1933 Act File No. 33-
69268
1940 Act File No. 811-
8042
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 8 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 9 X
INSURANCE MANAGEMENT SERIES
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
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.
Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:
X filed the Notice required by that Rule on February 15,
1995; or
intends to file the Notice required by that Rule on or
about ____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2),
need not file the Notice.
Copies To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of
Insurance Management Series, which consists of seven
portfolios: (1) Equity Growth and Income Fund, (2) Utility
Fund, (3) U.S. Government Bond Fund,
(4) Corporate Bond Fund, (5) Prime Money Fund, (6)
International Stock Fund, and (7) Growth Stock Fund, relates
only to International Stock Fund, and is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-7) Cover
Page.
Item 2. Synopsis Not applicable.
Item 3. Condensed Financial
Information (1-5)
Financial Highlights; (1-7)
Performance Information.
Item 4. General Description of
Registrant (1-7) General
Information; (1-7) Investment
Information; (1-7) Investment
Objectives; (1-7) Investment
Policies; (4,5) Investment
Risks; (1-7) Investment
Limitations; (5) Regulatory
Compliance.
Item 5. Management of the Fund (1-
7) Fund Information; (1-7)
Management of the Fund; (1-7)
Distribution of Fund Shares;
(1-7) Administration of the
Fund; (1-7) Brokerage
Transactions; (6,7) Expenses
of the Fund.
Item 6. Capital Stock and Other
Securities (1-7)
Dividends; (1-7) Shareholder
Information; (1-7) Tax
Information; (1-7) Federal
Taxes; (1-7) State and Local
Taxes; (1-7) Voting Rights.
Item 7. Purchase of Securities Being
Offered (1-7) Net Asset
Value; (1-7) Investing in the
Fund; (1-7) Purchases and
Redemptions; (1-7) What
Shares Cost.
Item 8. Redemption or Repurchase (1-
7) Purchases and Redemptions.
Item 9. Pending Legal Proceedings
None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page (1-7) Cover
Page.
Item 11. Table of Contents (1-7)
Table of Contents.
Item 12. General Information and
History Not Applicable.
Item 13. Investment Objectives and
Policies (1-7) Investment
Objectives and Policies; (1-
7) Investment Limitations.
Item 14. Management of the Fund (1-
7) Insurance Management
Series Management; Trustees
Compensation;
Item 15. Control Persons and Principal
Holders of Securities (1-
7) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-7) Investment
Advisory Services; (1-7)
Administrative Services;
(6,7) Transfer Agent and
Dividend Disbursing Agent.
Item 17. Brokerage Allocation (1-
7) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not
Applicable.
Item 19. Purchase, Redemption and
Pricing
of Securities Being Offered
(1-7) Purchasing Shares; (1-
7) Determining Net Asset
Value.
Item 20. Tax Status (1-7) Tax
Status.
Item 21. Underwriters Not
Applicable.
Item 22. Calculation of Performance
Data (1,2,3,4,6,7) Total
Return; (1-7) Yield; (5)
Effective Yield; (1-7)
Performance Comparisons.
Item 23. Financial Statements (1-
5) Incorporated by reference
to the Annual Report of
Registrant dated December 31,
1994 (File Nos. 33-69268 and
811-8042); (6) Filed in Part
A; (7) To be filed by
amendment.
INTERNATIONAL
STOCK
FUND
SEMI-ANNUAL REPORT
AND SUPPLEMENT TO
PROSPECTUS DATED
APRIL 30, 1995
Insurance Management Series
June 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 458043601
G01083-03 (8/95)
A. Please insert the following "Financial Highlights" table as page 1 of the
prospectus. In addition, please add the heading "Financial Highlights" to
the Table of Contents page as the first entry.
INTERNATIONAL STOCK FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1995(A)
(UNAUDITED)
<S> <C>
--------------------------------------------------------------------------------------------- -------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------
Net investment income 0.02
---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.01
Total from investment operations 0.03
---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------------------------------
Distributions from net investment income --
--------------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $ 10.03
---------------------------------------------------------------------------------------------
TOTAL RETURN (B) 0.30%
---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------
Expenses 0.00%(c)
---------------------------------------------------------------------------------------------
Net investment income 5.22%(c)
---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 297.10%(c)
---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $302
---------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from May 5, 1995 (date of initial public
investment) to June 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
B. Please insert the following as the fourth paragraph of the section
entitled "Voting Rights" on page 13 of the prospectus.
"As of August 2, 1995, Aetna Life Insurance and Annuity Company, Hartford,
Connecticut, owned 43.59%, and Aetna Insurance Company of America, Hartford,
Connecticut, owned 56.37% of the voting securities of the Fund, and, therefore,
may for certain purposes be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders."
C. Please insert the following Financial Statements after the section
entitled "Performance Information" and before the address page. In
addition, please add the heading "Financial Statements" to the Table of
Contents page after the heading "Performance Information."
INTERNATIONAL STOCK FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- ----------------------------------------------------------------------------------------- ----------
(a)REPURCHASE AGREEMENTS--89.3%
------------------------------------------------------------------------------------------------------
$55,000 Bank of Tokyo, 6.25%, dated 6/30/1995, due 7/3/1995 $ 55,000
-----------------------------------------------------------------------------------------
55,000 Bear, Stearns & Co., Inc., 6.125%, dated 6/30/1995, due 7/3/1995 55,000
-----------------------------------------------------------------------------------------
55,000 Chemical Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 55,000
-----------------------------------------------------------------------------------------
50,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 50,000
-----------------------------------------------------------------------------------------
55,000 NCNB of North Carolina--Charlotte, 6.30%, dated 6/30/1995, due 7/3/1995 55,000
----------------------------------------------------------------------------------------- ----------
TOTAL INVESTMENTS, AT AMORTIZED COST (B) $ 270,000
----------------------------------------------------------------------------------------- ----------
</TABLE>
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations, based on market prices as of the date of the portfolio.
The investments in repurchase agreements are through participation in joint
accounts with other Federated funds.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($302,303) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
----------------------------------------------------------------------------------------------------
Investment in repurchase agreements, at amortized cost and value $ 270,000
----------------------------------------------------------------------------------------------------
Cash 4,991
----------------------------------------------------------------------------------------------------
Income receivable 47
----------------------------------------------------------------------------------------------------
Receivable for shares sold 27,265
---------------------------------------------------------------------------------------------------- ------------
Total assets 302,303
---------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 30,126 shares outstanding $ 302,303
---------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
----------------------------------------------------------------------------------------------------
Paid-in capital $ 301,753
----------------------------------------------------------------------------------------------------
Undistributed net investment income 550
---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 302,303
---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Net Asset Value Per Share ($302,303 / 30,126 shares outstanding) $ 10.03
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JUNE 30, 1995(A) (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------------------------------
Interest $ 550
----------------------------------------------------------------------------------------------------------
EXPENSES:
-----------------------------------------------------------------------------------------------
Investment advisory fee $ 107
-----------------------------------------------------------------------------------------------
Administrative personnel and services fees 18,151
-----------------------------------------------------------------------------------------------
Custodian fees 3,900
-----------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 450
-----------------------------------------------------------------------------------------------
Legal fees 450
-----------------------------------------------------------------------------------------------
Portfolio accounting fees 3,430
-----------------------------------------------------------------------------------------------
Share registration costs 250
-----------------------------------------------------------------------------------------------
Printing and postage 1,200
-----------------------------------------------------------------------------------------------
Insurance premiums 2,000
-----------------------------------------------------------------------------------------------
Miscellaneous 1,350
----------------------------------------------------------------------------------------------- ---------
Total expenses 31,288
-----------------------------------------------------------------------------------------------
Deduct--
------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 107
------------------------------------------------------------------------------------
Reimbursement of other operating expenses 31,181 31,288
------------------------------------------------------------------------------------ --------- ---------
Net expenses 0
---------------------------------------------------------------------------------------------------------- ---------
Net investment income 550
---------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 550
---------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(a) For the period from May 5, 1995 (date of initial public investment) to June
30, 1995.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1995(A)
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
---------------------------------------------------------------------------------------------
OPERATIONS--
---------------------------------------------------------------------------------------------
Net investment income $ 550
---------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
($0 net loss as computed for federal income tax purposes) --
--------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from operations 550
--------------------------------------------------------------------------------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
---------------------------------------------------------------------------------------------
Distributions from net investment income --
---------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
---------------------------------------------------------------------------------------------
Proceeds from sale of Shares 302,283
---------------------------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of distributions declared --
---------------------------------------------------------------------------------------------
Cost of Shares redeemed (530)
--------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from share transactions 301,753
--------------------------------------------------------------------------------------------- -------------------
Change in net assets 302,303
---------------------------------------------------------------------------------------------
NET ASSETS:
---------------------------------------------------------------------------------------------
Beginning of period --
--------------------------------------------------------------------------------------------- -------------------
End of period (including undistributed net investment income of $550) $ 302,303
--------------------------------------------------------------------------------------------- -------------------
</TABLE>
(a) For the period from May 5, 1995 (date of initial public investment) to June
30, 1995.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein present only those of International Stock
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. However, federal taxes may be
imposed on the Fund upon the disposition of certain investments in passive
foreign investment companies. Withholding taxes on foreign dividends have
been provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred
and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1995(A)
<S> <C>
Shares sold 30,179
---------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared --
---------------------------------------------------------------------------------------------
Shares redeemed (53)
--------------------------------------------------------------------------------------------- -------
Net change resulting from Fund share transactions 30,126
--------------------------------------------------------------------------------------------- -------
</TABLE>
(a) For the period ended May 5, 1995 (date of initial public investment) to June
30, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
1.00% of the Fund's average daily net assets. The Adviser may voluntarily choose
to waive its fee and reimburse certain operating expenses of the Fund. The
Adviser can modify or terminate this voluntary waiver and reimbursement at any
time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Admnistrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by the Adviser and are estimated at $30,000. The Fund has agreed
to reimburse the Adviser for the organizational expenses during the five year
period following April 4, 1995 (date the Fund became effective). For the six
months ended June 30, 1995, the Fund paid $0 pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not 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. Investment in mutual funds involves
investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
INTERNATIONAL STOCK FUND
(A PORTFOLIO OF INSURANCE MANAGEMENT SERIES)
PROSPECTUS
This Prospectus offers shares of International Stock Fund
(the "Fund"), which is
a diversified investment portfolio in Insurance Management
Series (the "Trust"),
an open-end management investment company. The Fund's investment objective is to
obtain a total return on its assets. Shares of the Fund may
be sold only to
separate accounts of insurance companies to serve as the
investment medium for
variable life insurance policies and variable annuity
contracts issued by the
insurance companies.
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 BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This Prospectus contains the information you should read and
know before you
invest in the Fund through the variable life insurance
policies and variable
annuity contracts offered by insurance companies which
provide for investment in
the Fund. Keep this Prospectus for future reference.
The Fund has also filed a Statement of Additional
Information dated April 30,
1995, with the Securities and Exchange Commission. The
information contained in
the Statement of Additional Information is incorporated by
reference into this
Prospectus. You may request a copy of the Statement of
Additional Information
free of charge by calling 1-800-235-4669. To obtain other
information or to make
inquiries about the Fund, contact the Fund at the address
listed in the back of
this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A
CRIMINAL OFFENSE.
FUND SHARES ARE AVAILABLE EXCLUSIVELY AS A FUNDING VEHICLE
FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE LIFE INSURANCE POLICIES AND
VARIABLE ANNUITY
CONTRACTS. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE
PROSPECTUSES FOR SUCH
CONTRACTS.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
------------------------------------------------------------
--------------------
GENERAL INFORMATION
1
------------------------------------------------------
INVESTMENT INFORMATION
1
------------------------------------------------------
Investment Objective
1
Investment Policies
1
Investment Limitations
8
NET ASSET VALUE
9
------------------------------------------------------
INVESTING IN THE FUND
10
------------------------------------------------------
Purchases and Redemptions
10
What Shares Cost
10
Dividends
10
FUND INFORMATION
11
------------------------------------------------------
Management of the Fund
11
Distribution of Fund Shares
12
Administration of the Fund
12
Brokerage Transactions
12
Expenses of the Fund
13
SHAREHOLDER INFORMATION
13
------------------------------------------------------
Voting Rights
13
TAX INFORMATION
13
------------------------------------------------------
Federal Income Tax
13
State and Local Taxes
14
PERFORMANCE INFORMATION
14
------------------------------------------------------
ADDRESSES
15
------------------------------------------------------
GENERAL INFORMATION
------------------------------------------------------------
--------------------
The Trust was established as a Massachusetts business trust
under a Declaration
of Trust dated September 15, 1993. The Declaration of Trust
permits the Trust to
offer separate series of shares of beneficial interest in
separate portfolios of
securities, including the Fund.
Shares of the Fund are sold only to insurance companies as
funding vehicles for
variable insurance policies and variable annuity contracts
issued by the
insurance companies. Shares of the Fund are sold at net
asset value as described
in the section entitled "What Shares Cost." Shares of the
Fund are redeemed at
net asset value.
INVESTMENT INFORMATION
------------------------------------------------------------
--------------------
INVESTMENT OBJECTIVE
The Fund's investment objective is to obtain a total return
on its assets. The
investment objective cannot be changed without the approval
of the Fund's
shareholders. While there is no assurance that the Fund will
achieve its
investment objective, it attempts to do so by following the
investment policies
described in this Prospectus.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS. The Fund will attempt to achieve its
objective by
investing at least 65% of its assets (and under normal
market conditions
substantially all of its assets) in equity securities of
issuers located in at
least three different countries outside of the United
States. The Fund's
investment approach is based on the premise that investing
in such non-U.S.
securities provides three potential benefits over investing
solely in U.S.
securities: (1) the opportunity to invest in foreign issuers
believed to have
superior growth potential; (2) the opportunity to invest in
foreign countries
with economic policies or business cycles different from
those of the U.S.; and
(3) the opportunity to reduce portfolio volatility to the
extent that securities
markets inside and outside the U.S. do not move in harmony.
