the payments
which are generally described herein and in the prospectus, the financial
institution also may receive payments under the Rule 12b-1 Plan and/or Service
Fees.

You can ask your financial institution for information about any payments it
receives from the Distributor or the Federated funds and any services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial institutions.

Supplemental Payments
The Distributor may make supplemental payments to certain financial institutions
that are holders or dealers of record for accounts in one or more of the
Federated funds. These payments may be based on such factors as the number or
value of Shares the financial institution sells or may sell; the value of client
assets invested; or the type and nature of services or support furnished by the
financial institution.

Processing Support Payments
The Distributor may make payments to financial institutions that sell Federated
fund shares to help offset their costs associated with client account
maintenance support, statement processing and transaction processing. The types
of payments that the Distributor may make under this category include payment of
ticket charges on a per transaction basis; payment of networking fees; and
payment for ancillary services such as setting up funds on the financial
institution's mutual fund trading system.

Retirement Plan Program Servicing Payments
The Distributor may make payments to certain financial institutions who sell
Federated fund shares through retirement plan programs. A financial institution
may perform retirement plan program services itself or may arrange with a third
party to perform retirement plan program services. In addition to participant
recordkeeping, reporting, or transaction processing, retirement plan program
services may include services rendered to a plan in connection with
fund/investment selection and monitoring; employee enrollment and education;
plan balance rollover or separation, or other similar services.

Other Benefits to Financial Institutions
From time to time, the Distributor, at its expense, may provide additional
compensation to financial institutions that sell or arrange for the sale of
Shares. Such compensation may include financial assistance to financial
institutions that enable the Distributor to participate in or present at
conferences or seminars, sales or training programs for invited employees,
client and investor events and other financial institution-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of financial
institutions and may pay the travel and lodging expenses of attendees. The
Distributor also may provide, at its expense, meals and entertainment in
conjunction with meetings with financial institutions. Other compensation may be
offered to the extent not prohibited by applicable laws, regulations or the
rules of any self-regulatory agency, such as the NASD.

</R>

SUBACCOUNTING SERVICES

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

REDEMPTION IN KIND

Although each Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Because the Funds have elected to be governed by Rule 18f-1 under the 1940
Act, the Funds are obligated to pay Share redemptions to any one shareholder in
cash only up to the lesser of $250,000 or 1% of the net assets represented by
such Share class during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Funds' Board determines that payment should be in kind. In such a
case, a Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as each Fund determines its NAV.
The portfolio securities will be selected in a manner that the Funds' Board
deems fair and equitable and, to the extent available, such securities will be
readily marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving the portfolio securities and selling them
before their maturity could receive less than the redemption value of the
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.
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.

<R>

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS
Each Share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of 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.
Trustees may be removed by the Board or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding Shares
of all series entitled to vote.

As of January 4, 2005, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding the Shares of the Funds:
Federated Conservative Allocation Fund
Institutional Shares: BanCorpSouth, Inc., Jackson, MS, owned approximately 530,599 Shares (8.66%);
Charles Schwab & Co., San Francisco, CA, owned approximately 669,387 Shares (10.93%). Select Shares
Select Shares: First United Bank & Trust, Oakland MD, owned approximately 182,352 (5.34%).

Federated Growth Allocation Fund
Institutional Shares: PayChex Securities Corporation, W. Henrietta, NY, owned approximately 228,540
Shares (6.54%); Hibernia National Bank, New Orleans, LA, owned approximately 309,978 (8.88%); Charles
Schwab & Co., Inc., San Francisco, CA, owned approximately 385,782 Shares (11.05%).

Federated Moderate Allocation Fund
Institutional Shares: Exchange National Bank & Trust, Atchison, KS, owned
approximately 359,695 Shares (5.11%); Great Western Bank, Watertown SD, owned
approximately 365,123 Shares (5.18%); Charles Schwab & Co., San Francisco, CA,
owned approximately 706,948 Shares (10.04%).

</R>

TAX INFORMATION

FEDERAL INCOME TAX
Each Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will be subject to federal
corporate income tax. Each Fund will be treated as a single, separate entity for
federal income tax purposes so that income earned and capital gains and losses
realized by the Trust's other portfolios will be separate from those realized by
a Fund.
Each Fund is entitled to a loss carry-forward, which may reduce the taxable
income or gain that each Fund would realize, and to which the shareholder would
be subject, in the future.

FOREIGN INVESTMENTS
If a Fund purchases foreign securities, their investment income 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 a Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Funds intend to operate so as to qualify for treaty-reduced tax
rates when applicable.
Distributions from a Fund may be based on estimates of book income for the
year. Book income generally consists solely of the income generated by the
securities in the portfolio, whereas taxbasis income includes, in addition,
gains or losses attributable to currency fluctuation. Due to differences in the
book and tax treatment of fixed-income securities denominated in foreign
currencies, it is difficult to project currency effects on an interim basis.
Therefore, to the extent that currency fluctuations cannot be anticipated, a
portion of distributions to shareholders could later be designated as a return
of capital, rather than income, for income tax purposes, which may be of
particular concern to simple trusts.
If a Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to federal income taxes upon disposition of PFIC investments.
If more than 50% of the value of a Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, a Fund will qualify
for certain Code provisions that allow its shareholders to claim a foreign tax
credit or deduction on their U.S. income tax returns. The Code may limit a
shareholder's ability to claim a foreign tax credit. Shareholders who elect to
deduct their portion of a Fund's foreign taxes rather than take the foreign tax
credit must itemize deductions on their income tax returns.

<R>

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
The following tables give information about each Board member and the senior
officers of the Fund[s]. Where required, the tables separately list Board
members who are "interested persons" of the Fund (i.e., "Interested" Board
members) and those who are not (i.e., "Independent" Board members). Unless
otherwise noted, the address of each person listed is Federated Investors Tower,
1001 Liberty Avenue, Pittsburgh, PA. As of December 31, 2003, the Trust
comprised 3 portfolios, and the Federated Fund Complex consists of 44 investment
companies (comprising 133 portfolios). Unless otherwise noted, each Officer is
elected annually. Unless otherwise noted, each Board member oversees all
portfolios in the Federated Fund Complex and serves for an indefinite term.

As of January 4, the Fund's Board and Officers as a group owned less than 1% of
the Fund's outstanding Shares

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

As of January 4, the Fund's Board and Officers as a group owned less than 1% of
the Fund's outstanding Shares

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

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

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

------------------------------
Name Total Compensation
Birth Date Aggregate From Trust and
Address Principal Occupation(s) for Past Five Years, Compensation Federated Fund
Positions Held with Trust Other Directorships Held and Previous From Trust Complex
Date Service Began Position(s) (past fiscal (past calendar year)
year)
John F. Donahue* Principal Occupations: Chairman and Director or $0 $0
Birth Date: July 28, 1924 Trustee of the Federated Fund Complex; Chairman
CHAIRMAN AND TRUSTEE and Director, Federated Investors, Inc.
Began serving: November 1993
Previous Positions: Trustee, Federated
Investment Management Company and Chairman and
Director, Federated Investment Counseling.

J. Christopher Donahue* Principal Occupations: Principal Executive $0 $0
Birth Date: April 11, 1949 Officer and President of the Federated Fund
PRESIDENT AND TRUSTEE Complex; Director or Trustee of some of the
Began serving: August 2000 Funds in the Federated Fund Complex; President,
Chief Executive Officer and Director, Federated
Investors, Inc.; Chairman and Trustee,
Federated Investment Management Company;
Trustee, Federated Investment Counseling;
Chairman and Director, Federated Global
Investment Management Corp.; Chairman,
Federated Equity Management Company of
Pennsylvania, Passport Research, Ltd. and
Passport Research II, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.

Previous Positions: President, Federated
Investment Counseling; President and Chief
Executive Officer, Federated Investment
Management Company, Federated Global Investment
Management Corp. and Passport Research, Ltd.

Lawrence D. Ellis, M.D.* Principal Occupations: Director or Trustee of $1,205.28 $148,500
Birth Date: October 11, 1932 the Federated Fund Complex; Professor of
3471 Fifth Avenue Medicine, University of Pittsburgh; Medical
Suite 1111 Director, University of Pittsburgh Medical
Pittsburgh, PA Center Downtown; Hematologist, Oncologist and
TRUSTEE Internist, University of Pittsburgh Medical
Began serving: November 1993 Center.

Other Directorships Held: Member, National
Board of Trustees, Leukemia Society of America.

