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. 6 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 7 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:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
x on April 24, 1995 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 six portfolios: (1) Equity Growth
and Income Fund, (2) Utility Fund, (3) U.S. Government Bond Fund, (4)
Corporate Bond Fund, (5) Prime Money Fund, and (6) International Stock
Fund, relates only to Equity Growth and Income Fund, Utility Fund, U.S.
Government Bond Fund, Corporate Bond Fund and Prime Money 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 (1-6) Cover Page.
Item 2. Synopsis Not applicable.
Item 3. Condensed Financial
Information (1-5) Financial Highlights; (1-
5)
Performance Information.
Item 4. General Description of
Registrant (1-6) General Information; (1-
6)
Investment Information; (1-6)
Investment Objectives; (1-6)
Investment Policies; (4,5)
Investment Risks; (1-6)
Investment
Limitations; (5) Regulatory
Compliance.
Item 5. Management of the Fund (1-6) Fund Information; (1-6)
Management of the Fund; (1-6)
Distribution of Fund Shares;
(1-6)
Administration of the Fund; (1-
6)
Brokerage Transactions; (6)
Expenses
of the Fund.
Item 6. Capital Stock and Other
Securities (1-6) Dividends; (1-6)
Shareholder
Information; (1-6) Tax
Information;
(1-6) Federal Taxes; (1-6)
State and
Local Taxes; (1-6) Voting
Rights.
Item 7. Purchase of Securities Being
Offered (1-6) Net Asset Value; (1-6)
Investing in the Fund; (1-6)
Purchases and Redemptions; (1-
6)
What Shares Cost.
Item 8. Redemption or Repurchase (1-6) Purchases and
Redemptions.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-6) Cover Page.
Item 11. Table of Contents (1-6) Table of Contents.
Item 12. General Information and
History Not Applicable.
Item 13. Investment Objectives and
Policies (1-6) Investment Objectives
and
Policies; (1-6) Investment
Limitations.
Item 14. Management of the Fund (1-6) Insurance Management
Series
Management;
Item 15. Control Persons and Principal
Holders of Securities (1-6) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-6) Investment Advisory
Services;
(1-6) Administrative Services;
(6)
Transfer Agent and Dividend
Disbursing Agent.
Item 17. Brokerage Allocation (1-6) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-6) Purchasing Shares; (1-6)
Determining Net Asset Value.
Item 20. Tax Status (1-6) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1,2,3,4,6) Total Return; (1-
6)
Yield; (5) Effective Yield; (1-
6)
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) To
be
filed with 4-6 month update
EQUITY GROWTH AND INCOME FUND
(A PORTFOLIO OF INSURANCE MANAGEMENT SERIES)
PROSPECTUS
This prospectus offers shares of Equity Growth and Income Fund (the
"Fund"),
which is a diversified investment portfolio in Insurance Management
Series (the
"Trust"), an open-end, diversified management investment company. The
primary
investment objective of the Fund is to achieve long-term growth of
capital. The
Fund's secondary objective is to provide income. 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 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 annuity contracts and variable
life
insurance policies 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 FUNDING VEHICLES FOR LIFE
INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR
SUCH
CONTRACTS.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
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- --------
FINANCIAL HIGHLIGHTS
1
- ------------------------------------------------------
GENERAL INFORMATION
2
- ------------------------------------------------------
INVESTMENT INFORMATION
2
- ------------------------------------------------------
Investment Objective
2
Investment Policies
2
Investment Limitations
6
NET ASSET VALUE
6
- ------------------------------------------------------
INVESTING IN THE FUND
6
- ------------------------------------------------------
Purchases and Redemptions
6
What Shares Cost
7
Dividends
7
FUND INFORMATION
7
- ------------------------------------------------------
Management of the Fund
7
Distribution of Fund Shares
8
Administration of the Fund
9
Brokerage Transactions
9
SHAREHOLDER INFORMATION
9
- ------------------------------------------------------
Voting Rights
9
TAX INFORMATION
10
- ------------------------------------------------------
Federal Taxes
10
State and Local Taxes
10
PERFORMANCE INFORMATION
11
- ------------------------------------------------------
APPENDIX
12
- ------------------------------------------------------
ADDRESSES
15
- ------------------------------------------------------
EQUITY GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
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- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the
Fund's
independent auditors. Their report, dated February 10, 1995, on the
Fund's
financial statements for the year ended December 31, 1994, and on the
following
table for the period presented, is included in the Annual Report, which
is
incorporated by reference. This table should be read in conjunction with
the
Fund's financial statements and notes thereto, which may be obtained
from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1994*
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 10.00