The Fund may
purchase sponsored or unsponsored American Depositary
Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary
Receipts ("EDRs");
corporate and government fixed income securities of issuers
outside of the U.S.;
convertible securities; and options and financial futures
contracts. In
addition, the Fund may enter into forward commitments,
repurchase agreements,
and foreign currency transactions; and maintain reserves in
foreign or U.S.
money market instruments.
Unless otherwise indicated, the investment policies may be
changed by the
Trustees without shareholder approval. Shareholders will be
notified before any
material change to these policies becomes effective.
DEPOSITARY RECEIPTS. The Fund may purchase sponsored
or unsponsored ADRs,
GDRs, and EDRs (collectively, "Depositary Receipts").
ADRs are Depositary
Receipts typically issued by a U.S. bank or trust
company which evidence
ownership of underlying securities issued by a foreign
corporation. EDRs
and GDRs are typically issued by foreign banks or trust
companies, although
they also may be issued by U.S. banks or trust
companies, and evidence
ownership
of underlying securities issued by either a foreign or
a U.S. corporation.
Generally, Depositary Receipts in registered form are
designed for use in
the U.S. securities market and Depositary Receipts in
bearer form are
designed for use in securities markets outside the U.S.
Depositary Receipts
may not necessarily be denominated in the same currency
as the underlying
securities into which they may be converted. Ownership
of unsponsored
Depositary Receipts may not entitle the Fund to
financial or other reports
from the issuer of the underlying security, to which it
would be entitled
as the owner of sponsored Depositary Receipts.
FIXED INCOME SECURITIES. At the date of this
Prospectus, the Fund has
committed its assets primarily to dividend-paying
equity securities of
established companies that appear to have growth
potential. However, as a
temporary defensive position, the Fund may shift its
emphasis to fixed
income securities, warrants, or other obligations of
foreign companies or
governments, if they appear to offer potential higher
return. Fixed income
securities include preferred stock, bonds, notes, or
other debt securities
which are investment grade or higher, as described
below. The prices of
fixed income securities fluctuate inversely to the
direction of interest
rates.
The debt securities in which the Fund will invest will
possess a minimum
credit rating of BBB as assigned by Standard & Poor's
Ratings Group ("S&P")
or Baa by Moody's Investors Service, Inc. ("Moody's"),
or, if unrated, will
be judged by the Fund's adviser to be of comparable
quality. Because the
average quality of the Fund's portfolio investments
should remain
constantly between AAA and BBB, the Fund may avoid the
adverse consequences
that may arise for some debt securities in difficult
economic
circumstances. Downgraded securities will be evaluated
on a case by case
basis by the adviser. The adviser will determine
whether or not the
security continues to be an acceptable investment. If
not, the security
will be sold. A description of the ratings categories
is contained in the
Appendix to the Statement of Additional Information.
CONVERTIBLE SECURITIES. The Fund may invest in
convertible securities that
are rated, at the time of purchase, investment grade by
a nationally
recognized statistical rating organization ("NRSRO")
or, if unrated, of
comparable quality as determined by the adviser.
Convertible securities are
fixed income securities which may be exchanged or
converted into a
predetermined number of the issuer's underlying common
stock at the option
of the holder during a specified time period.
Convertible securities may
take the form of convertible bonds, convertible
preferred stock or
debentures, units consisting of "usable" bonds and
warrants or a
combination of the features of several of these
securities. The investment
characteristics of each convertible security vary
widely, which allows
convertible securities to be employed for different
investment objectives.
Convertible bonds and convertible preferred stocks are
fixed income
securities that generally retain the investment
characteristics of fixed
income securities until they have been converted but
also react to
movements in the underlying equity securities. The
holder is entitled to
receive the fixed income of a bond or the dividend
preference of a
preferred stock until the holder elects to exercise the
conversion
privilege. Usable bonds are corporate bonds that can be
used in whole or in
part, customarily at full face value, in lieu of cash
to purchase the
issuer's common stock. When owned as part of a unit
along with warrants,
which entitle the
holder to buy the common stock, they function as
convertible bonds, except
that the warrants generally will expire before the
bonds' maturity.
Convertible securities are senior to equity securities
and, therefore, have
a claim to assets of the corporation prior to the
holders of common stock
in the case of liquidation. However, convertible
securities are generally
subordinated to similar nonconvertible securities of
the same company. The
interest income and dividends from convertible bonds
and preferred stocks
provide a stable stream of income with generally higher
yields than common
stocks, but lower than nonconvertible securities of
similar quality. A Fund
will exchange or convert the convertible securities
held in its portfolio
into shares of the underlying common stocks when, in
the adviser's opinion,
the investment characteristics of the underlying common
shares will assist
the Fund in achieving its investment objective.
Otherwise, the Fund will
hold or trade the convertible securities. In selecting
convertible
securities for the Fund, the adviser evaluates the
investment
characteristics of the convertible security as a fixed
income instrument,
and the investment potential of the underlying equity
security for capital
appreciation. In evaluating these matters with respect
to a particular
convertible security, the adviser considers numerous
factors, including the
economic and political outlook, the value of the
security relative to other
investment alternatives, trends in the determinants of
the issuer's
profits, and the issuer's management capability and
practices.
OPTIONS AND FINANCIAL FUTURES CONTRACTS. The Fund may
purchase put and
call options, financial futures contracts, and options
on financial futures
contracts. In addition, the Fund may write (sell) put
and call options with
respect to securities in the Fund's portfolio.
FORWARD COMMITMENTS. Forward commitments are contracts
to purchase
securities for a fixed price at a date beyond customary
settlement time.
The Fund may enter into these contracts if liquid
securities in amounts
sufficient to meet the purchase price are segregated on
the Fund's records
at the trade date and maintained until the transaction
has been settled.
Risk is involved if the value of the security declines
before settlement.
Although the Fund enters into forward commitments with
the intention of
acquiring the security, it may dispose of the
commitment prior to
settlement and realize a short-term profit or loss.
REPURCHASE AGREEMENTS. Repurchase agreements are
arrangements in which
banks, broker/dealers, and other recognized financial
institutions sell
securities to the Fund and agree at the time of sale to
repurchase them at
a mutually agreed upon time and price. To the extent
that the original
seller does not repurchase the securities from the
Fund, the Fund could
receive less than the repurchase price on any sale of
such securities.
MONEY MARKET INSTRUMENTS. The Fund may invest in
foreign and U.S. money
market instruments, including interest-bearing call
deposits with banks,
government obligations, certificates of deposit,
banker's acceptances,
commercial paper, short-term corporate debt securities,
and repurchase
agreements. The commercial paper in which the Fund
invests will be rated
A-1 by S&P or P-1 by Moody's. These investments may be
used to temporarily
invest cash received from the sale of Fund shares, to
establish and
maintain reserves for temporary defensive purposes, or
to take advantage of
market opportunities. Investments in the World Bank,
Asian Development
Bank, or Inter-American Development Bank are not
anticipated.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may
purchase securities
on a when-issued or delayed delivery basis. These
transactions are arrangements
in which the Fund purchases securities with payment and
delivery scheduled for a
future time. The seller's failure to complete these
transactions may cause the
Fund to miss a price or yield considered to be advantageous.
Settlement dates
may be a month or more after entering into these
transactions, and the market
values of the securities purchased may vary from the
purchase prices.
Accordingly, the Fund may pay more or less than the market
value of the
securities on the settlement date. The Fund may dispose of a
commitment prior to
settlement if the adviser deems it appropriate to do so. In
addition, the Fund
may enter into transactions to sell its purchase commitments
to third parties at
current market values and simultaneously acquire other
commitments to purchase
similar securities at later dates. The Fund may realize
short-term profits or
losses upon the sale of such commitments.
RESTRICTED AND ILLIQUID SECURITIES. As a matter of
investment practice, the Fund
may invest up to 15% of its total assets in restricted
securities. This
restriction is not applicable to commercial paper issued
under Section 4(2) of
the Securities Act of 1933. Restricted securities are any
securities in which
the Fund may otherwise invest pursuant to its investment
objective and policies
but which are subject to restriction on resale under federal
securities law. To
the extent restricted securities are deemed to be illiquid,
the Fund will limit
their purchase, including non-negotiable time deposits,
repurchase agreements
providing for settlement in more than seven days after
notice, over-the-counter
options, and certain restricted securities determined by the
Trustees not to be
liquid, to 15% of the net assets of the Fund.
LENDING OF PORTFOLIO SECURITIES. In order to generate
additional income, the
Fund may lend its portfolio securities on a short-term or
long-term basis, or
both, to broker/dealers, banks, or other institutional
borrowers of securities.
The Fund will only enter into loan arrangements with
broker/dealers, banks, or
other institutions which the adviser has determined are
creditworthy under
guidelines established by the Trustees and will receive
collateral at all times
equal to at least 100% of the value of the securities
loaned. There is the risk
that when lending portfolio securities, the securities may
not be available to
the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to
sell the securities at a desirable price. In addition, in
the event that a
borrower of securities would file for bankruptcy or become
insolvent,
disposition of the securities may be delayed pending court
action.
FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into
foreign currency
transactions to obtain the necessary currencies to settle
securities
transactions. Currency transactions may be conducted either
on a spot or cash
basis at prevailing rates or through forward foreign
currency exchange
contracts.
The Fund may also enter into foreign currency transactions
to protect Fund
assets against adverse changes in foreign currency exchange
rates or exchange
control regulations. Such changes could unfavorably affect
the value of Fund
assets which are denominated in foreign currencies, such as
foreign securities
or funds deposited in foreign banks, as measured in U.S.
dollars. Although
foreign currency exchanges may be used by the Fund to
protect against a decline
in the value of one or more currencies, such efforts may
also limit any
potential gain that might result from a relative increase in
the value of such
currencies and might, in certain cases, result in losses to
the Fund.
Further, the Fund may be affected either unfavorably or
favorably by
fluctuations in the relative rates of exchange between the
currencies of
different nations. Cross-hedging transactions by the Fund
involve the risk of
imperfect correlation between changes in the values of the
currencies to which
such transactions relate and changes in the value of the
currency or other asset
or liability that is the subject of the hedge.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES. A
forward foreign currency exchange contract ("forward
contract") is an obligation
to purchase or sell an amount of a particular currency at a
specific price and
on a future date agreed upon by the parties.
Generally, no commission charges or deposits are involved.
At the time the Fund
enters into a forward contract, Fund assets with a value
equal to the Fund's
obligation under the forward contract are segregated on the
Fund's records and
are maintained until the contract has been settled. The Fund
will not enter into
a forward contract with a term of more than one year. The
Fund will generally
enter into a forward contract to provide the proper currency
to settle a
securities transaction at the time the transaction occurs
("trade date"). The
period between the trade date and settlement date will vary
between 24 hours and
30 days, depending upon local custom.
The Fund may also protect against the decline of a
particular foreign currency
by entering into a forward contract to sell an amount of
that currency
approximating the value of all or a portion of the Fund's
assets denominated in
that currency ("hedging"). The success of this type of short-
term hedging
strategy is highly uncertain due to the difficulties of
predicting short-term
currency market movements and of precisely matching forward
contract amounts and
the constantly changing value of the securities involved.
Although the adviser
will consider the likelihood of changes in currency values
when making
investment decisions, the adviser believes that it is
important to be able to
enter into forward contracts when it believes the interests
of the Fund will be
served. The Fund will not enter into forward contracts for
hedging purposes in a
particular currency in an amount in excess of the Fund's
assets denominated in
that currency. No more than 30% of the Fund's assets will be
committed to
forward contracts for hedging purposes at any time. (This
restriction does not
include forward contracts entered into to settle securities
transactions.)
The Fund may purchase and write put and call options on
foreign currencies for
the purpose of protecting against declines in the U.S.
dollar value of foreign
currency-denominated portfolio securities and against
increases in the U.S.
dollar cost of such securities to be acquired. As in the
case of other kinds of
options, however, the writing of an option on a foreign
currency constitutes
only a partial hedge, up to the amount of the premium
received, and the Fund
could be required to purchase or sell foreign currencies at
disadvantageous
exchange rates, thereby incurring losses. The purchase of an
option on a foreign
currency may constitute an effective hedge against
fluctuations in exchange
rates although, in the event of rate movements adverse to
the Fund's position,
it may forfeit the entire amount of the premium plus related
transaction costs.
Options on foreign currencies to be written or purchased by
the Fund are traded
on U.S. and foreign exchanges or over-the-counter.
RISKS ASSOCIATED WITH FINANCIAL FUTURES CONTRACTS AND
OPTIONS ON FINANCIAL
FUTURES CONTRACTS. When the Fund uses futures and options on
futures as hedging
devices, there is a risk that the prices of the securities
subject to the
futures contracts may not correlate with the prices of the
securities in the Fund's portfolio. This may cause the
futures contract and any
related options to react differently than the portfolio
securities to market
changes. In addition, the Fund's adviser could be incorrect
in its expectations
about the direction or extent of market factors such as
interest or currency
exchange rate movements. In these events, the Fund may lose
money on the futures
contract or option. Also, it is not certain that a secondary
market for
positions in futures contracts or for options will exist at
all times. Although
the Fund's adviser will consider liquidity before entering
into such
transactions, there is no assurance that a liquid secondary
market on an
exchange or otherwise will exist for any particular futures
contract or option
at any particular time. The Fund's ability to establish and
close out futures
and options positions depends on this secondary market.