Previous Positions: Trustee, University of
Pittsburgh; Director, University of Pittsburgh
Medical Center.

* Family relationships and reasons for "interested" status: John F. Donahue is
the father of J. Christopher Donahue; both are "interested" due to the positions
they hold with Federated and its subsidiaries. Lawrence D. Ellis, M.D. is
"interested" because his son-in-law is employed by the Fund's principal
underwriter, Federated Securities Corp.
-----------------------------------------------------------------------------------------------------------

INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION

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

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

Name Total Compensation
Birth Date Aggregate From Trust and
Address Principal Occupation(s) for Past Five Years, Compensation Federated Fund
Positions Held with Trust Other Directorships Held and Previous From Trust Complex
Date Service Began Position(s) (past fiscal (past calendar year)
year)
Thomas G. Bigley Principal Occupation: Director or Trustee of $1,325.82 $163,350
Birth Date: February 3, 1934 the Federated Fund Complex.
15 Old Timber Trail
Pittsburgh, PA Other Directorships Held: Director, Member of
TRUSTEE Executive Committee, Children's Hospital of
Began serving: November 1994 Pittsburgh; Director, University of Pittsburgh.

Previous Position: Senior Partner, Ernst &
Young LLP.

John T. Conroy, Jr. Principal Occupations: Director or Trustee of $1,325.82 $163,350
Birth Date: June 23, 1937 the Federated Fund Complex; Chairman of the
Investment Properties Board, Investment Properties Corporation;
Corporation Partner or Trustee in private real estate
3838 North Tamiami Trail ventures in Southwest Florida.
Suite 402
Naples, FL Previous Positions: President, Investment
TRUSTEE Properties Corporation; Senior Vice President,
Began serving: November 1993 John R. Wood and Associates, Inc., Realtors;
President, Naples Property Management, Inc. and
Northgate Village Development Corporation.

Nicholas P. Constantakis Principal Occupation: Director or Trustee of $1,325.82 $163,350
Birth Date: September 3, 1939 the Federated Fund Complex.
175 Woodshire Drive
Pittsburgh, PA Other Directorships Held: Director and Member
TRUSTEE of the Audit Committee, Michael Baker
Began serving: January 2000 Corporation (engineering and energy services
worldwide).

Previous Position: Partner, Anderson Worldwide
SC.

John F. Cunningham Principal Occupation: Director or Trustee of $1,205.28 $148,500
Birth Date: March 5, 1943 the Federated Fund Complex.
353 El Brillo Way
Palm Beach, FL Other Directorships Held: Chairman, President
TRUSTEE and Chief Executive Officer, Cunningham & Co.,
Began serving: January 1999 Inc. (strategic business consulting); Trustee
Associate, Boston College.

Previous Positions: Director, Redgate
Communications and EMC Corporation (computer
storage systems); Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer, Inc.

Peter E. Madden Principal Occupation: Director or Trustee of $1,205.28 $148,500
Birth Date: March 16, 1942 the Federated Fund Complex.
One Royal Palm Way
100 Royal Palm Way Other Directorships Held: Board of Overseers,
Palm Beach, FL Babson College.
TRUSTEE
Began serving: November 1993 Previous Positions: Representative,
Commonwealth of Massachusetts General Court;
President, State Street Bank and Trust Company
and State Street Corporation (retired);
Director, VISA USA and VISA International;
Chairman and Director, Massachusetts Bankers
Association; Director, Depository Trust
Corporation; Director, The Boston Stock
Exchange.

Charles F. Mansfield, Jr. Principal Occupations: Director or Trustee of $1,325.82 $163,350
Birth Date: April 10, 1945 the Federated Fund Complex; Management
80 South Road Consultant; Executive Vice President, DVC
Westhampton Beach, NY Group, Inc. (marketing, communications and
TRUSTEE technology) (prior to 9/1/00).
Began serving: January 1999
Previous Positions: Chief Executive Officer,
PBTC International Bank; Partner, Arthur Young
& Company (now Ernst & Young LLP); Chief
Financial Officer of Retail Banking Sector,
Chase Manhattan Bank; Senior Vice President,
HSBC Bank USA (formerly, Marine Midland Bank);
Vice President, Citibank; Assistant Professor
of Banking and Finance, Frank G. Zarb School of
Business, Hofstra University.

John E. Murray, Jr., J.D., Principal Occupations: Director or Trustee of $1,446.37 $178,200
S.J.D. the Federated Fund Complex; Chancellor and Law
Birth Date: December 20, 1932 Professor, Duquesne University; Partner,
Chancellor, Duquesne Murray, Hogue & Lannis.
University
Pittsburgh, PA Other Directorships Held: Director, Michael
TRUSTEE Baker Corp. (engineering, construction,
Began serving: February 1995 operations and technical services).

Previous Positions: President, Duquesne
University; Dean and Professor of Law,
University of Pittsburgh School of Law; Dean
and Professor of Law, Villanova University
School of Law.

Marjorie P. Smuts Principal Occupations: Director or Trustee of $1,205.28 $148,500
Birth Date: June 21, 1935 the Federated Fund Complex; Public
4905 Bayard Street Relations/Marketing Consultant/Conference
Pittsburgh, PA Coordinator.
TRUSTEE
Began serving: November 1993 Previous Positions: National Spokesperson,
Aluminum Company of America; television
producer; President, Marj Palmer Assoc.; Owner,
Scandia Bord.

John S. Walsh Principal Occupations: Director or Trustee of $1,205.28 $148,500
Birth Date: November 28, 1957 the Federated Fund Complex; President and
2604 William Drive Director, Heat Wagon, Inc. (manufacturer of
Valparaiso, IN construction temporary heaters); President and
TRUSTEE Director, Manufacturers Products, Inc.
Began serving: January 1999 (distributor of portable construction heaters);
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.

Previous Position: Vice President, Walsh &
Kelly, Inc.

OFFICERS**
-----------------------------------------------------------------------------------------------------------

Name
Birth Date
Address
Positions Held with Trust
------------------------------------------ Principal Occupation(s) and Previous Position(s)
Date Service Began
John W. McGonigle Principal Occupations: Executive Vice President and Secretary of the Federated
Birth Date: October 26, 1938 Fund Complex; Executive Vice President, Secretary and Director, Federated
EXECUTIVE VICE PRESIDENT AND SECRETARY Investors, Inc.
Began serving: November 1993
Previous Positions: Trustee, Federated Investment Management Company and
Federated Investment Counseling; Director, Federated Global Investment Management
Corp., Federated Services Company and Federated Securities Corp.

Richard J. Thomas Principal Occupations: Principal Financial Officer and Treasurer of the Federated
Birth Date: June 17, 1954 Fund Complex; Senior Vice President, Federated Administrative Services.
TREASURER
Began serving: November 1998 Previous Positions: Vice President, Federated Administrative Services; held
various management positions within Funds Financial Services Division of
Federated Investors, Inc.

Richard B. Fisher Principal Occupations: Vice Chairman or Vice President of some of the Funds in
Birth Date: May 17, 1923 the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman,
VICE PRESIDENT Federated Securities Corp.
Began serving: November 1993
Previous Positions: President and Director or Trustee of some of the Funds in the
Federated Fund Complex; Executive Vice President, Federated Investors, Inc. and
Director and Chief Executive Officer, Federated Securities Corp.

Stephen F. Auth Principal Occupations: Chief Investment Officer of this Fund and various other
Birth Date: September 3, 1956 Funds in the Federated Fund Complex; Executive Vice President, Federated
CHIEF INVESTMENT OFFICER Investment Counseling, Federated Global Investment Management Corp., Federated
Began serving: November 2002 Equity Management Company of Pennsylvania and Passport Research II, Ltd.

Previous Positions: Executive Vice President, Federated Investment Management
Company, and Passport Research, Ltd.; Senior Vice President, Global Portfolio
Management Services Division; Senior Vice President, Federated Investment
Management Company and Passport Research, Ltd.; Senior Managing Director and
Portfolio Manager, Prudential Investments.

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

John W. Harris John W. Harris has been the Fund's Portfolio Manager since November 1998. He is
Birth Date: June 6, 1954 Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an
VICE PRESIDENT Investment Analyst. He served as an Investment Analyst and an Assistant Vice
Began serving: November 1999 President from 1990 through 1992 and as a Senior Investment Analyst and Vice
President through May 1993. After leaving the money management field to travel
extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and
became a Portfolio Manager and an Assistant Vice President of the Fund's Adviser
in December 1998. In January 2000, Mr. Harris became a Vice President of the
Fund's Adviser. Mr. Harris is a Chartered Financial Analyst. He received his
M.B.A. from the University of Pittsburgh.