- ------------------------------------------------------------------------
- -----------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- -----------------
Net investment income
0.19
- ------------------------------------------------------------------------
- -----------------
Net realized and unrealized gain (loss) on investments
(0.26)
- ------------------------------------------------------------------------
- ----------------- -------
Total from investment operations
(0.07)
- ------------------------------------------------------------------------
- -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- -----------------
Dividends to shareholders from net investment income
(0.19)
- ------------------------------------------------------------------------
- ----------------- -------
NET ASSET VALUE, END OF PERIOD
$ 9.74
- ------------------------------------------------------------------------
- ----------------- -------
TOTAL RETURN**
(0.70%)
- ------------------------------------------------------------------------
- -----------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- -----------------
Expenses
0.54%(a)
- ------------------------------------------------------------------------
- -----------------
Net investment income
2.58%(a)
- ------------------------------------------------------------------------
- -----------------
Expense waiver/reimbursement (b)
25.42%(a)
- ------------------------------------------------------------------------
- -----------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- -----------------
Net assets, end of period (000 omitted)
$ 2,400
- ------------------------------------------------------------------------
- -----------------
Portfolio turnover rate
32%
- ------------------------------------------------------------------------
- -----------------
</TABLE>
* Reflects operations for the period from February 1, 1994 (date of
initial
public investment) to December 31, 1994. For the period from
December 9,
1993 (start of business) to January 31, 1994, the Fund had no
investment
activity.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
Further information about the Fund's performance is contained in the
Fund's
Annual Report, dated December 31, 1994, which can be obtained free of
charge.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Fund is a portfolio of the Trust which 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 annuity contracts and variable life insurance policies 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 OBJECTIVES
The primary investment objective of the Fund is to achieve long-term
growth of
capital. The Fund's secondary objective is to provide income. The
investment
objectives cannot be changed without the approval of the Fund's
shareholders.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies
described
in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in common stock of "blue-
chip"
companies. "Blue-chip" companies generally are top-quality, established
growth
companies which, in the opinion of the investment adviser, meet one or
more of
the following criteria:
industry leader with proven management capabilities;
historical and future earnings growth rate of approximately 10%
compounded annually;
strong balance sheet with pension liabilities funded;
products with brand recognition and consumer acceptance;
growing consumer-based demand with limited government sales;
ability to meet social, political, and environmental problems;
vigorous research effort with continuing new product flow;
low external capital requirements; and
not an import competitive company but possessing international
capabilities.
Unless indicated otherwise, the investment policies of the Fund may be
changed
by the Board of Trustees ("Trustees") without the approval of
shareholders.
Shareholders will be notified before any material change in these
policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term the economy will continue to expand
and
develop and that this economic growth will be
reflected in the growth of the revenues and earnings of blue-chip
companies.
Given these long-term investment horizons, the Fund will attempt to hold
its
portfolio securities throughout market cycles.
COMMON STOCKS. The Fund invests primarily in common stocks of blue-chip
companies selected by the Fund's investment adviser based on the
criteria set
forth above and traditional research techniques and technical factors,
including
assessment of earnings and dividend growth prospects and of the risk and
volatility of the company's industry. Other factors, such as product
position or
market share, will also be considered by the Fund's investment adviser.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities
and
warrants of the blue-chip companies. Convertible securities are fixed-
income
securities which may be exchanged or converted into a predetermined
number of
the issuer's underlying common stock at the option of the holder during
a
specified time period. Convertible securities may take the form of
convertible
preferred stock, convertible bonds or debentures, units consisting of
"usable"
bonds and warrants or a combination of the features of several of these
securities. The Fund invests in convertible bonds rated "B" or higher by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service,
Inc.