RISKS ASSOCIATED WITH NON-U.S. SECURITIES. Investing in non-
U.S. securities
carries substantial risks in addition to those associated
with domestic
investments. In an attempt to reduce some of these risks,
the Fund diversifies
its investments broadly among foreign countries, including
both developed and
developing countries. At least three different countries
will always be
represented.
The Fund occasionally takes advantage of the unusual
opportunities for higher
returns available from investing in developing countries.
These investments,
however, carry considerably more volatility and risk because
they are associated
with less mature economies and less stable political
systems.
CURRENCY RISKS. Because the Fund may purchase
securities denominated in
currencies other than the U.S. dollar, changes in
foreign currency exchange
rates could affect the Fund's net asset value; the
value of interest
earned; gains and losses realized on the sale of
securities; and net
investment income and capital gain, if any, to be
distributed to
shareholders by the Fund. If the value of a foreign
currency rises against
the U.S. dollar, the value of the Fund assets
denominated in that currency
will increase; correspondingly, if the value of a
foreign currency declines
against the U.S. dollar, the value of Fund assets
denominated in that
currency will decrease.
The exchange rates between the U.S. dollar and foreign
currencies are a
function of such factors as supply and demand in the
currency exchange
markets, international balances of payments,
governmental interpretation,
speculation and other economic and political
conditions. Although the Fund
values its assets daily in U.S. dollars, the Fund will
not convert its
holdings of foreign currencies to U.S. dollars daily.
When the Fund
converts its holdings to another currency, it may incur
conversion costs.
Foreign exchange dealers may realize a profit on the
difference between the
price at which they buy and sell currencies.
FOREIGN COMPANIES. Other differences between investing
in non-U.S. and
U.S. securities include:
less publicly available information about foreign
companies;
the lack of uniform financial accounting standards
applicable to foreign
companies;
less readily available market quotations on foreign
companies;
differences in government regulation and supervision
of foreign stock
exchanges, brokers, listed companies, and banks;
differences in legal systems which may affect the
ability to enforce
contractual obligations or obtain court judgements;
generally lower foreign stock market volume;
the likelihood that foreign securities may be less
liquid or more
volatile;
foreign brokerage commissions may be higher;
unreliable mail service between countries; and
political or financial changes which adversely affect
investments in some
countries.
U.S. GOVERNMENT POLICIES. In the past, U.S. government
policies have
discouraged or restricted certain investments abroad by
investors such as
the Fund. Investors are advised that when such policies
are instituted, the
Fund will abide by them.
SHORT SALES. The Fund intends to sell securities short
from time to time,
subject to certain restrictions. A short sale occurs
when a borrowed
security is sold in anticipation of a decline in its
price. If the decline
occurs, shares equal in number to those sold short can
be purchased at the
lower price. If the price increases, the higher price
must be paid. The
purchased shares are then returned to the original
lender. Risk arises
because no loss limit can be placed on the transaction.
When the Fund
enters into a short sale, assets equal to the market
price of the
securities sold short or any lesser price at which the
Fund can obtain such
securities, are segregated on the Fund's records and
maintained until the
Fund meets its obligations under the short sale.
DEVELOPING/EMERGING MARKETS. The economies of
individual emerging
countries may differ favorably from the U.S. economy in
such respects as
growth of gross domestic product, rate of inflation,
currency depreciation,
capital reinvestment, resource self-sufficiency and
balance of payments
position. Further, the economies of developing
countries generally are
heavily dependent on international trade and,
accordingly, have been, and
may continue to be, adversely affected by trade
barriers, exchange
controls, managed adjustments in relative currency
values and other
protectionist measures imposed or negotiated by the
countries with which
they trade. These economies also have been, and may
continue to be,
adversely affected by economic conditions in the
countries with which they
trade.
Prior governmental approval for foreign investments may
be required under
certain circumstances in some emerging countries, and
the extent of foreign
investment in certain debt securities and domestic
companies may be subject
to limitation in other emerging countries. Foreign
ownership limitations
also may be imposed by the charters of individual
companies in emerging
countries to prevent, among other concerns, violation
of foreign investment
limitations.
Repatriation of investment income, capital and the
proceeds of sales by
foreign investors may require governmental registration
and/or approval in
some emerging countries. The Fund could be adversely
affected by delays in,
or a refusal to grant, any required governmental
registration or approval
for such repatriation. Any investment subject to such
repatriation controls
will be considered illiquid if it appears reasonably
likely that this
process will take more than seven days.
With respect to any emerging country, there is the
possibility of
nationalization, expropriation or confiscatory
taxation, political changes,
governmental regulation, social instability or
diplomatic developments
(including war) which could affect adversely the
economies of such
countries or the value of the Fund's investments in
those countries. In
addition, it may be difficult to obtain and enforce a
judgment in a court
outside of the U.S.
INVESTMENT LIMITATIONS
The Fund will not:
with respect to 75% of the value of its total assets,
invest more than 5%
of the value of its total assets in the securities
(other than securities
issued or guaranteed by the government of the U.S. or
its agencies or
instrumentalities) of any one issuer, or acquire more
than 10% of the
outstanding voting securities of any one issuer;
sell securities short except under strict
limitations;
borrow money or pledge securities except, under
certain circumstances,
the Fund may borrow up to one-third of the value of
its total assets and
pledge its assets to secure such borrowings; or
permit margin deposits for financial futures
contracts held by the Fund,
plus premiums paid by it for open options on
financial futures contracts,
to exceed 5% of the fair market value of the Fund's
total assets, after
taking into account the unrealized profits and losses
on the contracts.
The above investment limitations cannot be changed without
shareholder approval.
The following limitations, however, may be changed by the
Trustees without
shareholder approval. Shareholders will be notified before
any material change
in these limitations becomes effective.
The Fund will not:
invest more than 5% of its assets in warrants;
own securities of other investment companies, except
under certain
circumstances and subject to certain limitations not
exceeding 10% of its
total assets (the Fund will indirectly bear its
proportionate share of
any fees and expenses paid by other investment
companies, in addition to
the fees and expenses payable directly by the Fund);
invest more than 5% of its total assets in securities
of issuers that
have records of less than three years of continuous
operations;
invest more than 15% of the value of its net assets
in illiquid
securities, including securities not determined by
the Trustees to be
liquid, repurchase agreements with maturities longer
than seven days
after notice, and certain over-the-counter options;
or
purchase put options on securities unless the
securities or an offsetting
call option is held in the Fund's portfolio.
VARIABLE ASSET REGULATIONS. The Fund is also subject to
variable contract asset
regulations prescribed by the U.S. Treasury Department under
Section 817(h) of
the Internal Revenue Code. After a one year start-up period,
the regulations
generally require that, as of the end of each calendar
quarter or within 30 days
thereafter, no more than 55% of the total assets of the Fund
may be
represented by any one investment, no more than 70% of the
total assets of the
Fund may be represented by any two investments, no more than
80% of the total
assets of the Fund may be represented by any three
investments, and no more than
90% of the total assets of the Fund may be represented by
any four investments.
In applying these diversification rules, all securities of
the same issuer, all
interests in the same real property project, and all
interests in the same
commodity are each treated as a single investment. In the
case of government
securities, each government agency or instrumentality shall
be treated as a
separate issuer. If the Fund fails to achieve the
diversification required by
the regulations, unless relief is obtained from the Internal
Revenue Service,
the contracts invested in the Fund will not be treated as
annuity, endowment, or
life insurance contracts.
The Fund will be operated at all times so as to comply with
the foregoing
diversification requirements.
STATE INSURANCE REGULATIONS. The Fund is intended to be a
funding vehicle for
variable annuity contracts and variable life insurance
policies offered by
certain insurance companies. The contracts will seek to be
offered in as many
jurisdictions as possible. Certain states have regulations
concerning, among
other things, the concentration of investments, sales and
purchases of futures
contracts, and short sales of securities. If applicable, the
Fund may be limited
in its ability to engage in such investments and to manage
its portfolio with
desired flexibility. The Fund will operate in material
compliance with the
applicable insurance laws and regulations of each
jurisdiction in which
contracts will be offered by the insurance companies which
invest in the Fund.
PORTFOLIO TURNOVER. Although the Fund does not intend to
invest for the purpose
of seeking short-term profits, securities in its portfolio
will be sold whenever
the Fund's investment adviser believes it is appropriate to
do so in light of
the Fund's investment objective, without regard to the
length of time a
particular security may have been held. It is not
anticipated that the portfolio
trading engaged in by the Fund will result in its annual
rate of portfolio
turnover exceeding 200%. A portfolio turnover rate of 100%
would occur, for
example, if all the securities in the Fund's portfolio were
replaced once in a
period of one year. The Fund's rate of portfolio turnover
may exceed that of
certain other mutual funds with the same investment
objective. A higher rate of
portfolio turnover involves correspondingly greater
brokerage commissions and
other expenses which must be borne directly by the Fund and,
thus, indirectly by
its shareholders. In addition, a high rate of portfolio
turnover may result in
the realization of larger amounts of capital gains which,
when distributed to
the Fund's shareholders, are taxable to them. Nevertheless,
transactions for the
Fund's portfolio will be based only upon investment
considerations and will not
be limited by any other considerations when the Fund's
investment adviser deems
it appropriate to make changes in the Fund's portfolio.
NET ASSET VALUE
------------------------------------------------------------
--------------------
The net asset value per share of the Fund fluctuates. It is
determined by
dividing the sum of the market value of all securities and
other assets of the
Fund, less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
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--------------------
PURCHASES AND REDEMPTIONS
Shares of the Fund are not sold directly to the general
public. The Fund's
shares are used solely as the investment vehicle for
separate accounts of
insurance companies offering variable life insurance
policies and variable
annuity contracts. The use of Fund shares as investments for
both variable life
insurance policies and variable annuity contracts is
referred to as "mixed
funding." The use of Fund shares as investments by separate
accounts of
unaffiliated life insurance companies is referred to as
"shared funding."
The Fund intends to engage in mixed funding and shared
funding in the future.
Although the Fund does not currently foresee any
disadvantage to contract owners
due to differences in redemption rates, tax treatment, or
other considerations
resulting from mixed funding or shared funding, the Trustees
of the Fund will
closely monitor the operation of mixed funding and shared
funding and will
consider appropriate action to avoid material conflicts and
take appropriate
action in response to any material conflicts which occur.
Such action could
result in one or more participating insurance companies
withdrawing their
investment in the Fund.
Shares of the Fund are purchased or redeemed on behalf of
participating
insurance companies at the next computed net asset value
after an order is
received on days on which the New York Stock Exchange is
open.
WHAT SHARES COST
Shares of the Fund are sold and redeemed at the net asset
value calculated at
4:00 p.m. (Eastern time), Monday through Friday. The Fund
reserves the right to
reject any purchase request.
Net asset value of shares of the Fund will not be calculated
on: (i) days on
which there are not sufficient changes in the value of the
Fund's portfolio
securities that its net asset value might be materially
affected; (ii) days on
which no shares are tendered for redemption and no orders to
purchase shares are
received; and (iii) the following holidays: New Year's Day,
Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and
Christmas Day.
Purchase orders from separate accounts investing in the Fund
which are received
by the insurance companies by 4:00 p.m. (Eastern time) will
be computed at the
net asset value of the Fund determined on that day, as long
as such purchase
orders are received by the Fund in proper form and in
accordance with applicable
procedures by 8:00 a.m. (Eastern time) on the next business
day and as long as
federal funds in the amount of such orders are received by
the Fund on the next
business day. It is the responsibility of each insurance
company which invests
in the Fund to properly transmit purchase orders and federal
funds in accordance
with the procedures described above.
DIVIDENDS
Dividends on shares of the Fund are declared and paid
annually. Shares of the
Fund will begin earning dividends if owned on the applicable
record date.
Dividends of the Fund are automatically reinvested in
additional shares of the
Fund on payment dates at the ex-dividend date net asset
value.
FUND INFORMATION
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--------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of
Trustees. The Trustees are
responsible for managing the business affairs of the Trust
and for exercising
all of the Trust's powers except those reserved for the
shareholders. The
Executive Committee of the Board of Trustees handles the
Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory
contract with the Trust,
investment decisions for the Fund are made by Federated
Advisers, the Fund's
investment adviser, subject to direction by the Trustees.
The adviser
continually conducts investment research and supervision for
the Fund and is
responsible for the purchase or sale of portfolio
instruments, for which it
receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual
investment advisory
fee equal to 1.00% of the Fund's average daily net
assets. The adviser may
voluntarily choose to waive a portion of its fee or
reimburse the Fund for
certain operating expenses. The adviser can terminate
this voluntary waiver
and reimbursement of expenses at any time at its sole
discretion.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware
business trust
organized on April 11, 1989, is a registered investment
adviser under the
Investment Advisers Act of 1940. It is a subsidiary of
Federated Investors.
All of the Class A (voting) shares of Federated
Investors are owned by a
trust, the trustees of which are John F. Donahue,
Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr.
Donahue's son, J.
Christopher Donahue, who is President and Trustee of
Federated Investors.
Federated Advisers and other subsidiaries of Federated
Investors serve as
investment advisers to a number of investment companies
and private
accounts. Certain other subsidiaries also provide
administrative services
to a number of investment companies. Total assets under
management or
administration by these and other subsidiaries of
Federated Investors is
approximately $70 billion. Federated Investors, which
was founded in 1956
as Federated Investors, Inc., develops and manages
mutual funds primarily
for the financial industry. Federated Investors' track
record of
competitive performance and its disciplined, risk
averse investment
philosophy serve approximately 3,500 client
institutions nationwide.