** Officers do not receive any compensation from the Funds.
-----------------------------------------------------------------------------------------------------------

COMMITTEES of the board
Meetings Held
Board Committee During Last
Committee Members Committee Functions Fiscal Year
Executive John F. Donahue In between meetings of the full Board, the Executive Committee Six
John E. Murray, Jr., generally may exercise all the powers of the full Board in the
J.D., S.J.D. management and direction of the business and conduct of the
affairs of the Trust in such manner
as the Executive Committee shall deem
to be in the best interests of the
Trust. However, the Executive
Committee cannot elect or remove
Board members, increase or decrease
the number of Trustees, elect or
remove any Officer, declare
dividends, issue shares or recommend
to shareholders any action requiring
shareholder approval.

Audit Thomas G. Bigley The purposes of the Audit Committee are to oversee the Seven
John T. Conroy, Jr. accounting and financial reporting process of the Funds, the
Nicholas P. Constantakis Funds' internal control over financial reporting, and the
Charles F. Mansfield, Jr. quality, integrity and independent audit of the Funds'
financial statements. The Committee
also oversees or assists the Board
with the oversight of compliance with
legal requirements relating to those
matters, approves the engagement and
reviews the qualifications,
independence and performance of the
Funds' independent registered public
accounting firm, acts as a liaison
between the independent registered
public accounting firm and the Board
and reviews the Funds' internal audit
function.

Nominating Thomas G. Bigley The Nominating Committee, whose members consist of all One
John T. Conroy, Jr. Independent Trustees, selects and nominates persons for
Nicholas P. Constantakis election to the Funds' Board when vacancies occur. The
John F. Cunningham Committee will consider candidates recommended by
Peter E. Madden shareholders, Independent Trustees, officers or employees of
Charles F. Mansfield, Jr. any of the Funds' agents or service providers and counsel to
John E. Murray, Jr. the Funds. Any shareholder who desires to have an individual
Marjorie P. Smuts considered for nomination by the Committee must submit a
John S. Walsh recommendation in writing to the Secretary of the Funds, at
the Funds' address appearing on the
back cover of this Statement of
Additional Information. The
recommendation should include the
name and address of both the
shareholder and the candidate and
detailed information concerning the
candidate's qualifications and
experience. In identifying and
evaluating candidates for
consideration, the Committee shall
consider such factors as it deems
appropriate. Those factors will
ordinarily include: integrity,
intelligence, collegiality, judgment,
diversity, skill, business and other
experience, qualification as an
"Independent Trustee," the existence
of material relationships which may
create the appearance of a lack of
independence, financial or accounting
knowledge and experience, and
dedication and willingness to devote
the time and attention necessary to
fulfill Board responsibilities.

Board ownership of shares in the funds and in the federated family of Investment
companies AS OF dECEMBER 31, 2004
-----------------------------------------------------------------------------------------------------------
Aggregate
Dollar Range of
Dollar Range of Shares Owned in
Interested Shares Owned Federated Family of
Board Member Name in Funds Investment Companies
John F. Donahue None Over $100,000
J. Christopher Donahue None Over $100,000
Lawrence D. Ellis, M.D. None Over $100,000

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis None Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. Mansfield, Jr. None $50,001 - $100,000
John E. Murray, Jr., J.D., S.J.D. None Over $100,000
Marjorie P. Smuts None Over $100,000
John S. Walsh None Over $100,000

</R>
-----------------------------------------------------------------------------------------------------------

INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Funds. The Adviser is a wholly owned subsidiary of Federated. The Adviser
shall not be liable to the Trust or any Fund shareholder for any losses that
may be
sustained in the purchase, holding, or sale of any security or for anything done
or omitted by it, except acts or omissions involving willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties imposed upon it by
its contract with the Trust.
As required by the 1940 Act, the Funds' Board has reviewed the Funds'
investment advisory contract and subadvisory contracts. The Board's decision to
approve these contracts reflects the exercise of its business judgment on
whether to continue the existing arrangements. During its review of these
contracts, the Board considers many factors, among the most material of which
are: the Funds' investment objectives and long term performance; the Adviser's
and subadviser's management philosophy, personnel and processes; the preferences
and expectations of Fund shareholders and their relative sophistication; the
continuing state of competition in the mutual fund industry; comparable fees in
the mutual fund industry; the range and quality of services provided to the
Funds and their shareholders by the Federated organization in addition to
investment advisory services; and the Funds' relationship to the Federated
funds.
In assessing the Adviser's and subadviser's performance of its obligations,
the Board also considers whether there has occurred a circumstance or event that
would constitute a reason for it to not renew an advisory contract. In this
regard, the Board is mindful of the potential disruptions of the Funds'
operations and various risks, uncertainties and other effects that could occur
as a result of a decision to terminate or not renew an advisory contract. In
particular, the Board recognizes that most shareholders have invested in the
Funds on the strength of the Adviser's industry standing and reputation and in
the expectation that the Adviser will have a continuing role in providing
advisory services to the Funds.
The Board also considers the compensation and benefits received by the Adviser
and subadviser. This includes fees received for services provided to each Fund
by other entities in the Federated organization and research services received
by the Adviser from brokers that execute fund trades, as well as advisory fees.
In this regard, the Board is aware that various courts have interpreted
provisions of the 1940 Act and have indicated in their decisions that the
following factors may be relevant to an Adviser's compensation: the nature and
quality of the services provided by the Adviser, including the performance of
each Fund; the Adviser's cost of providing the services; the extent to which the
Adviser may realize "economies of scale" as the Funds grow larger; any indirect
benefits that may accrue to the Adviser and its affiliates as a result of the
Adviser's relationship with the Funds performance and expenses of comparable
funds; and the extent to which the independent Board members are fully informed
about all facts bearing on the Adviser's service and fee. The Funds' Board is
aware of these factors and takes them into account in its review of the Funds'
advisory contract.
The Board considers and weighs these circumstances in light of its substantial
accumulated experience in governing each Fund and working with Federated on
matters relating to the Federated funds, and is assisted in its deliberations by
the advice of independent legal counsel. In this regard, the Board requests and
receives a significant amount of information about each Fund and the Federated
organization. Federated provides much of this information at each regular
meeting of the Board, and furnishes additional reports in connection with the
particular meeting at which the Board's formal review of the advisory contracts
occurs. In between regularly scheduled meetings, the Board may receive
information on particular matters as the need arises. Thus, the Board's
evaluation of an advisory contract is informed by reports covering such matters
as: the Adviser's investment philosophy, personnel, and processes; the Funds'
short- and long-term performance (in absolute terms as well as in relationship
to its particular investment program and certain competitor or "peer group"
funds), and comments on the reasons for performance; the Funds' expenses
(including the advisory fee itself and the overall expense structure of each
Fund, both in absolute terms and relative to similar and/or competing funds,
with due regard for contractual or voluntary expense limitations); the use and
allocation of brokerage commissions derived from trading the Funds' portfolio
securities; the nature and extent of the advisory and other services provided to
the Funds by the Adviser and its affiliates; compliance and audit reports
concerning the Federated funds and the Federated companies that service them;
and relevant developments in the mutual fund industry and how the Federated
funds and/or Federated are responding to them.
The Board also receives financial information about Federated, including
reports on the compensation and benefits Federated derives from its
relationships with the Federated funds. These reports cover not only the fees
under the advisory contracts, but also fees received by Federated's subsidiaries
for providing other services to the Federated funds under separate contracts
(e.g., for serving as the Federated funds' administrator and transfer agent).
The reports also discuss any indirect benefit Federated may derive from its
receipt of research services from brokers who execute Federated fund trades.
The Board bases its decision to approve an advisory contract on the totality
of the circumstances and relevant factors, and with a view to past and future
long-term considerations. Not all of the factors and considerations identified
above are relevant to every Federated fund, nor does the Board consider any one
of them to be determinative. Because the totality of circumstances includes
considering the relationship of each Federated fund, the Board does not approach
consideration of every Federated fund's advisory contract as if that were the
only Federated fund.

Services Agreement
Federated Advisory Services Company, an affiliate of the Adviser, provides
research, quantitative analysis, equity trading and transaction settlement and
certain support services to the Adviser. The fee for these services is paid by
the Adviser and not by the Fund.

Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

Code of Ethics Restrictions on Personal Trading
As required by SEC rules, the Funds, their Adviser, and their Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Trustees, and certain other employees. Although they
do permit these people to trade in securities, including those that the Funds
could buy, as well as Shares of the Funds, they also contain significant
safeguards designed to protect the Funds and its shareholders from abuses in
this area, such as requirements to obtain prior approval for, and to report,
particular transactions.

<R>

Voting Proxies on Fund Portfolio Securities
The Board has delegated to the Adviser authority to vote proxies on the
securities held in the Funds' portfolio. The Board has also approved the
Adviser's policies and procedures for voting the proxies, which are described
below.

Proxy Voting Policies
The Adviser's general policy is to cast proxy votes in favor of proposals that
the Adviser anticipates will enhance the long-term value of the securities being
voted. Generally, this will mean voting for proposals that the Adviser believes
will: improve the management of a company; increase the rights or preferences of
the voted securities; and/or increase the chance that a premium offer would be
made for the company or for the voted securities.
The following examples illustrate how these general policies may apply to
proposals submitted by a company's board of directors. However, whether the
Adviser supports or opposes a proposal will always depend on the specific
circumstances described in the proxy statement and other available information.
On matters of corporate governance, generally the Adviser will vote for
proposals to: require independent tabulation of proxies and/or confidential
voting by shareholders; reorganize in another jurisdiction (unless it would
reduce the rights or preferences of the securities being voted); and repeal a
shareholder rights plan (also known as a "poison pill"). The Adviser will
generally vote against the adoption of such a plan (unless the plan is designed
to facilitate, rather than prevent, unsolicited offers for the company).
On matters of capital structure, generally the Adviser will vote: against
proposals to authorize or issue shares that are senior in priority or voting
rights to the securities being voted; for proposals to grant preemptive rights
to the securities being voted; and against proposals to eliminate such
preemptive rights.
On matters relating to management compensation, generally the Adviser will
vote: for stock incentive plans that align the recipients' interests with the
interests of shareholders without creating undue dilution; and against proposals
that would permit the amendment or replacement of outstanding stock incentives
with new stock incentives having more favorable terms.
On matters relating to corporate transactions, the Adviser will vote proxies
relating to proposed mergers, capital reorganizations, and similar transactions
in accordance with the general policy, based upon its analysis of the proposed
transaction. The Adviser will vote proxies in contested elections of directors
in accordance with the general policy, based upon its analysis of the opposing
slates and their respective proposed business strategies. Some transactions may
also involve proposed changes to the company's corporate governance, capital
structure or management compensation. The Adviser will vote on such changes
based on its evaluation of the proposed transaction or contested election. In
these circumstances, the Adviser may vote in a manner contrary to the general
practice for similar proposals made outside the context of such a proposed
transaction or change in the board. For example, if the Adviser decides to vote
against a proposed transaction, it may vote for anti-takeover measures
reasonably designed to prevent the transaction, even though the Adviser
typically votes against such measures in other contexts.
The Adviser generally votes against proposals submitted by shareholders
without the favorable recommendation of a company's board. The Adviser believes
that a company's board should manage its business and policies, and that
shareholders who seek specific changes should strive to convince the board of
their merits or seek direct representation on the board.
In addition, the Adviser will not vote if it determines that the consequences
or costs outweigh the potential benefit of voting. For example, if a foreign
market requires shareholders casting proxies to retain the voted shares until
the meeting date (thereby rendering the shares "illiquid" for some period of
time), the Adviser will not vote proxies for such shares.

Proxy Voting Procedures
The Adviser has established a Proxy Voting Committee (Proxy Committee), to
exercise all voting discretion granted to the Adviser by the Board in accordance
with the proxy voting policies. The Adviser has hired Investor Responsibility
Research Center (IRRC) to obtain, vote, and record proxies in accordance with
the Proxy Committee's directions. The Proxy Committee directs IRRC by means of
Proxy Voting Guidelines, and IRRC may vote any proxy as directed in the Proxy
Voting Guidelines without further direction from the Proxy Committee (and may
make any determinations required to implement the Proxy Voting Guidelines).
However, if the Proxy Voting Guidelines require case-by-case direction for a
proposal, IRRC will provide the Proxy Committee with all information that it has
obtained regarding the proposal and the Proxy Committee will provide specific
direction to IRRC. The Adviser's proxy voting procedures generally permit the
Proxy Committee to amend the Proxy Voting Guidelines, or override the directions
provided in such Guidelines, whenever necessary to comply with the proxy voting
policies.

Conflicts of Interest
The Adviser has adopted procedures to address situations where a matter on which
a proxy is sought may present a potential conflict between the interests of the
Funds (and its shareholders) and those of the Adviser or Distributor. This may
occur where a significant business relationship exists between the Adviser (or
its affiliates) and a company involved with a proxy vote. A company that is a
proponent, opponent, or the subject of a proxy vote, and which to the knowledge
of the Proxy Committee has this type of significant business relationship, is
referred to as an "Interested Company."
The Adviser has implemented the following procedures in order to avoid
concerns that the conflicting interests of the Adviser have influenced proxy
votes. Any employee of the Adviser who is contacted by an Interested Company
regarding proxies to be voted by the Adviser must refer the Interested Company
to a member of the Proxy Committee, and must inform the Interested Company that
the Proxy Committee has exclusive authority to determine how the Adviser will
vote. Any Proxy Committee member contacted by an Interested Company must report
it to the full Proxy Committee and provide a written summary of the
communication. Under no circumstances will the Proxy Committee or any member of
the Proxy Committee make a commitment to an Interested Company regarding the
voting of proxies or disclose to an Interested Company how the Proxy Committee
has directed such proxies to be voted. If the Proxy Voting Guidelines already
provide specific direction on the proposal in question, the Proxy Committee
shall not alter or amend such directions. If the Proxy Voting Guidelines require
the Proxy Committee to provide further direction, the Proxy Committee shall do
so in accordance with the proxy voting policies, without regard for the
interests of the Adviser with respect to the Interested Company. If the Proxy
Committee provides any direction as to the voting of proxies relating to a
proposal affecting an Interested Company, it must disclose to the Funds' Board
information regarding: the significant business relationship; any material
communication with the Interested Company; the matter(s) voted on; and how, and
why, the Adviser voted as it did.
If the Funds hold shares of another investment company for which the Adviser
(or an affiliate) acts as an investment adviser, the Proxy Committee will vote
the Funds' proxies in the same proportion as the votes cast by shareholders who
are not clients of the Adviser at any shareholders' meeting called by such
investment company, unless otherwise directed by the Board. Proxy Voting Report
A report on "Form N-PX" of how the Fund voted any proxies during the most recent
12-month period ended June 30 is available through Federated's website. Go to
www.federatedinvestors.com; select "Products;" select the Fund; then use the
link to "Prospectuses and Regulatory Reports" to access the link to Form N-PX.

PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the
"Products" section of the Federated Investors website at
www.federatedinvestors.com. A complete listing of the Fund's portfolio holdings
as of the end of each calendar quarter is posted on the website 30 days (or the
next business day) after the end of the quarter and remains posted until
replaced by the information for the succeeding quarter. Summary portfolio
composition information as of the close of each month (except for recent
purchase and sale transaction information, which is updated quarterly) is posted
on the website 15 days (or the next business day) after month-end and remains
until replaced by the information for the succeeding month. The summary
portfolio composition information may include identification of the Fund's top
ten issuer exposures and percentage breakdowns of the portfolio by effective
maturity range, type of security and sector.

To access this information from the "Products" section of the website, click on
"Portfolio Holdings" and select the appropriate link opposite the name of the
Fund, or select the name of the Fund from the menus on the "Products" section,
and from the Fund's page click on the "Portfolio Holdings" or "Composition"
link. A user is required to register on the website the first time the user
accesses this information.

You may also access from the "Products" section of the website portfolio
information as of the end of the Funds' fiscal quarters. The Fund's annual and
semiannual reports, which contain complete listings of the Fund's portfolio
holdings as of the end of the Fund's second and fourth fiscal quarters, may be
accessed by selecting the name of the Fund, clicking on "Prospectuses and
Regulatory Reports" and selecting the link to the appropriate PDF. Complete
listings of the Fund's portfolio holdings as of the end of the Fund's first and
third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of
the Fund. Fiscal quarter information is made available on the website within 70
days after the end of the fiscal quarter. This information is also available in
reports filed with the SEC at the SEC's website at www.sec.gov.