("Moody's") at the time of investment or, if unrated, of comparable
quality. If
a convertible bond is rated below "B" according to the characteristics
set forth
hereafter after the Fund has purchased it, the Fund is not required to
drop the
convertible bond from the portfolio but will consider appropriate
action. 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 are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before
the
bond's 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. The
Fund
will exchange or convert the convertible securities held in its
portfolio into
shares of the underlying common stock in instances in which, in the
investment
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 Fund's 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 Fund's 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.
BANK INSTRUMENTS AND SECURITIES OF OTHER INVESTMENT COMPANIES. Primarily
to
manage short-term cash, the Fund may also invest in certificates of
deposit,
demand and time deposits, bankers' acceptances, deposit notes, and other
instruments of domestic and foreign banks and other deposit institutions
("Bank
Instruments") and securities of other investment companies.
REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements.
Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized
financial institutions sell U.S. government securities or other
securities to
the Fund and agree at the time of sale to repurchase them at a mutually
agreed
upon time and price. The Fund or its custodian will take possession of
the
securities subject to repurchase agreements and these securities will be
marked
to market daily. To the extent that the original seller does not
repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price
on any sale of such securities. In the event that such 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 found by the
Fund's
adviser to be creditworthy pursuant to guidelines established by the
Trustees.
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 portfolio securities on a short-term or long-term basis,
or both,
up to one-third of the value of its total assets to broker/dealers,
banks, or
other institutional borrowers of securities. This is a fundamental
policy which
may not be changed without the approval of shareholders. The Fund will
only
enter into loan arrangements with broker/dealers, banks, or other
institutions
which the adviser has determined are creditworthy under guidelines
established
by the Trustees, and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the
portfolio
securities loaned at all times. 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.
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 the transaction 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/less than the market value of the securities on the
settlement
date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also
invest
temporarily in cash and cash items during times of unusual market
conditions and
to maintain liquidity. Cash items may include short-term obligations
such as:
commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by
Moody's,
or F-1 or F-2 by Fitch Investors Service, Inc.
securities issued and/or guaranteed as to the payment of
principal and
interest by the U.S. government or its agencies and
instrumentalities;
and
repurchase agreements.
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.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a
percentage of its cash value with an agreement to buy it back on
a set
date) or pledge securities except, under certain circumstances,
the Fund
may borrow money and engage in reverse repurchase agreements in
amounts
up to one-third of the value of its total assets and pledge up to
15% of
its total assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
The following limitation, 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 10% of its total assets in securities of other
investment companies.
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
- ------------------------------------------------------------------------
- --------
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 annuity contracts and variable
life
insurance policies. The use of Fund shares as investments for both
variable
annuity contracts and variable life insurance policies 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 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 quarterly.
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
- ------------------------------------------------------------------------
- --------
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 .75 of 1% 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 are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
Peter R. Anderson has been the Fund's portfolio manager since the
Fund
commenced operations. Mr. Anderson joined Federated Investors in
1972 as,
and is presently, a Senior Vice President of the Fund's investment
adviser.
Mr. Anderson is a Chartered Financial Analyst and received his
M.B.A. in
Finance from the University of Wisconsin.
Frederick L. Plautz has been the Fund's portfolio manager since
December
1994. Mr. Plautz joined Federated Investors in 1990 as an Assistant
Vice
President and has been a Vice President of the Fund's investment
adviser
since October 1994. Mr. Plautz was a portfolio manager at Banc One
Asset
Management Corp. from 1986 until 1990. Mr. Plautz received his M.S.
in
Finance from the University of Wisconsin.
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 as
specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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.
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's 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.
As of April 7, 1995, Aetna Life Insurance and Annuity, Hartford,
Connecticut,
owned 82.89% 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.
TAX INFORMATION
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- --------
FEDERAL TAXES
The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment
companies and to receive the special tax treatment afforded to such
companies.