Through these same client institutions, individual
shareholders also have
access to this same level of investment expertise.
Randall S. Bauer has been the Fund's portfolio manager
since the Fund
commenced operations. Mr. Bauer joined Federated
Investors in 1989 as an
Assistant Vice President of the Fund's investment
adviser. Mr. Bauer was an
Assistant Vice President of the International Banking
Division at
Pittsburgh National Bank from 1982 until 1989. Mr.
Bauer is a Chartered
Financial Analyst and received his M.B.A. in Finance
from Pennsylvania
State University.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for
shares of the Fund.
Federated Securities Corp. is located at Federated Investors
Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November
14, 1969, and is the principal distributor for a number of
investment companies.
Federated Securities Corp. is a subsidiary of Federated
Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services,
a subsidiary of
Federated Investors, provides administrative personnel and
services (including
certain legal and financial reporting services) necessary to
operate the Fund.
Federated Administrative Services provides these at an
annual rate which relates
to the average aggregate daily net assets of all funds
advised by subsidiaries
of Federated Investors ("Federated Funds") as specified
below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
ASSETS
ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750
million
</TABLE>
The administrative fee received during any fiscal year shall
be at least
$125,000 per portfolio and $30,000 per each additional class
of shares.
Federated Administrative Services may choose voluntarily to
waive a portion of
its fee.
CUSTODIAN. State Street Bank and Trust Company, P.O. Box
8604, Boston,
Massachusetts 02266-8604, is custodian for the securities
and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated
Services Company,
Pittsburgh, Pennsylvania, a subsidiary of Federated
Investors, is the transfer
agent for shares of the Fund and dividend disbursing agent
for the Fund.
INDEPENDENT AUDITORS. The independent auditors for the Fund
are Deloitte &
Touche LLP, Boston, Massachusetts.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase
and sale of portfolio
instruments, the adviser looks for prompt execution of the
order at a favorable
price. In working with dealers, the adviser will generally
utilize those who are
recognized dealers in specific portfolio instruments, except
when a better price
and execution of the order can be obtained elsewhere. In
selecting among firms
believed to meet these criteria, the adviser may give
consideration to those
firms which have sold or are selling shares of the other
funds distributed by
Federated Securities Corp. The adviser makes decisions on
portfolio transactions
and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable
share of Trust expenses.
These expenses may include, but are not limited to, the cost
of: organizing the
Trust and continuing its existence; Trustees' fees;
investment advisory and
administrative services; printing prospectuses and other
documents for contract
holders; registering the Trust, the Fund, and shares of the
Fund; taxes and
commissions; issuing, purchasing, repurchasing, and
redeeming shares;
custodians, transfer agents, dividend disbursing agents,
contract holders
servicing agents, and registrars; printing, mailing,
auditing, accounting, and
legal expenses; reports to contract holders and governmental
agencies; meetings
of Trustees and contract holders and proxy solicitations
therefor; insurance;
association membership dues; and such nonrecurring and
extraordinary items as
may arise. However, the investment adviser may voluntarily
reimburse some
expenses.
SHAREHOLDER INFORMATION
------------------------------------------------------------
--------------------
VOTING RIGHTS
The insurance company separate accounts, as shareholders of
the Fund, will vote
the Fund shares held in their separate accounts at meetings
of the shareholders.
Voting will be in accordance with instructions received from
contract owners of
the separate accounts, as more fully outlined in the
prospectus of the separate
account.
Each share of the Fund gives the shareholder one vote in
Trustee elections and
other matters submitted to shareholders for vote. All shares
of each portfolio
in the Trust have equal voting rights except that only
shares of the Fund are
entitled to vote on matters affecting only the Fund. As a
Massachusetts business
trust, the Trust is not required to hold annual shareholder
meetings.
Shareholder approval will be sought only for certain changes
in the Trust or the
Fund's operation and for the election of Trustees in certain
circumstances.
Trustees may be removed by the Trustees or by shareholders
at a special meeting.
A special meeting of shareholders shall be called by the
Trustees upon the
written request of shareholders owning at least 10% of the
outstanding shares of
all series of the Trust.
TAX INFORMATION
------------------------------------------------------------
--------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because the Fund
expects to meet the
requirements of the Internal Revenue Code applicable to
regulated investment
companies and to receive the special tax treatment afforded
to such companies.
The Fund will be treated as a single, separate entity for
federal income tax
purposes so that income (including capital gains) and losses
realized by the
Trust's other portfolios will not be combined for tax
purposes with those
realized by the Fund.
The Fund intends to comply with the variable asset
diversification regulations
which are described earlier in this Prospectus. If the Fund
fails to comply with
these regulations, contracts invested in the Fund shall not
be treated as
annuity, endowment, or life insurance contracts under the
Internal Revenue Code.
Contract owners should review the applicable contract
prospectus for information
concerning the federal income tax treatment of their
contracts and distributions
from the Fund to the separate accounts.
STATE AND LOCAL TAXES
Contract owners are urged to consult their own tax advisers
regarding the status
of their contracts under state and local tax laws.
PERFORMANCE INFORMATION
------------------------------------------------------------
--------------------
From time to time the Fund advertises total return and
yield. Total return
represents the change, over a specified period of time, in
the value of an
investment in the Fund after reinvesting all income and
capital gain
distributions. It is calculated by dividing that change by
the initial
investment and is expressed as a percentage. The yield of
the Fund is calculated
by dividing the net investment income per share (as defined
by the Securities
and Exchange Commission) earned by the Fund over a thirty-
day period by the
offering price per share of the Fund on the last day of the
period. This number
is then annualized using semi-annual compounding. The yield
does not necessarily
reflect income actually earned by the Fund and, therefore,
may not correlate to
the dividends or other distributions paid to shareholders.
Performance
information will not reflect the charges and expenses of a
variable annuity or
variable life insurance contract. Because shares of the Fund
can only be
purchased by a separate account of an insurance company
offering such a
contract, you should review the performance figures of the
contract in which you
are invested, which performance figures will accompany any
advertisement of the
Fund's performance.
From time to time, the Fund may advertise its performance
using certain
financial publications and/ or compare its performance to
certain indices.
ADDRESSES
------------------------------------------------------------
--------------------
Insurance Management Series
International Stock Fund Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
------------------------------------------------------------
--------------------
Distributor
Federated Securities Corp. Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
------------------------------------------------------------
--------------------
Investment Adviser
Federated Advisers Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
------------------------------------------------------------
--------------------
Custodian
State Street Bank P.O. Box 8604
and Trust Company Boston,
Massachusetts 02266-8604
------------------------------------------------------------
--------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated
Investors Tower
Pittsburgh,
Pennsylvania 15222-3779
------------------------------------------------------------
--------------------
Independent Auditors
Deloitte & Touche LLP 125 Summer
Street
Boston,
Massachusetts 02110-1617
------------------------------------------------------------
--------------------
INTERNATIONAL STOCK FUND
PROSPECTUS
A Diversified Portfolio of
Insurance Management Series,
An Open-End, Management
Investment Company
April 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
458043 60 1
G01078-01 (4/95)
INTERNATIONAL STOCK FUND
(A Portfolio of Insurance Management Series)
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED
APRIL 30, 1995
A. Please insert the following as the second paragraph in
the section entitled "Fund Ownership" on page 12.
"As of August 2, 1995, the following shareholders of
record owned 5% or more of the outstanding shares of
the Fund: Aetna Life Insurance and Annuity Company
owned approximately 37,152 shares (43.59%) and Aetna
Insurance Company of America owned approximately 48,039
shares (56.37%)."
B. Please insert the following as the second paragraph in
the section entitled "Advisory Fees on page 14.
"For the period from May 5, 1995, (date of initial
public investment) to June 30, 1995, the adviser earned
advisory fees of $107, all of which was waived."
C. Please insert the following as the second sentence in
the section entitled "Administrative Services" on page
14.
"For the period from May 5, 1995, (date of initial
public investment) to June 30, 1995, the Fund incurred
$18,151, in costs for administrative services, all of
which was reimbursed by the Adviser."
D. Please insert the following as the final paragraph in
the section entitled "Brokerage Transactions" which
starts on page 15.
"For the period from May 5, 1995, (date of initial
public investment) to June 30, 1995, the Fund paid no
brokerage commissions."
E. Please insert the following as the first paragraph in
the section entitled "Total Return" on page 16.
"The Fund's cumulative total return from May 5, 1995,
(date of initial public investment) to June 30, 1995,
was 0.30%. Cumulative total return reflects the Fund's
total performance over a specific period of time. This
total return assumes and is reduced by the payment of
the maximum sales load. The Fund's total return is
representative of only two months of investment
activity since the Fund's effective date."
June 30, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 458043601
G01083-04 (8/95)
INTERNATIONAL STOCK FUND
A PORTFOLIO OF INSURANCE MANAGEMENT SERIES
Statement of Additional Information
This Statement of Additional Information should be read
with the prospectus for International Stock Fund (the
"Fund"), a portfolio of Insurance Management Series
(the "Trust"), dated April 30, 1995. This Statement is
not a prospectus itself. To receive a copy of the
prospectus, write or call the Fund.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated April 30, 1995
FEDERATED SECURITIES
CORP.
Distributor
A subsidiary of
Federated Investors
INVESTMENT OBJECTIVE AND POLICIES1
TYPES OF INVESTMENTS 1
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS 1
REPURCHASE AGREEMENTS 1
REVERSE REPURCHASE AGREEMENTS 1
LENDING OF PORTFOLIO SECURITIES1
RESTRICTED AND ILLIQUID
SECURITIES 1
FUTURES AND OPTIONS
TRANSACTIONS 2
FOREIGN CURRENCY HEDGING
TRANSACTIONS 4
RISKS 5
WARRANTS 5
INVESTMENT LIMITATIONS 6
INSURANCE MANAGEMENT SERIES
MANAGEMENT 8
FUND OWNERSHIP 12
TRUSTEES COMPENSATION 13
INVESTMENT ADVISORY SERVICES 14
ADVISER TO THE FUND 14
ADVISORY FEES 14
OTHER RELATED SERVICES 14
ADMINISTRATIVE SERVICES 14
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT 14
BROKERAGE TRANSACTIONS 14
PURCHASING SHARES 15
DETERMINING NET ASSET VALUE 15
DETERMINING MARKET VALUE OF
SECURITIES 15
TRADING IN FOREIGN SECURITIES 15
MASSACHUSETTS PARTNERSHIP LAW 16
TAX STATUS 16
THE FUND'S TAX STATUS 16
FOREIGN TAXES 16
SHAREHOLDERS' TAX STATUS 16
TOTAL RETURN 16
YIELD 17
PERFORMANCE COMPARISONS 17
APPENDIX 18
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to obtain a total return
on its assets.
TYPES OF INVESTMENTS
The Fund invests in a diversified portfolio of equity
securities issued by non-U.S. issuers. The Fund will invest
at least 65%, and under normal market conditions,
substantially all of its total assets, in equity securities
of issuers located in at least three different countries
outside of the United States. The Fund may also purchase
sponsored or unsponsored American Depositary Receipts
("ADRs"), Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs"); purchase investment grade
corporate and government fixed income securities of issuers
outside the U.S.; enter into forward commitments, repurchase
agreements, and foreign currency transactions; and maintain
reserves in foreign or U.S. money market instruments.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to
be an advantageous price or yield for the Fund. No fees or
other expenses, other than normal transaction costs, are
incurred. However, liquid assets of the Fund sufficient to
make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These
assets are marked to market daily and maintained until the
transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to
an extent that would cause the segregation of more than 20%
of the total value of its assets.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the
securities subject to repurchase agreements, and these
securities will be marked to market daily. In the event that
a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might
be delayed pending court action. The Fund believes that
under the regular procedures normally in effect for custody
of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such
securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by
the Fund's adviser or sub-adviser to be creditworthy,
pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a
portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage
of the instrument's market value in cash, and agrees that on
a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration
plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets
of the Fund, in a dollar amount sufficient to make payment
for the obligations to be purchased, are segregated at the
trade date. These securities are marked to market daily and
maintained until the transaction is settled.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio
securities must be valued daily and, should the market value
of the loaned securities increase, the borrower must furnish
additional collateral to the Fund. During the time portfolio
securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the
borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper in reliance on the
exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. Section 4(2) commercial paper is
restricted as to disposition under federal securities law
and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public
distribution. Any resale by t he investor must be in an
exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors like the
Fund through or with the assistance of the issuer or
investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity. The ability of
the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and
Exchange Commission Staff position set forth in the adopting
release for Rule 144A under the Securities Act of 1933 (the
"Rule"). The Rule is a non-exclusive, safe-harbor for
certain secondary market transactions involving securities
subject to restrictions on resale under federal securities
laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further
enhance the liquidity of the secondary market for securities
eligible for resale under the Rule . The Fund believes that
the staff of the Securities and Exchange Commission has left
the question of determining the liquidity of all restricted
securities (eligible for resale under the Rule) to the
Trustees. The Trustees consider the following criteria in
determining the liquidity of certain restricted securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the
security and the number of other potential buyers;
- dealer undertakings to make a market in the security;
and
- the nature of the security and the nature of the
marketplace trades.
When the Fund invests in certain restricted securities
determined by the Trustees to be liquid, such investments
could have the effect of increasing the level of Fund
illiquidity to the extent that the buyers in the secondary
market for such securities (whether in resales under the
Rule or other exempt transactions) become, for a time,
uninterested in purchasing these securities.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value
of shares of the Fund, the Fund may attempt to hedge all or
a portion of its portfolio by buying and selling futures
contracts and options on futures contracts, and buying put
and call options on portfolio securities and securities
indices. The Fund may also write covered put and call
options on portfolio securities to attempt to increase its
current income or to hedge a portion of its portfolio
investments. The Fund will maintain its positions in
securities, option rights, and segregated cash subject to
puts and calls until the options are exercised, closed, or
have expired. An option position on a futures contract may
be closed out over-the-counter or on a nationally recognized
exchange which provides a secondary market for options of
the same series. The Fund will not engage in futures
transactions for speculative purposes.