The disclosure policy of the Funds and the Adviser prohibits the disclosure of
portfolio holdings information to any investor or intermediary before the same
information is made available to other investors. Employees of the Adviser or
its affiliates who have access to nonpublic information concerning the Fund's
portfolio holdings are prohibited from trading securities on the basis of this
information. Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or
other services to the Funds may receive nonpublic information about Fund
portfolio holdings for purposes relating to their services. The Funds may also
provide portfolio holdings information to publications that rate, rank or
otherwise categorize investment companies. Traders or portfolio managers may
provide "interest" lists to facilitate portfolio trading if the list reflects
only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest. A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information appears
in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party
(other than authorized governmental or regulatory personnel) requires the prior
approval of the President of the Adviser and of the Chief Compliance Officer of
the Funds. The President of the Adviser and the Chief Compliance Officer will
approve the furnishing of nonpublic portfolio holdings information to a third
party only if they consider the furnishing of such information to be in the best
interests of the Fund and its shareholders. In that regard, and to address
possible conflicts between the interests of Fund shareholders and those of the
Adviser and its affiliates, the following procedures apply. No consideration may
be received by the Fund, the Adviser, any affiliate of the Adviser or any of
their employees in connection with the disclosure of portfolio holdings
information. Before information is furnished, the third party must sign a
written agreement that it will safeguard the confidentiality of the information,
will use it only for the purposes for which it is furnished and will not use it
in connection with the trading of any security. Persons approved to receive
nonpublic portfolio holdings information will receive it as often as necessary
for the purpose for which it is provided. Such information may be furnished as
frequently as daily and often with no time lag between the date of the
information and the date it is furnished. The Board receives and reviews
annually a list of the persons who receive nonpublic portfolio holdings
information and the purposes for which it is furnished.

</R>

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. 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. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). The
Adviser may also direct certain portfolio trades to a broker that, in turn, pays
a portion of the Fund's operating expenses. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Fund's Board.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. Except as noted below, when the Fund and one or
more of those accounts invests in, or disposes of, the same security, available
investments or opportunities for sales will be allocated among the Fund and the
account(s) in a manner believed by the Adviser to be equitable. While the
coordination and ability to participate in volume transactions may benefit the
Fund, it is possible that this procedure could adversely impact the price paid
or received and/or the position obtained or disposed of by the Fund. Investments
for Federated Kaufmann Fund and other accounts managed by that fund's portfolio
managers in initial public offerings ("IPO") are made independently from any
other accounts, and much of their non-IPO trading may also be conducted
independently from other accounts.

Research Services
Research services 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 may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
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 those 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.

ADMINISTRATOR
Federated Administrative Services (FAS), a subsidiary of Federated, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Funds. FAS provides these at the
following annual rate of the average aggregate daily net assets of all Federated
funds as specified below:
Average Aggregate Daily Net
Assets of the Federated
Maximum Administrative Fee Funds
0.150 of 1% on the first $5 billion
0.125 of 1% on the next $5 billion
0.100 of 1% on the next $10 billion
0.075 of 1% on assets over $20 billion

-----------------------------------------------------------------------------------------------------------
The administrative fee received during any fiscal year shall be at least
$150,000 per portfolio and $40,000 per each additional class of Shares. FAS may
voluntarily waive a portion of its fee and may reimburse the Funds for expenses.
FAS also provides certain accounting and recordkeeping services with respect
to the Funds' portfolio investments for a fee based on Fund assets plus
out-of-pocket expenses.

CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Funds. Foreign instruments purchased by the Funds are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, the Funds' registered transfer agent,
maintains all necessary shareholder records.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Funds, Deloitte &
Touche LLP, conducts its audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States), which require it to plan and
perform its audits to provide reasonable assurance about whether the Funds'
financial statements and financial highlights are free of material misstatement.

<R>

FEES PAID BY THE FUNDS FOR SERVICES

Brokerage Commissions Paid Administrative Fee Paid
Advisory Fee Paid Administrative Fee
Advisory Fee Waived Waived

----------------------------------------------------------------------------------------
For the Fiscal Year Ended November 30 2004 2003 2002 2004 2003 2002 2004 2003 2002
Conservative Allocation Fund $829,419 $838,362 $1,019,214 0 $62,868 $14,976 $190,000 $157,877 $155,000
171,203 3,227 0 33,895 2,784 0
Moderate Allocation Fund 1,099,061 1,083,437 1,343,468 0 131,554 85,620 190,001 157,877 155,000
179,808 2,867 0 33,535 2,755 0
Growth Allocation Fund 623,635 605,500 801,505 0 109,958 71,108 190,002 157,877 155,000
77,493 13,342 34,169 2,808 0

--------------------------------------------------------------------------------------------------
Select Shares Institutional Shares Select Shares

--------------------------------------------------------------------------------------------------
12b-1 Fee Paid 12b-1 Fee Waived Shareholder Shareholder Shareholder Shareholder
Servicing Servicing Servicing Servicing
Fee Paid Fee Waived/ See Paid Fee
Reimbursed Waived/
Figures for the Fiscal Year Ended 11/30/2004 Reimbursed
Conservative Allocation Fund $297,133 $99,044 $177,429 $156,842 $99,044 $8,361
Moderate Allocation Fund 420,283 140,095 226,259 202,162 140,095 13,117
Growth Allocation Fund 285,340 95,114 112,765 102,129 95,114 10,080

</R>
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Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

<R>

HOW DO THE FUNDS MEASURE PERFORMANCE?

The Funds may advertise Share performance by using the SEC's standard methods
for calculating performance applicable to all mutual funds. The SEC also permits
this standard performance information to be accompanied by non-standard
performance information.
The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund' or any class of Shares'
expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings
and/or the value of portfolio holdings fluctuate daily. Both net earnings and
offering price per Share are factors in the computation of yield and total
return.

Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and Start of Performance
periods ended November 30, 2004.
Yield is given for the 30-day period ended November 30, 2004.

Average Annual Total Returns and Yield

Average Annual Total Returns Yields for the
For the Periods Ended 11/30/2004 30-Day Period Ended
11/30/2004
Institutional Shares Select Shares
One-Year Five-Years Ten Years One-Year Five-Years Ten-Years Institutional Select
------------ ----------Shares Shares
Fund

Conservative Allocation Fund NA NA NA NA NA NA 2.02% 1.32%
Before Taxes 7.00% 2.93% 6.81% 6.26% 2.22% 6.08% NA NA
After Taxes on Distributions 5.93% 1.45% 4.79% 5.45% 1.02% 4.35% NA NA
After Taxes on Distributions and Sale 4.54% 1.66% 4.68% 4.06% 1.23% 4.24% NA NA
of Shares
Moderate Allocation Fund NA NA NA NA NA NA 1.39% 0.70%
Before Taxes 8.24% 1.25 % 7.34% 7.50% 0.57% 6.60% NA NA
After Taxes on Distributions 7.49% 0.03% 5.53% 7.00% (0.39)% 5.08% NA NA
After Taxes on Distributions and Sale 5.37% 0.41 % 5.35% 4.88% (0.01)% 4.89% NA NA
of Shares
Growth Allocation Fund NA NA NA NA NA NA 0.41% 0.00%
Before Taxes 9.11% (1.17)% 6.74% 8.33% (1.88)% 6.00% NA NA
After Taxes on Distributions 9.02% (2.00)% 5.33% 8.33% (2.50)% 4.86% NA NA
After Taxes on Distributions and Sale 5.94% (1.37)% 5.11% 5.42% (1.84)% 4.63% NA NA
of Shares

</R>
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TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $10,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV 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 $10,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions. Total returns after taxes are calculated in a
similar manner, but reflect additional standard assumptions required by the SEC.

YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares 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 investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or performance comparisons of
Shares to certain indices;
o charts, graphs and illustrations using a Fund's returns, or returns in
general, that demonstrate investment concepts such as taxdeferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's
views on how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the Investment
Company Institute. The Funds may compare its performance, or performance for the
types of securities in which it invests, to a variety of other investments,
including federally insured bank products such as bank savings accounts,
certificates of deposit, and Treasury bills.
The Funds may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete
view of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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 the Funds use in advertising may include:

Lipper, Inc.
Lipper, 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
Fund will quote its Lipper ranking in advertising and sales literature.

Standard & Poor's 500 Index
Standard & Poor's 500 Index is an unmanaged capitalization- weighted index of
500 stocks designed to measure performance of the broad domestic economy through
changes in the aggregate market value of 500 stocks representing all major
industries.

Standard & Poor's Ratings Group Small-Cap 600 Index
Standard & Poor's Ratings Group Small-Cap 600 Index, is an unmanaged capitalization-weighted index
representing all major industries in the mid-range of the U.S. Stock Market.