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
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- --------
From time to time the Fund advertises total return and yield. Total
return
represents the change, over a specific 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, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
the
Fund's performance to certain indices.
APPENDIX
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- --------
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard &
Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal
although it is somewhat more susceptible to the adverse effects of
changes in
circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
more
likely to lead to a weakened capacity to pay interest and repay
principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The
BB
rating category is also used for debt subordinated to senior debt that
is
assigned an actual or implied BBB rating.
B--Debt rated B has a greater vulnerability to default but currently has
the
capacity to meet interest payments and principal repayments. Adverse
business,
financial, or economic conditions will likely impair capacity or
willingness to
pay interest and repay principal.
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.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality.
The obligor has an exceptionally strong ability to pay interest and
repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high quality.
The
obligor's ability to pay interest and repay principal is very strong,
although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA
categories are not significantly vulnerable to foreseeable future
developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality.
The
obligor's ability to pay interest and repay principal is considered to
be
strong, but may be more vulnerable to adverse changes in economic
conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality.
The obligor's ability to pay interest and repay principal is considered
to be
adequate. Adverse changes in economic conditions and circumstances,
however, are
more likely to have adverse impact on these bonds, and therefore, impair
timely
payment.
BB--Bonds are considered speculative. The obligor's ability to pay
interest and
repay principal may be affected over time by adverse economic changes.
However,
business and financial alternatives can be identified which could assist
the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class
are
currently meeting debt service requirements, the probability of
continued timely
payment of principal and interest reflects the obligor's limited margin
of
safety and the need for reasonable business and economic activity
throughout the
life of the issue.
NR--NR indicates that Fitch does not rate the specific issue. Plus or
Minus (-):
Plus or minus signs are used with a rating symbol to indicate the
relative
position of a credit within the rating category. Plus and minus signs,
however,
are not used in the AAA category.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
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 RATINGS
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 moderated reliance on debt
and ample asset protection.
Broad margins in earning coverage of fixed financila 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., COMMERCIAL PAPER RATINGS
F-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having
the strongest degree of assurance for timely payment.
F-2--(Very Good Grade) Issues assigned this rating reflect an assurance
of
timely payment only slightly less in degree than the strongest issues.
ADDRESSES
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- --------
<TABLE>
<S> <C>
<C>
Insurance Management Series
Equity Growth and Income 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 and
P.O. Box 8604
Trust Company
Boston, Massachusetts 02266-8604
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- -----------------------------------------------
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
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- -----------------------------------------------
</TABLE>
EQUITY GROWTH AND
INCOME 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
458043502
3113010A (4/95)
Equity Growth and Income Fund
(A Portfolio of Insurance Management Series)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Equity Growth and Income Fund (the "Fund") 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 Objectives and Policies 1
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 2
Lending of Portfolio Securities 2
Reverse Repurchase Agreements 2
Portfolio Turnover 3
Investment Limitations 3
Insurance Management Series Management 5
Fund Ownership 10
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 11
Administrative Services 11
Transfer Agent and Dividend
Disbursing Agent 11
Brokerage Transactions 11
Purchasing Shares 12
Determining Net Asset Value 12
Determining Value of Securities 12
Massachusetts Partnership Law 12
Tax Status 12
The Fund's Tax Status 12
Shareholder's Tax Status 13
Total Return 13
Yield 13
Performance Comparisons 13
Investment Objectives and Policies
The primary investment objective of the Fund is to achieve long-term
growth of capital. The Fund's secondary objective is to provide income.
The investment objectives cannot be changed without approval of
shareholders.
Types of Investments
The Fund invests, under normal circumstances, at least 65% of its total
assets in common stock of "blue-chip" companies, as defined in the
prospectus. The Fund may also invest in other securities of these
companies, U.S. government securities, repurchase agreements, and bank
instruments. The following supplements the discussion of acceptable
investments in the prospectus.