Futures Contracts
The Fund may purchase and sell financial futures
contracts to hedge against the effects of changes in
the value of portfolio securities due to anticipated
changes in interest rates and market conditions without
necessarily buying or selling the securities. Although
some financial futures contracts call for making or
taking delivery of the underlying securities, in most
cases these obligations are closed out before the
settlement date. The closing of a contractual
obligation is accomplished by purchasing or selling an
identical offsetting futures contract. Other financial
futures contracts by their terms call for cash
settlements.
The Fund also may purchase and sell stock index futures
contracts with respect to any stock index traded on a
recognized stock exchange or board of trade to hedge
against changes in prices. Stock index futures
contracts are based on indices that reflect the market
value of common stock of the firms included in the
indices. An index futures contract is an agreement
pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the difference
between the value of the index at the close of the last
trading day of the contract and the price at which the
index contract was originally written. No physical
delivery of the underlying securities in the index is
made. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being
the difference between the contract price and the
actual level of the stock index at the expiration of
the contract.
A futures contract is a firm commitment by two parties:
the seller who agrees to make delivery of the specific
type of security called for in the contract ("going
short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the
future. For example, in the fixed income securities
market, prices move inversely to interest rates. A rise
in rates means a drop in price. Conversely, a drop in
rates means a rise in price. In order to hedge its
holdings of fixed income securities against a rise in
market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined
price (i.e., "go short") to protect itself against the
possibility that the prices of its fixed income
securities may decline during the Fund's anticipated
holding period. The Fund would "go long" (agree to
purchase securities in the future at a predetermined
price) to hedge against a decline in market interest
rates.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund
does not pay or receive money upon the purchase or sale
of a futures contract. Rather, the Fund is required to
deposit an amount of "initial margin" in cash, U.S.
government securities or highly-liquid debt securities
with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures
transactions is different from that of margin in
securities transactions in that initial margin in
futures transactions does not involve the borrowing of
funds by the Fund to finance the transactions. Initial
margin is in the nature of a performance bond or good
faith deposit on the contract which is returned to the
Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at
the official settlement price of the exchange on which
it is traded. Each day the Fund pays or receives cash,
called "variation margin," equal to the daily change in
value of the futures contract. This process is known as
marking to market. Variation margin does not
represent a borrowing or loan by the Fund but is
instead settlement between the Fund and the broker of
the amount one would owe the other if the futures
contract expired. In computing its daily net asset
value, the Fund will mark to market its open futures
positions. The Fund is also required to deposit and
maintain margin when it writes call options on futures
contracts.
To the extent required to comply with Commodity Futures
Trading Commission ("CFTC") Regulation 4.5 and thereby
avoid status as a "commodity pool operator," the Fund
will not enter into a futures contract, or purchase an
option thereon, if immediately thereafter the initial
margin deposits for futures contracts held by it, plus
premiums paid by it for open options on futures
contracts, would exceed 5% of the market value of the
Fund's total assets, after taking into account the
unrealized profits and losses on those contracts it has
entered into; and, provided further, that in the case
of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in
computing such 5%. Second, the Fund will not enter into
these contracts for speculative purposes; rather, these
transactions are entered into only for bona fide
hedging purposes, or other permissible purposes
pursuant to regulations promulgated by the CFTC. Third,
since the Fund does not constitute a commodity pool, it
will not market itself as such, nor serve as a vehicle
for trading in the commodities futures or commodity
options markets. Finally, because the Fund will submit
to the CFTC special calls for information, the Fund
will not register as a commodities pool operator.
Put Options on Financial and Stock Index Futures
Contracts
The Fund may purchase listed put options on financial
and stock index futures contracts to protect portfolio
securities against decreases in value resulting from
market factors, such as an anticipated increase in
interest rates or stock prices. Unlike entering
directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date
at a specified price, the purchase of a put option on a
futures contracts entitles (but does not obligate) its
purchaser to decide on or before a future date whether
to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease
in value during the term of an option, the related
futures contracts will also decrease in value and the
option will increase in value. In such an event, the
Fund will normally close out its option by selling an
identical option. If the hedge is successful, the
proceeds received by the Fund upon the sale of the
second option will be large enough to offset both the
premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to
close out the position. To do so, it would
simultaneously enter into a futures contract of the
type underlying the option (for a price less than the
strike price of the option) and exercise the option.
The Fund would then deliver the futures contract in
return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option
will expire on the date provided in the option
contract, and only the premium paid for the contract
will be lost.
When the Fund sells a put on a futures contract, it
receives a cash premium in exchange for granting to the
purchaser of the put the right to receive from the
Fund, at the strike price, a short position in such
futures contract, even though the strike price upon
exercise of the option is greater than the value of the
futures position received by such holder. If the value
of the underlying futures position is not such that
exercise of the option would be profitable to the
option holder, the option will generally expire without
being exercised. It will generally be the policy of the
Fund, in order to avoid the exercise of an option sold
by it, to cancel its obligation under the option by
entering into a closing purchase transaction, if
available, unless it is determined to be in the Fund's
interest to deliver the underlying futures position. A
closing purchase transaction consists of the purchase
by the Fund of an option having the same term as the
option sold by the Fund, and has the effect of
canceling the Fund's position as a seller. The premium
which the Fund will pay in executing a closing purchase
transaction may be higher than the premium received
when the option was sold, depending in large part upon
the relative price of the underlying futures position
at the time of each transaction.
Call Options on Financial and Stock Index Futures
Contracts
In addition to purchasing put options on futures, the
Fund may write listed and over-the-counter call options
on financial and stock index futures contracts to hedge
its portfolio. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during
the life of the option if the option is exercised. As
stock prices fall or market interest rates rise,
causing the prices of futures to go down, the Fund's
obligation under a call option on a future (to sell a
futures contract) costs less to fulfill, causing the
value of the Fund's call option position to increase.
In other words, as the underlying futures price falls
below the strike price, the buyer of the option has no
reason to exercise the call, so that the Fund keeps the
premium received for the option. This premium can
substantially offset the drop in value of the Fund's
portfolio securities.
When the Fund purchases a call on a financial futures
contract, it receives in exchange for the payment of a
cash premium the right, but not the obligation, to
enter into the underlying futures contract at a strike
price determined at the time the call was purchased,
regardless of the comparative market value of such
futures position at the time the option is exercised.
The holder of a call option has the right to receive a
long (or buyer's) position in the underlying futures
contract.
The Fund will not maintain open positions in futures
contracts it has sold or call options it has written on
futures contracts if, in the aggregate, the value of
the open positions (marked to market) exceeds the
current market value of its securities portfolio plus
or minus the unrealized gain or loss on those open
positions, adjusted for the correlation of volatility
between the hedged securities and the futures
contracts. If this limitation is exceeded at any time,
the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open
futures and options positions within this limitation.
Purchasing Put Options on Portfolio Securities and Stock
Indices
The Fund may purchase put options on portfolio
securities and stock indices to protect against price
movements in the Fund's portfolio securities. A put
option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer
(seller) at a specified price during the term of the
option.
Writing Covered Call Options on Portfolio Securities and
Stock Indices
The Fund may also write covered call options to
generate income and thereby protect against price
movements in the Fund's portfolio securities. As writer
of a call option, the Fund has the obligation upon
exercise of the option during the option period to
deliver the underlying security upon payment of the
exercise price or, in the case of a securities index, a
cash payment equal to the difference between the
closing price of the index and the exercise price of
the option. The Fund may only sell call options either
on securities held in its portfolio or on securities
which it has the right to obtain without payment of
further consideration (or has segregated cash in the
amount of any additional consideration).
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate
risks, the Fund may enter into forward foreign currency
exchange contracts and foreign currency futures contracts,
as well as purchase put or call options on foreign
currencies, as described below. The Fund may also conduct
its foreign currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign
currency exchange market.
The Fund may enter into forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the
risk to the Fund from adverse changes in the relationship
between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date which is
individually negotiated and privately traded by currency
traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a
contract for the purchase or sale of a security denominated
in a foreign currency in order to "lock in" the U.S. dollar
price of the security. In addition, for example, when the
Fund believes that a foreign currency may suffer a
substantial decline against the U.S. dollar, it may enter
into a forward contract to sell an amount of that foreign
currency approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign
currency, or when the Fund believes that the U.S. dollar may
suffer a substantial decline against a foreign currency, it
may enter into a forward contract to buy that foreign
currency for a fixed dollar amount. This second investment
practice is generally refered to as "cross-hedging." Because
in connection with the Fund's forward foreign currency
transactions an amount of the Fund's assets equal to the
amount of the purchase will be held aside or segregated to
be used to pay for the commitment, the Fund will always have
cash, cash equivalents or high quality debt securities
available sufficient to cover any commitments under these
contracts or to limit any potential risk. The segregated
account will be marked to market on a daily basis. While
these contracts are not presently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward
contracts. In such event, the Fund's ability to utilize
forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from
a positive change in the relationship between the U.S.
dollar and foreign currencies. Unanticipated changes in
currency prices may result in poorer overall performance for
the Fund than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against
declines in the dollar value of foreign portfolio securities
and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds
of options, however, the writing of an option on foreign
currency will constitute only a partial hedge, up to the
amount of the premium received, and the Fund could be
required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute
an effective hedge against fluctuation in exchange rates,
although, in the event of rate movements adverse to the
Fund's position, the Fund may forfeit the entire amount of
the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Fund
will be traded on U.S. and foreign exchanges or over-the-
counter.
The Fund may enter into exchange-traded contracts for the
purchase or sale for future delivery of foreign currencies
("foreign currency futures"). This investment technique will
be used only to hedge against anticipated future changes in
exchange rates which otherwise might adversely affect the
value of the Fund's portfolio securities or adversely affect
the prices of securities that the Fund intends to purchase
at a later date. The successful use of foreign currency
futures will usually depend on the ability of the adviser to
forecast currency exchange rate movements correctly. Should
exchange rates move in an unexpected manner, the Fund may
not achieve the anticipated benefits of foreign currency
futures or may realize losses.
RISKS
When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities
or foreign currency subject to the futures contracts may not
correlate perfectly with the prices of the securities or
currency in the Fund's portfolio. This may cause the futures
contract and any related options to react differently to
market changes than the portfolio securities or foreign
currency. In addition, the adviser could be incorrect in its
expectations about the direction or extent of market factors
such as stock price movements or foreign currency exchange
rate fluctuations. In these events, the Fund may lose money
on the futures contract or option.
It is not certain that a secondary market for positions in
futures contracts or for options will exist at all times.
Although the adviser will consider liquidity before entering
into these transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for
any particular futures contract or option at any particular
time. The Fund's ability to establish and close out futures
and options positions depends on this secondary market. The
inability to close out these positions could have an adverse
effect on the Fund's ability to effectively hedge its
portfolio.
To minimize risks, the Fund may not purchase or sell futures
contracts or related options if immediately thereafter the
sum of the amount of margin deposits on the Fund's existing
futures positions and premiums paid for related options
would exceed 5% of the value of the Fund's total assets
after taking into account the unrealized profits and losses
on those contracts it has entered into; and, provided
further, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be
excluded in computing such 5%. When the Fund purchases
futures contracts, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures
contracts (less any related margin deposits), will be
deposited in a segregated account with the Fund's custodian
(or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures
contract is unleveraged. When the Fund sells futures
contracts, it will either own or have the right to receive
the underlying future or security, or will make deposits to
collateralize the position as discussed above.
WARRANTS
The Fund may invest in warrants. Warrants are basically
options to purchase common stock at a specific price
(usually at a premium above the market value of the optioned
common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a year
to twenty years or may be perpetual. However, most warrants
have expiration dates after which they are worthless. In
addition, if the market price of the common stock does not
exceed the warrant's exercise price during the life of the
warrant, the warrant will expire as worthless. Warrants have
no voting rights, pay no dividends, and have no rights with
respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the
warrant may tend to be greater than the percentage increase
or decrease in the market price of the optioned common
stock.
INVESTMENT LIMITATIONS
Diversification of Investments
With respect to 75% of the value of its total assets,
the Fund will not purchase securities of any one issuer
(other than securities issued or guaranteed by the
government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the
value of its total assets would be invested in the
securities of that issuer, or if it would own more than
10% of the outstanding voting securities of any one
issuer.
Acquiring Securities
The Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer.
Concentration of Investments
The Fund will not invest 25% or more of its total
assets in securities of issuers having their principal
business activities in the same industry.
Borrowing
The Fund will not borrow money except as a temporary
measure for extraordinary or emergency purposes and
then only in amounts up to one-third of the value of
its total assets, including the amount borrowed. This
borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the
liquidation of portfolio securities would be
inconvenient or disadvantageous. The Fund will not
purchase securities while outstanding borrowings exceed
5% of the value of its total assets.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate
assets, except when necessary for permissible
borrowings. Neither the deposit of underlying
securities or other assets in escrow in connection with
the writing of put or call options or the purchase of
securities on a when-issued basis, nor margin deposits
for the purchase and sale of financial futures
contracts and related options are deemed to be a
pledge.
Buying on Margin
The Fund will not purchase any securities on margin,
but may obtain such short-term credits as are necessary
for clearance of transactions, except that the Fund may
make margin payments in connection with its use of
financial futures contracts or related options and
transactions.