Morgan Stanley Capital International--All Country World Index Ex. U.S Morgan
Stanley Capital International (MSCI)--All Country World Index Ex. U.S, is an
unmanaged index representing 48 developed and emerging markets around the world
that collectively comprise virtually all of the foreign equity stock markets.
Investments cannot be made directly in an index.

MSCI Europe, Australasia and Far East Index (EAFE)
MSCI Europe, Australasia and Far East Index (EAFE) is an unmanaged market
capitalization-weighted equity index comprising 20 of the 48 countries in the
MSCI universe and representing the developed world outside of North America.
Each MSCI country index is created separately, then aggregated, without change,
into regional MSCI indices. EAFE performance data is calculated in U.S. dollars
and in local currency.

Russell 1000 Index
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
Russell 2000 Index measures the performance of the 2,000 smallest companies in
the Russell 3000 Index, which represents approximately 10% of the total market
capitalization of the Russell 3000 Index.

Lehman Brothers Treasury Intermediate Bond Index (U.S. Dollars) 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) 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
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) 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
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
Lehman Brothers Mortgage Backed Securities Index is an unmanaged index composed
of all fixed securities mortgage pools by GNMA, FNMA and the FHLMC, including
GNMA Graduated Payment Mortgages.

Lehman Brothers Aggregate Bond Index
Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
securities from the Lehman Brothers Government/ Corporate Bond Index, Mortgage
Backed Securities Index and the Asset Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage of the
original investment. Indices are rebalanced monthly by market capitalization.

Lehman Brothers Intermediate Government/Corporate Bond Index Lehman Brothers
Intermediate Government/Corporate Bond Index is an unmanaged index comprised of
all the bonds covered 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
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 Moody's
Investors Service, including defaulted issues. If no Moody's 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.
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.

<R>

WHO IS FEDERATED INVESTORS, INC.?

Federated and its subsidiaries are dedicated to providing you with world-class
investment management. From offices in Pittsburgh, New York City and Frankfurt,
Federated is a firm with independent research, product breadth and industry
standing.

Federated seeks to achieve superior and sustainable investment performance for a
broad array of global clients through a disciplined investment process and an
information advantage crated by proprietary fundamental research. Federated is
distinctive in our disciplined process that integrates proprietary research with
trading and portfolio management.

Federated overview

Equities
As of December 31, 2004, Federated managed 34 equity funds totaling
approximately $26.0 billion in assets across growth, value, equity income,
international, index and asset allocation styles.

Taxable Fixed Income
As of December 31, 2004, Federated managed 31 taxable bond funds including,
high-yield, multi-sector, mortgage-backed, U.S. government, U.S. corporate and
international, with assets approximating $17.7 billion.

Tax Free Fixed Income
As of December 31, 2004, Federated managed 15 municipal bond funds with
approximately $3.4 billion in assets and 22 municipal money market funds with
approximately $24.4 billion in total assets.

Money Market Funds
As of December 31, 2004, Federated managed $110.6 billion in assets across 53
money market funds, including 19 government, 11 prime, 22 municipal and 1
euro-denominated with assets approximating $43.9 billion, $42.4 billion and
$58.9 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA for Global Equity,
Robert J. Ostrowski, CFA for Taxable Fixed Income; Mary Jo Ochson, CFA for Tax
Free Fixing Income; and Deborah A. Cunningham, CFA for Money Market funds.

</R>

FINANCIAL INFORMATION

The Financial Statements for the Funds for the fiscal year ended November 30,
2004 are incorporated herein by reference to the Annual Reports to Shareholders
of the Funds dated November 30, 2004.

INVESTMENT RATINGS

Standard and Poor's Long-Term Debt Rating Definitions
AAA--Highest credit quality. `AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.
AA--Very high credit quality. `AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
A--High credit quality. `A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings. BBB--Good credit
quality. `BBB' ratings indicate that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
BB--Speculative. `BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment grade.
B--Highly speculative. `B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favourable business and economic environment. CCC, CC, C--High
default risk. Default is a real possibility. Capacity for meeting financial
commitments is solely reliant upon sustained, favourable business or economic
developments. A `CC' rating indicates that default of some kind appears
probable. `C' ratings signal imminent default.

Moody's Investors Service Commercial Paper Ratings
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well established industries, high rates of return on
funds employed, conservative capitalization structure with moderate reliance on
debt and ample asset protection, broad margins in earning coverage of fixed
financial charges and high internal cash generation, and well-established access
to a range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Standard and Poor's Commercial Paper Ratings
A-1--A short-term obligation rated `A-1' is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong. A-2--A
short-term obligation rated `A-2' is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

Fitch Ratings Commercial Paper Rating Definitions F-1--Indicates the strongest
capacity for timely payment of financial commitments relative to other issuers
or issues in the same country. Under their national rating scale, this rating is
assigned to the "best" credit risk relative to all others in the same country
and is normally assigned to all financial commitments issued or guaranteed by
the sovereign state. Where the credit risk is particularly strong, a "+" is
added to the assigned rating. F-2-- Indicates a satisfactory capacity for timely
payment of financial commitments relative to other issuers or issues in the same
country. However, the margin of safety is not as great as in the case of the
higher ratings.

ADDRESSES

Federated Conservative Allocation Fund
Federated Moderate Allocation Fund
Federated Growth Allocation Fund

Institutional Shares
Select Shares
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Investment Adviser
Federated Equity Management Company of Pennsylvania
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Sub-Adviser
Federated Investment Management Company
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 Registered Public Accounting Firm
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

<R>

APPENDIX

The following is a list of persons other than the Adviser and its affiliates
that may receive nonpublic portfolio holdings information concerning the Funds:

Custodian
State Street Bank and Trust Company

Securities Lending Agent
State Street Bank and Trust Company

Independent Registered Public Accounting Firm
Deloitte & Touche LLP

Legal Counsel
ReedSmith LLP
Dickstein, Shapiro, Morin & Oshinsky LLP

Service Providers
Bloomberg
Factset
Institutional Shareholder Services, Inc.
Investor Responsibility Research Center
Wilshire Associates, Inc.

Security Pricing Services
FT Interactive Data
Reuters

Ratings Agencies
Standard & Poor's

Performance Reporting/Publications
Fidelity-Strategic Advisors
Lipper
Morningstar
Morningstar Associates
NASDAQ
Value Line
Wiesenberger/Thompson Financial

Other
Investment Company Institute
Astec Consulting Group Inc.
</R>

PART C. OTHER INFORMATION.

Item 22. Exhibits:
--------

(a) (i) Conformed copy of Amended and
Restated Declaration of Trust of the
Registrant; (12)
(ii) Conformed copy of Amendment No. 7 to the Declaration of Trust; (15)
(iii) Conformed Copy of Amendment No. 8 to the Declaration of Trust; (16)
(b) (i) Copy of By-Laws of the Registrant; (1)
(ii) Copy of Amendment No. 1 to the By-Laws of the Registrant; (12)
(iii) Copy of Amendment No. 2 to the By-Laws of the Registrant; (9)
(iv) Copy of Amendment No. 3 to the By-Laws of the Registrant; (9)
(v) Copy of Amendment No. 4 to the By-Laws of the Registrant; (9)
(vi) Copy of Amendment No. 5 to the By-Laws of the Registrant; (14)
(vii) Copy of Amendment No. 6 to the By-Laws of the Registrant; (15)
(viii) Copy of Amendment No. 7 to the By-Laws of the Registrant; (16)
(c) Copy of Specimen Certificate for
Shares of Beneficial Interest of the
Registrant; (2)
(d) (i) Conformed copy of Investment Advisory Contract of
the Registrant; (3) (ii) Conformed copy of Exhibits
A-D to the Investment Advisory Contract of
the Registrant; (13)
(iii) Conformed copy of an Amendment to the Investment
Advisory Contract of the Registrant; (13) (iv)
Conformed copy of Sub-Advisory Contract of the
Registrant ;(15) (v) Conformed copy of Assignment of
Investment Advisory Contract and Sub-
Advisory Agreement; (15)
(e) (i) Conformed copy of Distributor's Contract of the
Registrant; (3) (ii) Conformed copy of Exhibit A to
the Distributor's Contract of the
Registrant;(3)
(iii) Conformed copy of Exhibit B to the
Distributor's Contract of the
Registrant;(3)
(iv) Conformed copy of Exhibit C to the
Distributor's Contract of the
Registrant;(3)
(v) Conformed copy of Exhibit D to the
Distributor's Contract of the
Registrant;(3)
(vi) Conformed copy of Exhibit E to the
Distributor's Contract of the
Registrant;(3)
(vii) Conformed copy of Exhibit F to the
Distributor's Contract of the
Registrant;(3)
(ix) Conformed copy of Exhibit G to the Distributor's
Contract of the Registrant;(3) (ix) Conformed copy of
Exhibit H to the Distributor's Contract of the
Registrant;(3)
(x) Conformed copy of an Amendment to
the Distributor's Contract of the
Registrant; (13)