Convertible Securities
As with all fixed-income securities, various market forces
influence the market value of convertible securities, including
changes in the level of interest rates. As interest rates
increase, the market value of convertible securities may decline
and, conversely, as interest rates decline, the market value of
convertible securities may increase. The unique investment
characteristics of convertible securities, the right to be
exchanged for the issuer's common stock, causes the market value
of convertible securities to increase when the underlying common
stock increases. However, since securities prices fluctuate, there
can be no assurance of capital appreciation, and most convertible
securities will not reflect as much capital appreciation as their
underlying common stocks. When the underlying common stock is
experiencing a decline, the value of the convertible security
tends to decline to a level approximating the yield-to-maturity
basis of straight nonconvertible debt of similar quality, often
called "investment value," and may not experience the same decline
as the underlying common stock.
Many convertible securities sell at a premium over their
conversion values (i.e., the number of shares of common stock to
be received upon conversion multiplied by the current market price
of the stock). This premium represents the price investors are
willing to pay for the privilege of purchasing a fixed-income
security with a possibility of capital appreciation due to the
conversion privilege. If this appreciation potential is not
realized, the premium may not be recovered.
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.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations
issued and/or guaranteed by the U.S. government agencies or
instrumentalities. These securities are backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
- Farmers Home Administration;
- Federal Home Loan Banks;
- Federal Home Loan Mortgage Corporation;
- Federal National Mortgage Association;
- Government National Mortgage Association; and
- Student Loan Marketing Association.
Bank Instruments
The Fund only invests in bank instruments (as defined in the
prospectus) either issued by an institution having capital,
surplus, and undivided profits over $100 million or insured by the
Bank Insurance Fund ("BIF") or the Savings Association Insurance
Fund ("SAIF"), both of which are administered by the Federal
Deposit Insurance Corporation. Bank instruments may include
Eurodollar Certificates of Deposit, Yankee Certificates of
Deposit, and Eurodollar Time Deposits. Institutions issuing
Eurodollar instruments are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as
reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping and the public availability of
information.
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. 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. 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 are
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.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of 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. The
Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
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.
Portfolio Turnover
Securities in the Fund's portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the
Fund's investment objectives, without regard to the length of time a
particular security may have been held.
For the period from February 1, 1994, (date of initial public
investment) to December 31, 1994, the portfolio turnover rate of the
Fund was 32%.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of portfolio
securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as
a temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous, and then only in
amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase
agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are
made. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage purposes.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in any
one industry. However, the Fund may at any time invest 25% or more
of its total assets in cash or cash items and securities issued
and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted
by the Fund's investment objectives and policies or the Trust's
Declaration of Trust.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objectives, policies, and limitations.
Diversification of Investments
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other
differences.
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 changes in these limitations become effective.
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 its net assets in
illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after
notice, and certain restricted securities not determined by the
Trustees to be liquid.
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 of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
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.
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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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.
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.
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.; 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 Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; 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; 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; The Virtus Funds; World
Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April 7 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: TransAmerica Occidental Life
Insurance Company owned approximately 95,028 shares (15.94%) and AEtna
Life Insurance and Annuity owned approximately 494,032 shares (82.89%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Trust and
Trustee and Chairman 68 other investment
companies in
the Fund Complex
Thomas G. Bigley, $252 $20,688 for the Trust and
Trustee 49 other investment
companies in
the Fund Complex
John T. Conroy, Jr., $276 $117,202 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
William J. Copeland, $276 $117,202 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
J. Christopher Donahue, $0 $0 for the Trust and
Trustee and President 14 other investment
companies in
the Fund Complex
James E. Dowd, $276 $117,202 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
Lawrence D. Ellis, M.D., $252 $106,460 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
Edward L. Flaherty, Jr., $276 $117,202 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
Peter E. Madden, $100 $90,563 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
Gregor F. Meyer, $252 $106,460 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
John E. Murray, Jr., $0 $0 for the Trust and
Trustee 68 other investment
companies in
the Fund Complex
Wesley W. Posvar, $252 $106,460 for the Trust and
Trustee 64 other investment
companies in
the Fund Complex
Marjorie P. Smuts, $252 $106,460 for the Trust and
Trustee 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 six portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All 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 or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the period from December 9, 1993 (start of business) to December 31,
1994, the adviser earned advisory fees of $4,397, all of which was
waived.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from December 9, 1993 (start
of business) to December 31, 1994, the Fund incurred $73,288 in costs
for administrative services. 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 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 upon 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 upon 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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
For the period from December 9, 1993 (start of business) to December 31,
1994, the Fund paid $3,714 in brokerage commissions on brokerage
transactions.