Issuing Senior Securities
The Fund will not issue senior securities except in
connection with borrowing money directly or through
reverse repurchase agreements or as required by forward
commitments to purchase securities or currencies.
Underwriting
The Fund will not underwrite or participate in the
marketing of securities of other issuers, except as it
may be deemed to be an underwriter under federal
securities law in connection with the disposition of
its portfolio securities.
Investing in Real Estate
The Fund will not invest in real estate, although it
may invest in securities secured by real estate or
interests in real estate or issued by companies,
including real estate investment trusts, which invest
in real estate or interests therein.
Investing in Commodities
The Fund will not purchase or sell commodities or
commodity contracts, except that the Fund may purchase
and sell financial futures contracts and options on
financial futures contracts, provided that the sum of
its initial margin deposits for financial futures
contracts held by the Fund, plus premiums paid by it
for open options on financial futures contracts, may
not exceed 5% of the fair market value of the Fund's
total assets, after taking into account the unrealized
profits and losses on those contracts. Further, the
Fund may engage in foreign currency transactions and
purchase or sell forward contracts with respect to
foreign currencies and related options.
Lending Cash or Securities
The Fund will not lend any assets except portfolio
securities. This shall not prevent the purchase or
holding of bonds, debentures, notes, certificates of
indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are
permitted by the Fund's investment objective and
policies or its Declaration of Trust.
Selling Short
The Fund will not sell securities short unless (1) it
owns, or has a right to acquire, an equal amount of
such securities, or (2) it has segregated an amount of
its other assets equal to the lesser of the market
value of the securities sold short or the amount
required to acquire such securities. The segregated
amount will not exceed 10% of the Fund's net assets.
While in a short position, the Fund will retain the
securities, rights, or segregated assets.
To comply with registration requirements in certain
states, the Fund (1) will limit short sales of
securities of any class of any one issuer to the lesser
of 2% of the Fund's net assets or 2% of the securities
of that class, (2) will make short sales only on
securities listed on recognized stock exchanges. The
latter restrictions, however, do not apply to short
sales of securities the Fund holds or has a right to
acquire without the payment of any further
consideration, and (3) will not invest more than 5% of
its total assets in restricted securities. (If state
requirements change, these restrictions may be revised
without shareholder notification.)
Except as noted, the above investment limitations cannot be
changed without shareholder approval. The following
limitations, however, may be changed by the Trustees without
shareholder approval. Except as noted, shareholders will be
notified before any material change in these limitations
becomes effective.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for
the purpose of exercising control or management.
Investing in Warrants
The Fund will not invest more than 5% of its assets in
warrants, including those acquired in units or attached
to other securities. To comply with certain state
restrictions, the Fund will limit its investment in
such warrants not listed on recognized stock exchanges
to 2% of its total assets. (If state restrictions
change, this latter restriction may be revised without
notice to shareholders.) For purposes of this
investment restriction, warrants acquired by the Fund
in units or attached to securities may be deemed to be
without value.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other
investment companies, except by purchase in the open
market involving only customary brokerage commissions
and as a result of which not more than 10% of the
value of its total assets would be invested in such
securities, or except as part of a merger,
consolidation or other acquistion.
Investing in New Issuers
The Fund will not invest more than 5% of the value of
its total assets in securities of issuers which have
records of less than three years of continuous
operations, including the operation of any predecessor.
Investing in Minerals
The Fund will not invest in interests in oil, gas, or
other mineral exploration or development programs,
other than debentures or equity stock interests.
Investing in Restricted Securities
The Fund will not invest more than 15% of its total
assets in securities subject to restrictions on resale
under the Securities Act of 1933, except for commercial
paper issued under Section 4(2) of the Securities Act
of 1933 and certain other restricted securities which
meet the criteria for liquidity as established by the
Trustees.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of
its net assets in illiquid securities, including
securities not determined by the Trustees to be liquid,
repurchase agreements with maturities longer than seven
days after notice, and certain over-the-counter
options.
Dealing in Puts and Calls
The Fund will not write call options on securities
unless the securities are held in the Fund's portfolio
or the Fund is entitled to them in deliverable form
without further payment or the Fund has segregated cash
in the amount of any further payments. The Fund will
not purchase put options on securities unless the
securities or an offsetting call option is held in the
Fund's portfolio. The Fund may also purchase, hold or
sell (i) contracts for future delivery of securities or
currencies and (ii) warrants granted by the issuer of
the underlying securities.
Investing in Issuers Whose Securities are Owned by
Officers and Trustees of the Trust
The Fund will not purchase or retain the securities of
any issuer if the officers and Trustees of the Trust or
the Fund's investment adviser or sub-adviser owning
individually more than 1/2 of 1% of the issuer's
securities together own more than 5% of the issuer's
securities.
Arbitrage Transactions
To comply with certain state restrictions, the Fund
will not enter into transactions for the purpose of
engaging in arbitrage. If state requirements change,
this restriction may be revised without shareholder
notification.
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.
The Fund has no present intent to borrow money or pledge
securities in excess of 5% of the value of its total assets
in the coming fiscal year.
Insurance Management Series Management
Officers and Trustees are listed with their addresses,
present positions with Insurance Management Series, and
principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated Research;
Chairman and Director, Federated Research Corp.; Chairman,
Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr.Donahue is the
father of J. Christopher Donahue, President and Trustee of
the Trust.
Thomas G. Bigley
28th Floor, One Oxford
Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board,
Children's Hospital of Pittsburgh; Director, Trustee, or
Managing General Partner of the Funds; formerly, Senior
Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial
Department
John R. Wood and
Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-
President, John R. Wood and Associates, Inc., Realtors;
President, Northgate Village Development Corporation;
Partner or Trustee in private real estate ventures in
Southwest Florida; Director, Trustee, or Managing General
Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael
Baker, Inc.; Director, Trustee, or Managing General Partner
of the Funds; formerly, Vice Chairman and Director, PNC
Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes,
Inc.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
President and Trustee, Federated Investors, Federated
Advisers, Federated Management, and Federated Research;
President and Director, Federated Research Corp.; President,
Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the
Funds; Director, Trustee, or Managing General Partner of
some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
Director, Trustee, or Managing General Partner of the Funds;
formerly, Director, Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite
1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees,
University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center;
formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director, Trustee, or
Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Koehuba, Meyer and
Flaherty
Two Gateway Center - Suite
674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and
Flaherty; Director, Eat'N Park Restaurants, Inc., and
Statewide Settlement Agency, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Birthdate: April 16, 1942
Trustee
Consultant; State Representative, Commonwealth of
Massachusetts; Director, Trustee, or Managing General
Partner of the Funds; formerly, President, State Street Bank
and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Henny, Koehuba, Meyer and
Flaherty
Two Gateway Center - Suite
674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and
Flaherty; Chairman, Meritcare, Inc.; Director, Eat'N Park
Restaurants, Inc.; Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D.,
S.J.D.
President, Duquesne
University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting
Partner, Mollica, Murray and Hogue; Director, Trustee or
Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, Foreign Policy and Management Consultant;
Trustee, Carnegie Endowment for International Peace, RAND
Corporation, Online Computer Library Center, Inc., and U.S.
Space Foundation; Chairman, Czecho Slovak Management Center;
Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy
and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: July 21, 1935
Trustee
Public relations/marketing consultant; Director, Trustee, or
Managing General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors;
Director, Federated Research Corp.; Chairman and Director,
Federated Securities Corp.; President or Vice President of
some of the Funds; Director or Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors;
Vice President and Treasurer, Federated Advisers, Federated
Management, Federated Research, Federated Research Corp.,
and Passport Research, Ltd.; Executive Vice President,
Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee,
Federated Administrative Services; Trustee or Director of
some of the Funds; Vice President and Treasurer of the
Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee,
Federated Investors; Vice President, Secretary, and Trustee,
Federated Advisers, Federated Management, and Federated
Research; Vice President and Secretary, Federated Research
Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and
Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice
President and Director, Federated Securities Corp.; Vice
President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person"
as defined in the Investment Company Act of 1940, as
amended.
@ Member of the Executive Committee. The Executive
Committee of the Board of Trustees handles the
responsibilities of the Board of Trustees between
meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the
following investment companies: American Leaders Fund, Inc.;
Annuity Management Series; Arrow Funds; Automated Cash
Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series II; Cash
Trust Series, Inc.; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated
Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S.
Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc.--1999;
Liberty U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The
Medalist Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's
outstanding shares.
As of April 4, 1995 there were no shareholders of record who
owned 5% or more of the outstanding shares of the Fund.
Trustees COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue
Trustee and Chairman $ 0 $0 for the Trust and
68 other investment companies in the
Fund Complex
Thoms G. Bigley
Trustee $ 252 $20,688 for the Trust and
49 other investment companies in the
Fund Complex
John T. Conroy, Jr.
Trustee $ 276 $117,202 for the Trust and
64 other investment companies in the
Fund Complex
William J. Copeland
Trustee $ 276 $117,202 for the Trust and
64 other investment companies in the
Fund Complex
J. Christopher Donahue
Trustee and President $ 0 $0 for the Trust and
14 other investment companies in the
Fund Complex
James E. Dowd
Trustee $ 276 $117,202 for the Trust and
64 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D.
Trustee $ 252 $106,460 for the Trust and
64 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr.
Trustee $ 276 $117,202 for the Trust and
64 other investment companies in the
Fund Complex
Peter E. Madden
Trustee $ 100 $90,563 for the Trust and
64 other investment companies in the
Fund Complex
Gregor F. Meyer
Trustee $ 252 $106,460 for the Trust and
64 other investment companies in the
Fund Complex
John E. Murray, Jr.
Trustee $0 $0 for the Trust and
68 other investment companies in the
Fund Complex
Wesley W. Posvar
Trustee $ 252 $106,460 for the Trust and
64 other investment companies in the
Fund Complex
Marjorie P. Smuts
Trustee $ 252 $106,460 for the Trust and
64 other investment companies in the
Fund Complex
*Information is furnished for the fiscal year ended December
31, 1994.
#The aggregate compensation is provided for the Trust which
is comprised of 6 portfolios.
+The information is provided for the last calendar year.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers (the
"Adviser"). It is a subsidiary of Federated Investors. All
the voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife,
and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund, the Trust, or
any shareholder of the Fund for any losses that may be
sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties imposed upon
it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual
investment advisory fee as described in the prospectus.
State Expense Limitations
The Adviser has undertaken to comply with the expense
limitation established by certain states for investment
companies whose shares are registered for sale in those
states. If the Fund's normal operating expenses
(including the investment advisory fees, but not
including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the
first $30 million of average net assets, 2% per year of
the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the
Adviser will reimburse the Fund for its expenses over
the limitation.
If the Fund's monthly projected operating expenses
exceed this limitation, the investment advisory fees
paid will be reduced by the amounts of the excess,
subject to an annual adjustment. If the expense
limitation is exceeded, the amounts to be reimbursed by
the Adviser will be limited, in any single fiscal year,
by the amounts of the investment advisory fees.
This arrangement is not part of the advisory contract
agreement and may be amended or rescinded in the
future.
OTHER RELATED SERVICES
Affiliates of the Adviser may, from time to time, provide
certain electronic equipment and software to institutional
customers in order to facilitate the purchase of shares of
funds offered by Federated Securities Corp.
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated
Investors, provides administrative personnel and services to
the Fund and receives an administrative fee as described in
the prospectus. Dr. Henry J. Gailliot, an officer of
Federated Advisers, the Adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves
as a director of Commercial Data Services, Inc., a company
which provides computer processing services to Federated
Administrative Services.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company serves as transfer agent and
dividend disbursing agent for the Fund. The fee paid to the
transfer agent is based on the size, type and number of
accounts and transactions made by shareholders.
Federated Services Company also maintains the Fund's
accounting records. The fee paid for this service is based
on the level of the Fund's average net assets for the period
plus out-of-pocket expenses.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be
furnished directly to the Fund or to the Adviser and may
include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. The
Adviser determines in good faith that commissions charged by
such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the
Adviser or by affiliates of Federated Investors in advising
certain other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to
reduce their expenses.
The Adviser may engage in other non-U.S. transactions that
may have adverse effects on the market for securities in the
Fund's portfolio. The Adviser is not obligated to obtain any
material non-public ("inside") information about any
securities issuer, or to base purchase or sale
recommendations on such information.
PURCHASING SHARES
Except under certain circumstances described in the
prospectus, shares are sold at their net asset value without
a sales charge on days the New York Stock Exchange is open
for business. The procedure for purchasing shares is
explained in the prospectus under "Purchases and
Redemptions" and "What Shares Cost."
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on
which net asset value is calculated by the Fund are
described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities are
determined as follows:
- according to the last reported sale price on a recognized
securities exchange, if available. (If a security is
traded on more than one exchange, the price on the primary
market for that security, as determined by the Adviser is
used.);
- according to the last reported bid price, if no sale on
the recognized exchange is reported or if the security is
traded over-the-counter;
- at fair value as determined in good faith by the Trustees;
or
- for short-term obligations with remaining maturities of
less than 60 days at the time of purchase, at amortized
cost, which approximates value.
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; coupon rate; maturity; type of
issue; trading characteristics; and other market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times
which vary from the closing of the New York Stock Exchange.