(xi) Conformed Copy of Amendments to the
Distributor's Contract between The
Federated Funds and Federated
Securities Corp.; (15)
(xii) The Registrant hereby incorporates
the conformed copy of the specimen
Mutual Funds Sales and Service
Agreement; Mutual Funds Service
Agreement; and Plan Trustee/Mutual
Funds Service Agreement from Item
24(b)(6) of the Cash Trust Series II
Registration Statement on Form N-1A,
filed with the Commission on July
24, 1995. (File Numbers 33-38550 and
811-6269);
(f) Not applicable;
(g) (i) Conformed copy of Custodian Contract of the
Registrant; (4) (ii) Conformed copy of an Amendment
to the Custodian Contract of the
Registrant; (13)
(iii) Conformed copy of Custodian Fee Schedule; (7)
(h) (i) Conformed copy of Amended and
Restated Agreement for Fund
Accounting Services, Administrative
Services, Shareholder Transfer
Agency Services and Custody Services
Procurement; (6)
(ii) Conformed copy of an Amendment to
the Agreement for Fund Accounting
Services, Administrative Services,
Shareholder Transfer Agency Services
and Custody Services Procurement;
(13)
(iii) The Registrant hereby incorporates
the conformed copy of the Second
Amended and Restated Services
Agreement from Item (h)(v) of the
Investment Series Funds, Inc.
Registration Statement on Form N-1A,
filed with the Commission on January
23, 2002. (File Nos. 33-48847 and
811-07021);
(iv) The Registrant hereby incorporates
the conformed copy of the
Shareholder Services Sub-Contract
between Fidelity and Federated
Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA
Trust Registration Statement of Form
N-1A, filed with the Commission on
March 25, 1996. (File Nos. 2-75670
and 811-3375);
(v) The responses described in Item 23(e)(xi) are hereby incorporated by
reference;
(vi) The Registrant hereby incorporates the conformed copy of Amendment No.
2 to the Amended and Restated Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services and Custody Services
Procurement form Item 23 (h)(v) of the Federated U.S. Government
Securities Fund: 2-5 Years Registration Statement on Form N-1A filed
with the Commission on March 30, 2004. (File Nos. 2-75769 and
811-3387);
(vii) The Registrant hereby incorporates the conformed copy of Amendment No.
3 to the Amended and Restated Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services and Custody Services
Procurement form Item 23 (h)(v) of the Federated U.S. Government
Securities Fund: 2-5 Years Registration Statement on Form N-1A filed
with the Commission on March 30, 2004. (File Nos. 2-75769 and
811-3387);
(viii) The Registrant hereby incorporates
by reference the conformed copy of
the Agreement for Administrative
Services from Item 23 (h)(vix) of
the Federated Index Trust
Registration Statement on Form N-1A,
filed with the Commission on
December 30, 2003. (File Nos.
33-33852 and 811-6061);
(ix) The Registrant hereby incorporates
the conformed copy of the Second
Amended and Restated Services
Agreement, with attached Schedule 1
revised 6/30/04, from Item (h)(vii)
of the Cash Trust Series, Inc.
Registration Statement on Form N-1A,
filed with the Commission on July
29, 2004. (File Nos. 33-29838 and
811-5843);
(x) The Registrant hereby incorporates
the conformed copy of the Financial
Administration and Accounting
Services Agreement Agreement, with
attached Exhibit A revised 6/30/04,
from Item (h)(viii) of the Cash
Trust Series, Inc. Registration
Statement on Form N-1A, filed with
the Commission on July 29, 2004.
(File Nos. 33-29838 and 811-5843);
(i) Conformed copy of Opinion and
Consent of Counsel as to legality of
shares being registered; (2)
(j) Conformed copy of Consent of Independent Auditors; +
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (2)
(m) (i) Conformed copy of Distribution Plan of the Registrant; (4)
(ii) Conformed copy of Exhibits A-D of
the Distribution Plan of the
Registrant; (13)
(iii) The responses described in Item 23(e)(xi) are hereby incorporated by
reference;
(iv) Conformed copy of Distribution Plan of the
Registrant; (16) (n) The Registrant hereby incorporates the
conformed copy of the Multiple
Class Plan from Item (n) of the
Federated GNMA Trust, Inc.
Registration Statement on Form N-1A,
filed with the Commission on March
29, 2004. (File Nos. 33-75670 and
811-3375).
(o) (i) Conformed copy of Power of Attorney of the Registrant; (12)
(ii) Conformed copy of Power of Attorney of Chief Investment Officer of the
Registrant; (14)
(iii) Conformed copy of Limited Power of Attorney; (11)
(p) The Registrant hereby incorporates
the conformed copy of the Code of
Ethics for Access Persons from Item
23(p) of the Money Market
Obligations Trust Registration
Statement on Form N-1A filed with
the Commission on February 29, 2004.
(File Nos. 33-31602 and 811-5950).

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

+ All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed December 2, 1993 (File Nos.
33-51247 and 811-7129).
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed February 11, 1994 (File Nos.
33-51247 and 811-7129).
3. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed March 2, 1994 (File Nos. 33-51247
and 811-7129).
4. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 1 on Form N-1A filed September 30, 1994 (File Nos.
33-51247 and 811-7129).
6. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 6 on Form N-1A filed January 30, 1997 (File Nos. 33-51247
and 811-7129).
7. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 7 on Form N-1A filed November 26, 1997 (File Nos.
33-51247 and 811-7129).
9. Response is incorporated by reference to Registrant's Post Effective
Amendment No. 9 on Form N-1A filed December 2, 1998 (File Nos. 33-51247
and 811-7129).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed November 29, 1999 (File Nos.
33-51247 and 811-7129).
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed on January 25, 2001 (File Nos.
33-51247 and 811-7129).
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed on January 25, 2002 (File Nos.
33-51247 and 811-7129).
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed on January 25, 2003 (File Nos.
33-51247 and 811-7129).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed on February 2, 2004. (File Nos.
33-51247 and 811-7129).
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed on November 23, 2004. (File Nos.
33-51247 and 811-7129).

Item 23. Persons Controlled by or Under Common Control with Registrant:
-------------------------------------------------------------

None.

Item 24. Indemnification: (2)
---------------

Item 25. Business and Other Connections of Investment Adviser:
----------------------------------------------------
For a description of the other business of the investment adviser, see the section entitled "Who Manages
the Fund?" in Part A. The affiliations with the Registrant of one of the Trustees and one of the Officers
of the investment adviser are included in Part B of this Registration Statement under "Who Manages and
Provides Services to the Fund?" The remaining Trustees of the investment adviser and, in parentheses,
their principal occupations are: Thomas R. Donahue, (Chief Financial Officer, Federated Investors, Inc.),
1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and Mark D. Olson (a principal of the firm, Mark D. Olson &
Company, L.L.C. and Partner, Wilson, Halbrook & Bayard, P.A.), 800 Delaware Avenue, P.O. Box 2305,
Wilmington, DE 19899-2305.
The remaining Officers of the investment adviser are:
President/ Chief Executive Officer
and Trustee: Keith M. Schappert
Executive Vice President: Stephen F. Auth

Senior Vice Presidents: Linda A. Duessel
James E. Grefenstette

Vice Presidents: G. Andrew Bonnewell
David P. Gilmore
John W. Harris
Steven Lehman
Kevin McClosky
John L. Nichol

Assistant Vice Presidents: Angela A. Kohler
Dana Meissner
Michael R. Tucker

Secretary: G. Andrew Bonnewell
Treasurer: Thomas R. Donahue
Assistant Secretary: Jay S. Neuman

Assistant Treasurer: Denis McAuley, III The business address of each of
the Officers of the investment adviser is Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority
of the investment advisers to the investment companies in the
Federated Fund Complex described in Part B of this
Registration Statement.

Item 26. Principal Underwriters:

(a) Federated Securities Corp. the Distributor for shares
of the Registrant, acts as principal underwriter for
the following open-end investment companies,
including the Registrant:

Cash Trust Series, Inc.; Cash Trust Series II;
Federated Adjustable Rate Securities Fund; Federated
American Leaders Fund, Inc.; Federated Core Trust;
Federated Core Trust II, L.P.; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated
Fixed Income Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.;
Federated High Income Bond Fund, Inc.; Federated High
Yield Municipal Income Fund; Federated High Yield
Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series;
Federated International Series, Inc.; Federated
Investment Series Funds, Inc.; Federated Limited
Duration Government Fund, Inc.; Federated Managed
Allocation Portfolios; Federated Municipal High Yield
Advantage Fund, Inc.; Federated Municipal Securities
Fund, Inc.; Federated Municipal Securities Income
Trust; Federated Premier Intermediate Municipal
Income Fund; Federated Premier Municipal Income Fund;
Federated Short-Term Municipal Trust; Federated Stock
and Bond Fund, Inc.; Federated Stock Trust; Federated
Total Return Government Bond Fund; 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 World Investment Series, Inc.;
Intermediate Municipal Trust; Edward Jones Money
Market Fund; Money Market Obligations Trust; Regions
Morgan Keegan Select Funds and SouthTrust Funds.

(b)

(1) (2) (3)
Positions and Offices Positions and Offices
With Distributor Name With Registrant
--------------------- ----------------- ----------------------

Chairman: Richard B. Fisher Vice President

President-Institutional
Sales and Director: John B. Fisher

Executive Vice
Vice President, Assistant
Secretary and Director: Thomas R. Donahue

President-Broker/Dealer
And Director: James F. Getz

Vice President, Assistant
Secretary and Director: Peter J. Germain

Treasurer and Director: Denis McAuley III

Senior Vice Presidents: Mark W. Bloss
Richard W. Boyd
Laura M. Deger
Peter W. Eisenbrandt
Theodore Fadool, Jr.
Christopher Fives
James S. Hamilton
James M. Heaton
H. Joseph Kennedy
Amy Michaliszyn
Keith Nixon
Solon A. Person, IV
Ronald M. Petnuch
Thomas E. Territ
Robert F. Tousignant
Paul Uhlman

Vice Presidents: Irving Anderson
Dan Berry
John B. Bohnet
Edward R. Bozek
Jane E. Broeren-Lambesis
Brian Burke
Craig Burness
David J. Callahan
Mark Carroll
Dan Casey
Scott Charlton
Steven R. Cohen
Mary J. Combs
James Conely
R. Edmond Connell, Jr.
Kevin J. Crenny
G. Michael Cullen
Beth C. Dell
Robert J. Deuberry
Ron Dorman
William C. Doyle
Donald C. Edwards
Lee England
Timothy Franklin
Jamie Getz
Joseph D. Gibbons
J. Todd Glickson
G. Tad Gullickson
Scott Gundersen
Dayna C. Haferkamp
Raymond J. Hanley
Vincent L. Harper, Jr.
Bruce E. Hastings
Teresa M. Johnson
Christopher L. Johnston
William Kastrol
Stephen Kittel
Michael W. Koenig
Ed Koontz
Theodore J. Kravits, Jr.
Christopher A. Layton
Michael H. Liss
Michael R. Manning
Martin J. McCaffrey
Mary A. McCaffrey
Richard C. Mihm
Chris Milliken
Vincent T. Morrow
Alec H. Neilly
Rebecca Nelson
James E. Ostrowski
Thomas A. Peter III
Raleigh Peters
Robert F. Phillips
Josh Rasmussen
Richard A. Recker
Christopher Renwick
Diane M. Robinson
Brian S. Ronayne
Timothy A. Rosewicz
Thomas S. Schinabeck
Edward J. Segura
Peter Siconolfi
Edward L. Smith
John A. Staley
Colin B. Starks
Jeffrey A. Stewart
Kevin Stutz
William C. Tustin
G. Walter Whalen
Stephen White
Patrick M. Wiethorn
Edward J. Wojnarowski
Michael P. Wolff

Assistant Vice Presidents: Lisa A. Toma
Robert W. Bauman
Charles L. Davis, Jr.
Brian F. Palusa
William Rose

Secretary: Stephen A. Keen

Assistant Secretary: Thomas R. Donahue
Peter J. Germain

The business address of each of the Officers of Federated Securities Corp. is Federated Investors Tower, 1001
Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779.

Item 27. Location of Accounts and Records:

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of
the following locations:

Registrant Reed Smith LLP
Investment and Asset
Management Group (IAMG)
Federated Investors Tower
12th Floor
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(Notices should be sent to the Agent for Service at above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian, Transfer Agent and
Dividend Disbursing Agent")

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Federated Equity Management Federated Investors Tower
Company of Pennsylvania 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779

Item 28. Management Services: Not applicable.

Item 29. Undertakings:
------------

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, FEDERATED MANAGED ALLOCATION PORTFOLIOS
certifies that it meets all of the requirements for effectiveness of this
Amendment to its registration Statement pursuant to Rule 485 (b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 31st day of January
, 2005.

FEDERATED MANAGED ALLOCATION PORTFOLIOS

BY: /s/ Todd P. Zerega
Todd P. Zerega, Assistant Secretary
January 31, 2005

Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
person in the capacity and on the date indicated:

NAME TITLE DATE
---- ----- ----

By: /s/ Todd P. Zerega Attorney In Fact January 31, 2005
Todd P. Zerega For the Persons
ASSISTANT SECRETARY Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee

J. Christopher Donahue*
President and Trustee
(Principal Executive
Officer)

Richard J. Thomas* Treasurer
(Principal Financial Officer)

Stephen F. Auth* Chief Investment Officer

Thomas G. Bigley * Trustee

John T. Conroy, Jr.* Trustee

Nicholas P. Constantakis* Trustee

John F. Cunningham* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

Charles F. Mansfield, Jr.* Trustee

John E. Murray, Jr.* Trustee

Marjorie P. Smuts* Trustee

John S. Walsh* Trustee

* By Power of Attorney

Federated Managed Allocation Portfolios

PROSPECTUS

INSTITUTIONAL SHARES

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary

WHAT IS EACH FUND’S INVESTMENT OBJECTIVE?

WHAT ARE THE FUNDS’ MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUNDS?

Risk/Return Bar Chart and Table

Average Annual Total Return Table

Risk/Return Bar Chart and Table

Average Annual Total Return Table

Risk/Return Bar Chart and Table

Average Annual Total Return Table

What are the Fund’s Fees and Expenses?

FEDERATED CONSERVATIVE ALLOCATION FUND

FEES AND EXPENSES

EXAMPLE

What are the Fund’s Fees and Expenses?

FEDERATED MODERATE ALLOCATION FUND

FEES AND EXPENSES

EXAMPLE

What are the Fund’s Fees and Expenses?

FEDERATED GROWTH ALLOCATION FUND

FEES AND EXPENSES

EXAMPLE

What are the Funds’ Investment Strategies?

HEDGING

PORTFOLIO TURNOVER

What are the Principal Securities in Which the Funds Invest?

EQUITY SECURITIES

Common Stocks

FOREIGN SECURITIES

Depositary Receipts

FIXED INCOME SECURITIES

Treasury Securities

Agency Securities

Corporate Debt Securities

FOREIGN GOVERNMENT SECURITIES

Foreign Corporate Debt Securities

MORTGAGE BACKED SECURITIES

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

Sequential CMOs

PACs, TACs and Companion Classes

IOs and POs

Floaters and Inverse Floaters

Z Classes

DERIVATIVE CONTRACTS

Futures Contracts

Options

SPECIAL TRANSACTIONS

Delayed Delivery Transactions

Foreign Exchange Contracts

To Be Announced Securities (TBAs)

Dollar Rolls

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

What are the Specific Risks of Investing in the Funds?

STOCK MARKET RISKS

INTEREST RATE RISKS

CREDIT RISKS

CURRENCY RISKS

CALL AND PREPAYMENT RISKS

SECTOR RISKS

LIQUIDITY RISKS

RISKS RELATED TO COMPANY SIZE

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

RISKS OF INVESTING IN EMERGING MARKET COUNTRIES

RISKS OF FOREIGN INVESTING

RISKS OF INVESTING IN DERIVATIVES CONTRACTS

RISKS OF INVESTING IN AMERICAN DEPOSITARY RECEIPTS

What Do Shares Cost?

How are the Funds Sold?

SERVICE FEES

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

How to Purchase Shares

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUNDS

By Wire