In computing the net asset value, the Fund values foreign
securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of
the New York Stock Exchange. Certain foreign currency
exchange rates may also be determined at the latest rate
prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into
U.S. dollars at current rates. Occasionally, events that
affect these values and exchange rates may occur between the
times at which they are determined and the closing of the
New York Stock Exchange. If such events materially affect
the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by
the Trustees, although the actual calculation may be done by
others.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders of the Fund may be
held liable as partners under Massachusetts law for
obligations of the Fund. To protect shareholders of the
Fund, the Fund has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for
acts or obligations of the Fund. These documents require
notice of this disclaimer to be given in each agreement,
obligation, or instrument the Trust or its Trustees enter
into or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held
personally liable for the Trust's obligations on behalf of
the Fund, the Trust is required to use the property of the
Fund to protect or compensate the shareholder. On request,
the Trust will defend any claim made and pay any judgment
against a shareholder of the Fund for any act or obligation
of the Trust on behalf of the Fund. Therefore, financial
loss resulting from liability as a shareholder of the Fund
will occur only if the Trust itself cannot meet its
obligations to indemnify shareholders and pay judgments
against them from the assets of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects
to meet the requirements of Subchapter M of the Internal
Revenue Code, as amended, applicable to regulated investment
companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends,
interest, and gains from the sale of securities;
- derive less than 30% of its gross income from the sale of
securities held less than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net
income earned during the year.
However, the Fund may invest in the stock of certain foreign
corporations which would constitute a Passive Foreign
Investment Company (PFIC). Federal income taxes may be
imposed on the Fund upon disposition of PFIC investments.
FOREIGN TAXES
Investment income on certain foreign securities in which the
Fund may invest may be subject to foreign withholding or
other taxes that could reduce the return on these
securities. Tax treaties between the United States and
foreign countries, however, may reduce or eliminate the
amount of foreign taxes to which the Fund would be subject.
SHAREHOLDERS' TAX STATUS
The Fund intends to comply with the variable asset
diversification regulations which are described in the
prospectus and in this Statement of Additional Information.
If the Fund fails to comply with these regulations,
contracts invested in the Fund shall not be treated as
annuity, endowment or life insurance contracts under the
Internal Revenue Code, as amended.
Contract owners should review the contract prospectus for
information concerning the federal income tax treatment of
their contracts and distributions from the Fund to the
separate accounts.
TOTAL RETURN
The average annual total return for shares of the Fund is
the average compounded rate of return for a given period
that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned
at the end of the period by the offering price per share at
the end of the period. The number of shares owned at the end
of the period is based on the number of shares purchased at
the beginning of the period with $1,000, less any applicable
sales load, adjusted over the period by any additional
shares, assuming the annual reinvestment of all dividends
and distributions. You should review the performance
figures for your insurance contract, which figures reflect
the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the
Fund's performance.
YIELD
The Fund's yield is determined by dividing the net
investment income per share (as defined by the SEC) earned
by the Fund over a thirty-day period by the offering price
per share of the Fund on the last day of the period. This
value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-
day period is assumed to be generated each month over a
twelve-month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by
the Fund because of certain adjustments required by the SEC
and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. You should review the
performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the
contract. Such performance figures will accompany any
advertisement of the Fund's performance.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in Fund expenses; and
- various other factors.
The Fund's performance fluctuates on a daily basis largely
because net earnings and offering price per share fluctuate
daily. Both net earnings and offering price per share are
factors in the computation of total return.
Investors may use financial publications and/or indices to
obtain a more complete view of the Fund's performance. When
comparing performance, investors should consider all
relevant factors such as the composition of any indices
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 Fund uses in
advertising may include:
- LIPPER ANALYTICAL SERVICES, INC., for example, makes
comparative calculations for one-month, three-month, one-
year, and five-year periods which assume the reinvestment
of all capital gains distributions and income dividends.
- MORGAN STANLEY EUROPE, AUSTRALIA, AND FAR EAST (EAFE)
Index is a market capitalization weighted foreign
securities index, which is widely used to measure the
performance of European, Australian, New Zealand and Far
Eastern stock markets.
The index covers approximately 1,020 companies drawn from
18 countries in the above regions. The index values its
securities daily in both U.S. dollars and local currency
and calculates total returns monthly. EAFE U.S. dollar
total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital
International, S.A., Geneva, Switzerland.
- SALOMON BROTHERS WORLD EQUITY INDEX EX U.S. is a
capitalization-weighted index comprised of equities from
22 countries excluding the United States.
- FT ACTUARIES WORLD - EX U.S. index is comprised of 1,740
stocks, excluding U.S. stocks, jointly compiled by the
Financial Times Ltd., Goldman, Sachs & Co., and NatWest
Securities Ltd. in conjunction with the Institute of
Actuaries and the Faculty of Actuaries.
Advertisements and sales literature for the Fund may quote
total returns which are calculated on non-standardized base
periods. These total returns also represent the historic
change in the value of an investment in the Fund based on
annual reinvestment of dividends over a specified period of
time.
From time to time as it deems appropriate the Fund may
advertise its performance using charts, graphs, and
descriptions, compared to federally insured bank products,
including certificates of deposit and time deposits and to
money market fund using the Lipper Analytical Services money
market instruments average.
APPENDIX
STANDARD AND POOR'S RATINGS GROUP BOND RATING DEFINITIONS
AAA Debt rated "AAA" has the highest rating assigned by
Standard & Poor's Corporation. Capacity to pay interest and
repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay
interest and repay principal and differs from the higher
rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effect of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than in higher
rated categories.
BB Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major
ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB- rating.
B Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal payments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
CCC Debt rated CCC has a currently identifiable
vulnerability to default and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal.
CC The rating CC typically is applied to debt subordinated
to senior debt that is assigned an actual or implied CCC
debt rating.
C The rating C typically is applied to debt subordinated to
senior debt which is assigned an actual or implied CCC- debt
rating. The C rating may be used to cover a situation where
a bankruptcy petition has been filed but debt service
payments are continued.
CI The rating CI is reserved for income bonds on which no
interest is being paid.
D Debt rated D is in payment default. The D rating category
is used when interest payments or principal payments are not
made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such
payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA Bonds which are rated AAA are judged to be of the best
quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds which are rated AA are judged to be of high quality
by all standards. Together with the AAA group, they
comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in AAA
securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
BAA Bonds which are rated BAA are considered as medium-grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present, but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and, in fact, have
speculative characteristics as well.
BA Bonds which are BA are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may
be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the
contract over any long period of time may be small.
CAA-Bonds which are rated CAA are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
CA-Bonds which are rated C represent obligations which are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of
bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA Bonds considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally
strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances
than bonds with higher ratings.
BBB Bonds considered to be investment grade and of
satisfactory credit quality. The obligator's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these
bonds, and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher
ratings.
BB Bonds are considered speculative. The obligor's ability
to pay interest and repay principal may be affected over
time by adverse economic changes. However, business and
financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B Bonds are considered highly speculative. While bonds in
this call are currently meeting debt service requirements,
the probability of continued timely payment of principal and
interest reflects the limited margin of safety and the need
for reasonable business and economic activity throughout the
life of the issue.
CCC Bonds have certain identifiable characteristics which,
if not remedied, may lead to default. The ability to meet
obligations requires an advantageous business and economic
environment.
CC Bonds are minimally protected. Default in payment of
interest and/or principal seems probably over time.
C Bonds are in imminent default in payment of interest or
principal.
DDD,DD, AND D Bonds are in default on interest and/or
principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery
value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these
bonds, and D represents the lowest potential for recovery.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING
A-1 -- This highest category indicates that the degree of
safety regarding timely payment is strong. Those issues
determined to possess extremely strong safety
characteristics are denoted with a plus sign (+)
designation.
A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree
of safety is not as high as for issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING
PRIME-1 Issuers rated PRIME-1 (or related supporting
institutions) have a superior capacity for repayment of
short-term promissory obligations. PRIME-1 repayment
capacity will normally be evidenced by 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; well-established access to a
range of financial markets and assured sources of alternate
liquidity.
PRIME-2 Issuers rated PRIME-2 (or related supporting
institutions) have a strong capacity for repayment of short-
term promissory 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.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING
F-1+ Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this
rating reflect an assurance for timely payment only slightly
less in degree than issues rated F-1+.
F-2 Good Credit Quality. Issues carrying this rating have
a satisfactory degree of assurance for timely payment, but
the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
458043 60 1
G01078-02 (4/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and
Exhibits:
(a) Financial Statements: (1-5) Incorporated by
reference to the Annual Reports of
Registrant dated December 31, 1994 (File
Nos. 33-69268 and 811-8042); (6) Filed in
Part A; (7) To be filed by amendment;
(b) Exhibits:
(1) Conformed copy of Amended and Restated
Declaration of Trust; (3)
(2) Copy of By-Laws; (2)
(3) Not Applicable;
(4) (i) Copy of Specimen Certificate for
Shares of
Beneficial Interest of
Equity Growth and Income Fund;
(2)
(ii) Copy of Specimen
Certificate for Shares of
Beneficial Interest of Utility Fund; (2)
(iii) Copy of Specimen
Certificate for Shares of
Beneficial Interest of U.S. Government Bond
Fund; (2)
(iv) Copy of Specimen
Certificate for Shares of
Beneficial Interest of Corporate Bond
Fund; (2)
(v) Copy of Specimen
Certificate for Shares of
Beneficial Interest of Prime Money
Fund; (2)
(vi) Copy of Specimen
Certificate for Shares of
Beneficial Interest of International Stock
Fund; (4)
(vii) Copy of Specimen
Certificate for Shares of
Beneficial Interest of Growth Stock Fund;
(to be filed by amendment)
(5) Conformed copy of Investment Advisory
Contract; (3)
(i) Conformed copy of Exhibit A
to Investment Advisory Contract; (3)
(ii) Conformed copy of Exhibit B
to Investment Advisory Contract; (3)
(iii) Conformed copy of
Exhibit C to Investment Adivsory
Contract; (3)
(iv) Conformed copy of Exhibit D
to Investment Adivsory Contract; (3)
(v) Conformed copy of Exhibit E
to Investment Adivsory Contract; (3)
+ All exhibits have been filed electronically.
(2) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed April 29,
1994. (File Nos. 33-69268 and 811-8042).
(3) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed August 23,
1994. (File Nos. 33-69268 and 811-8042).
(4) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-1A filed January 19,
1995. (File Nos. 33-69268 and 811-8042O).
(vi) Conformed copy of Exhibit F
to Investment Advisory Contract; (6)
(vii) Conformed copy of
Exhibit G to the Trust's present
investment advisory contract to add
Growth Stock Fund to the present investment
advisory contract; (to be filed by
amendment)
(6) Conformed copy of Distributor's
Contract; (3)
(i) Conformed copy of Exhibit A
to Distributor's Contract; (3)
(ii) Conformed copy of Exhibit B
to Distributor's Contract; (3)
(iii) Conformed copy of
Exhibit C to Distributor's Contract; (3)
(iv) Conformed copy of Exhibit D
to Distributor's Contract; (3)
(v) Conformed copy of Exhibit E
to Distributor's Contract; (3)
(vi) Conformed copy of Exhibit F
to Distributor's Contract; (7)
(vii) Conformed copy of
Exhibit G to Distributor's Contract; (to be filed by
amendment)
(7) Not Applicable;
(8) Conformed copy of Custodian Contract; (7)
(9) (i) Conformed copy of Administrative
Services Agreement; (7)
(ii) Conformed copy of Agreement
for Fund Accounting, Shareholder Recordkeeping and
Custody Services Procurement; (7)
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered; (2)
(11) Not applicable;
(12) Not Applicable;
(13) Conformed copy of Initial Capital
Understanding; (2)
(14) Not Applicable;
(15) Not Applicable;
(16) (i) Copy of Equity Growth and
Income Fund Schedule for Computation of Fund
Performance Data; (3)
(ii) Copy of Utility Fund
Schedule for Computation of Fund Performance Data; (3)
(iii) Copy of U.S.
Government Bond Fund Schedule
for Computation of Fund Performance
Data;(3)
(iv) Copy of Corporate Bond
Fund Schedule for Computation
of Fund Performance Data; (2)
+ All exhibits have been filed electronically.
(2) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed April 29,
1994. (File Nos. 33-69268 and 811-8042).
(3) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed August 23,
1994. (File Nos. 33-69268 and 811-8042).
(6) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on Form N-1A filed April 3, 1995.
(File Nos. 33-69268 and 811-80420).
(7) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 6 on Form N-1A filed April 21,
1995. (File Nos. 33-69268 and 811-80420).
(v) Copy of Prime Money
Fund Schedule for Computation
of Fund Performance Data;+
(vi) Copy of International
Stock Fund Schedule for
Computation of Fund Performance Data;+
(Schedule for computation of Yield
Calculation to be filed by amendment)
(17) Copy of Financial Data Schedules;+
(18) Not applicable
(19) Conformed copy of Power of Attorney; (8)
Item 25. Persons Controlled by or
Under Common Control with
Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of August 2, 1995
Shares of beneficial interest
(no par value)
Corporate Bond Fund 15
Equity Growth and Income Fund 12
International Stock Fund 8
Prime Money Fund 9
U.S. Government Bond Fund 15
Utility Fund 14
Item 27. Indemnification: (1)
Item 28. Business and Other
Connections of Investment
Adviser:
For a description of the other business of the
investment adviser, see the section entitled "Fund
Information - Management of the Fund" in Part A. The
affiliations with the Registrant of three of the
Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration
Statement under "Insurance Management Series
Management." The remaining Trustee of the investment
adviser, his position with the investment adviser,
and, in parentheses, his principal occupation is: Mark
D. Olson (Partner, Wilson, Holbrook and Bayard), 107
W. Market Street, Georgetown, Delaware 19447.
+ All exhibits have been filed electronically.
(1) Response is incorported by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed December 10,
1993. (File Nos. 33-69268 and 811-80420).
(8) Response is incorported by reference to Registrant's Post-
Effective Amendment No. 7 on Form N-1A filed July 17, 1995.
(File Nos. 33-69268 and 811-80420).
The remaining Officers of the investment adviser are:
William D. Dawson, III, Henry A. Frantzen, J. Thomas
Madden, and Mark L. Mallon, Executive Vice Presidents;
Henry J. Gailliot, Senior Vice President-Economist;
Peter R. Anderson, and J. Alan Minteer, Senior Vice
Presidents; J. Scott Albrecht, Randall A. Bauer, David
A. Briggs, Jonathan C. Conley, Deborah A. Cunningham,
Michael P. Donnelly, Mark E. Durbiano, Kathleen M.
Foody-Malus, Thomas M. Franks, Edward C. Gonzales,
Jeff A. Kozemchak, Marian R. Marinack, John W.
McGonigle, Susan M. Nason, Mary Jo Ochson, Robert J.
Ostrowski, Frederick L. Plautz, Jr., Charles A.
Ritter, James D. Roberge, Sandra L. Weber and
Christopher H. Wiles, Vice Presidents; Edward C.
Gonzales, Treasurer; and John W. McGonigle, Secretary.
The business address of each of the Officers of the
investment adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are
also officers of a majority of the investment advisers
to the Funds listed in Part B of this Registration
Statement.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the
Distributor for shares of the Registrant, also
acts as principal underwriter for the following
open-end investment companies: Alexander Hamilton
Funds; American Leaders Fund, Inc.; Annuity
Management Series; Arrow Funds; Automated Cash
Management Trust; Automated Government Money
Trust; BayFunds; The Biltmore Funds; The Biltmore
Municipal Funds; Blanchard Funds; Blanchard
Precious Metals, Inc.; California Municipal Cash
Trust; Cash Trust Series, Inc.; Cash Trust Series
II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated
Tax-Free Trust; Federated Total Return Series,
Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3
Years; Federated U.S.Government Securities Fund:
3-5 Years;First Priority Funds; First Union Funds;
Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility
Fund, Inc.; Fountain Square Funds; Fund for U.S.
Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust;
Independence One Mutual Funds; Intermediate
Municipal Trust; International Series Inc.;
Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty
High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Marshall
Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; The
Monitor Funds; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; 111
Corcoran Funds; Peachtree Funds; The Planters
Funds; RIMCO Monument Funds; The Shawmut Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Tower Mutual
Funds; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; The Virtus Funds; Vision
Fiduciary Funds, Inc.; Vision Group of Funds,
Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as
principal underwriter for the following closed-end
investment company: Liberty Term Trust, Inc.-
1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, and Treasurer, President
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Executive Vice
Federated Investors Tower President, and Assistant President and
Pittsburgh, PA 15222-3779 Secretary, Federated Secretary
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Albert H. Burchfield Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President --
Federated Investors Tower Federated Securities
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Newton Heston, III Vice President --
Federated Investors Tower Federated Securities
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Stephen A. La Versa Vice President --
Federated Investors Tower Federated Securities
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles H. Field Assistant Vice President --
Federated Investors Tower Federated Securities
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President --
Federated Investors Tower Federated Securities
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Assistant
Federated Investors Tower Federated Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. 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 Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company P.O. Box 8600
Transfer Agent, Dividend Boston, Massachusetts 02266- 8600
Disbursing Agent and
Portfolio Recordkeeper
Federated Administrative Federated Investors Tower
Services Pittsburgh, PA 15222-3779
Administrator
Federated Advisers Federated Investors Tower
Investment Adviser Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
Custodian
Item 31. Management Services: Not
applicable.
Item 32. 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.
Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered, a copy of the
Registrant's latest annual report to shareholders,
upon request and without charge.
Registrant hereby undertakes to file a post-effective
amendment on behalf of Growth Stock Fund, using
financial statements for Growth Stock Fund, which need
not be certified, within four to six months from the
effective date of Post-Effective Amendment No. 7.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
INSURANCE MANAGEMENT SERIES, 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, thereto duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 28th day
of August, 1995.
INSURANCE MANAGEMENT SERIES
BY: /s/G. Andrew Bonnewell
G. Andrew Bonnewell, Assistant Secretary
Attorney in Fact for John F. Donahue
August 28, 1995
Pursuant to the requirements of the Securities Act of
1933, this Amendment to its Registration Statement has been
signed below by the following person in the capacity and on
the date indicated:
NAME TITLE DATE
By: /s/G. Andrew Bonnewell
G. Andrew Bonnewell Attorney In Fact August 28, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
Edward C. Gonzales* Executive Vice President
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
David M. Taylor* Treasurer
(Principal Financial and
Accounting Officer)
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601/ Reg. S-K
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Prime Money Fund Price/
Share= $1.00
Return Since Inception
ending 7/31/95 NAV= $1.00
FYE: December 31
DECLARED: DAILY
PAID: MONTHLY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
Reinvest Period Dividend Gain Price Period Ending Invest
Dates Shares /Share /Share /Share Shares Price Value
11/30/94 1000.000 0.001265972 0.00000 $1.00 1001.266 $1.00 $1,001.27
12/31/94 1001.266 0.003770798 0.00000 $1.00 1005.042 $1.00 $1,005.04
1/31/95 1005.042 0.003782940 0.00000 $1.00 1008.844 $1.00 $1,008.84
2/28/95 1008.844 0.003873511 0.00000 $1.00 1012.751 $1.00 $1,012.75
3/31/95 1012.751 0.004411326 0.00000 $1.00 1017.219 $1.00 $1,017.22
4/30/95 1017.219 0.004267716 0.00000 $1.00 1021.560 $1.00 $1,021.56
5/31/95 1021.560 0.004545728 0.00000 $1.00 1026.204 $1.00 $1,026.20
6/30/95 1026.204 0.004398509 0.00000 $1.00 1030.718 $1.00 $1,030.72
7/31/95 1030.718 0.004385015 0.00000 $1.00 1035.237 $1.00 $1,035.24
</TABLE>
$1,000 (1+T) = End Value
T = 3.52%
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601/ Reg. S-K
Schedule for computation of Yield Calculation
Prime Money Fund
This example illustrates the
yield quotation for the seven-day period ended: 31-Jul-95
Value of a hypothetical pre-existing
account with exactly
one share at the beginning of
the base period $1.000000000
Value of same account (excluding
capital changes) at end
of the seven-day base period* $1.000983299
Net change in account value $0.000983299
Base Period Return: $0.000983299
Net change in account value divided by
the beginning account value ($ .000983299 / $1.000000000)
5.13%
Annualized Current Net Yield ( .000458656 x 365/7)
5.26%
Effective Yield ** (.000983299 + 1 ) (365/7) - 1
* This value includes the value of additional shares purchased with
dividends from the original share, and dividends declared on both the
original share and any such additional shares.
** This value may change to include shares purchased with dividends
reinvested on a less frequent basis.
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601/ Reg. S-K
Schedule for Computation Initial
of Fund Performance Data Invest of: $1,000
Offering
Prime Money Fund Price/
Share= $1.00
Return Since Inception
ending 7/31/95 NAV= $1.00
FYE: December 31
Total
DECLARED: DAILY
PAID: MONTHLY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Begin Capital Reinvest Ending Total
Reinvest Period Dividend Gain Price Period Ending Invest
Dates Shares /Share /Share /Share Shares Price Value
11/30/94 1000.000 0.001265972 0.00000 $1.00 1001.266 $1.00 $1,001.27
12/31/94 1001.266 0.003770798 0.00000 $1.00 1005.042 $1.00 $1,005.04
1/31/95 1005.042 0.003782940 0.00000 $1.00 1008.844 $1.00 $1,008.84
2/28/95 1008.844 0.003873511 0.00000 $1.00 1012.751 $1.00 $1,012.75
3/31/95 1012.751 0.004411326 0.00000 $1.00 1017.219 $1.00 $1,017.22
4/30/95 1017.219 0.004267716 0.00000 $1.00 1021.560 $1.00 $1,021.56
5/31/95 1021.560 0.004545728 0.00000 $1.00 1026.204 $1.00 $1,026.20
6/30/95 1026.204 0.004398509 0.00000 $1.00 1030.718 $1.00 $1,030.72
7/31/95 1030.718 0.004385015 0.00000 $1.00 1035.237 $1.00 $1,035.24
</TABLE>
$1,000 (1+T) = End Value
T = 3.52%
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Insurance Management Series
Corporate Bond Fund
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1995
<INVESTMENTS-AT-COST> 6,201,551
<INVESTMENTS-AT-VALUE> 6,162,896
<RECEIVABLES> 156,656
<ASSETS-OTHER> 19,583
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,339,135
<PAYABLE-FOR-SECURITIES> 301,031
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 301,031
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,077,503
<SHARES-COMMON-STOCK> 637,856
<SHARES-COMMON-PRIOR> 164,270
<ACCUMULATED-NII-CURRENT> 384
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,128)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (38,655)
<NET-ASSETS> 6,038,104
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 141,456
<OTHER-INCOME> 0
<EXPENSES-NET> 10,998
<NET-INVESTMENT-INCOME> 130,458
<REALIZED-GAINS-CURRENT> 11,220
<APPREC-INCREASE-CURRENT> 126,493
<NET-CHANGE-FROM-OPS> 268,171
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 128,010
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 581,704
<NUMBER-OF-SHARES-REDEEMED> 121,691
<SHARES-REINVESTED> 13,573
<NET-CHANGE-IN-ASSETS> 4,581,161
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (12,348)
<OVERDISTRIB-NII-PRIOR> (2,064)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 127,025
<AVERAGE-NET-ASSETS> 2,961,479
<PER-SHARE-NAV-BEGIN> 8.870
<PER-SHARE-NII> 0.400
<PER-SHARE-GAIN-APPREC> 0.600
<PER-SHARE-DIVIDEND> 0.400
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.470
<EXPENSE-RATIO> 80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> Insurance Management Series
Equity Growth & Income Fund
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1995
<INVESTMENTS-AT-COST> 13,374,225
<INVESTMENTS-AT-VALUE> 14,335,211
<RECEIVABLES> 114,307
<ASSETS-OTHER> 7,185
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,456,703
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,526,665
<SHARES-COMMON-STOCK> 1,281,341
<SHARES-COMMON-PRIOR> 246,391
<ACCUMULATED-NII-CURRENT> 2,786
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (33,734)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 960,986
<NET-ASSETS> 14,456,703
<DIVIDEND-INCOME> 73,302
<INTEREST-INCOME> 40,590
<OTHER-INCOME> 0
<EXPENSES-NET> 28,486
<NET-INVESTMENT-INCOME> 85,406
<REALIZED-GAINS-CURRENT> (19,546)
<APPREC-INCREASE-CURRENT> 962,337
<NET-CHANGE-FROM-OPS> 1,028,197
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 83,117
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,225,431
<NUMBER-OF-SHARES-REDEEMED> 198,046
<SHARES-REINVESTED> 7,566
<NET-CHANGE-IN-ASSETS> 12,056,673
<ACCUMULATED-NII-PRIOR> 495
<ACCUMULATED-GAINS-PRIOR> (14,187)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 25,097
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 145,210
<AVERAGE-NET-ASSETS> 6,749,372
<PER-SHARE-NAV-BEGIN> 9.740
<PER-SHARE-NII> 0.100
<PER-SHARE-GAIN-APPREC> 1.540
<PER-SHARE-DIVIDEND> 0.100
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.280
<EXPENSE-RATIO> 85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> Insurance Management Series
U.S. Government Bond Fund
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1995
<INVESTMENTS-AT-COST> 3,982,238
<INVESTMENTS-AT-VALUE> 3,982,238
<RECEIVABLES> 48,161
<ASSETS-OTHER> 4,056
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,034,455
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 305
<TOTAL-LIABILITIES> 305
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 4,033,423
<SHARES-COMMON-STOCK> 403,629
<SHARES-COMMON-PRIOR> 124,552
<ACCUMULATED-NII-CURRENT> 733
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 4,034,150
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68,682
<OTHER-INCOME> 0
<EXPENSES-NET> 9,319
<NET-INVESTMENT-INCOME> 59,363
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 59,363
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 58,630
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 353,954
<NUMBER-OF-SHARES-REDEEMED> 80,280
<SHARES-REINVESTED> 5,403
<NET-CHANGE-IN-ASSETS> 2,790,386
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (6)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,979
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 137,365
<AVERAGE-NET-ASSETS> 2,375,403
<PER-SHARE-NAV-BEGIN> 9.990
<PER-SHARE-NII> 0.240
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.240
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.990
<EXPENSE-RATIO> 80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> Insurance Management Series
Prime Money Fund
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-END> Jun-30-1995
<INVESTMENTS-AT-COST> 6,630,381
<INVESTMENTS-AT-VALUE> 6,630,381
<RECEIVABLES> 7,354
<ASSETS-OTHER> 739
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,638,474
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,206
<TOTAL-LIABILITIES> 17,206
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6,621,268
<SHARES-COMMON-STOCK> 6,621,268
<SHARES-COMMON-PRIOR> 552,268
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 6,621,268
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 97,368
<OTHER-INCOME> 0
<EXPENSES-NET> 12,779
<NET-INVESTMENT-INCOME> 84,589
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 84,589
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 84,589
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,483,613
<NUMBER-OF-SHARES-REDEEMED> 4,497,787
<SHARES-REINVESTED> 83,174
<NET-CHANGE-IN-ASSETS> 6,069,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,987
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 119,794
<AVERAGE-NET-ASSETS> 3,188,786
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.030
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 81
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<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 5
<NAME> Insurance Management Series
Utility Fund
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</TABLE>
<TABLE> <S> <C>
<S> <C>
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<SERIES>
<NUMBER> 6
<NAME> Insurance Management Series
International Stock Fund
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