Purchasing Shares
Shares of the Fund 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 of the Fund 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 Value of Securities
The values of the Fund's portfolio securities are determined as follows:
- for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities
exchange, if available;
- in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices;
- for bonds and other fixed income securities, at the last sale
price on a national securities exchange, if available; otherwise,
as determined by an independent pricing service;
- for unlisted equity securities, the latest mean prices;
- for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service; or
- for all other securities, at fair value as determined in good
faith by the Board of Trustees.
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 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.
Shareholder's Tax Status
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. 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 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 Fund's cumulative total return for the period ended from February 1,
1994 (date of initial public investment) to December 31, 1994, was
(0.70%). Cumulative total return reflects the Fund's total performance
over a specific period of time. The Fund's cumulative total return is
representative of only eleven month of Fund activity.
The average annual total return for 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, adjusted over the period by any additional shares, assuming the
quarterly 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 for the thirty day period ended December 31, 1994 was
3.14%.
The yield for the Fund is determined 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 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 Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders. Also, the yield does not
reflect the charges and expenses of an insurance contract. 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 and market value of portfolio
securities;
- changes in Fund expenses; and
- the relative amount of the Fund's cash flow.
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 yield and
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 index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the growth and income funds
category in advertising and sales literature.
- Dow Jones Industrial Average ("DJIA"), is an unmanaged index
representing share prices of major industrial corporations, public
utilities, and transportation companies. Produced by the Dow Jones
& Company, it is cited as a principal indicator of market
conditions.
- Standard & Poor's Daily Stock Price Index Of 500 Common Stocks, a
composite index of common stocks in industry, transportation, and
financial and public utility companies, can be used to compare to
the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the S&P index assumes reinvestment
of all dividends paid by stocks listed on its index. Taxes due on
any of these distributions are not included, nor are brokerage or
other fees calculated in the S&P figures.
- Morningstar, Inc., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and 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 quarterly 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 funds using the Lipper Analytical
Services money market instruments average.
458043502
3113010B (4/95)
CORPORATE BOND FUND
(A PORTFOLIO OF INSURANCE MANAGEMENT SERIES)
PROSPECTUS
This prospectus offers shares of Corporate Bond Fund (the "Fund"), which
is a
diversified investment portfolio in Insurance Management Series (the
"Trust"),
an open-end, diversified management investment company. The Fund invests
in a
professionally managed, diversified portfolio limited primarily to fixed
income
securities which seek to achieve high current income. 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 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 variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for
investment
in the Fund. Keep this prospectus for future reference.
SPECIAL RISKS
The Fund's portfolio consists primarily of lower-rated corporate debt
obligations, which are commonly referred to as "junk bonds." These lower-
rated
bonds may be more susceptible to real or perceived adverse economic
conditions
than investment grade bonds. These lower-rated bonds are regarded as
predominantly speculative with regard to each issuer's continuing
ability to
make principal and interest payments. In addition, the secondary trading
market
for lower-rated bonds may be less liquid than the market for investment
grade
bonds. The Fund's investment adviser will endeavor to limit these risks
through
diversifying the portfolio and through careful credit analysis of
individual
issuers. Purchasers should carefully assess the risks associated with an
investment in this Fund. (See the sections in this prospectus entitled
"Investment Risks" and "Reducing Risks of Lower-Rated Securities.")
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 FUNDING VEHICLES FOR LIFE
INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR
SUCH
CONTRACTS.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
FINANCIAL HIGHLIGHTS
1
- ------------------------------------------------------
GENERAL INFORMATION
2
- ------------------------------------------------------
INVESTMENT INFORMATION
2
- ------------------------------------------------------
Investment Objective
2
Investment Policies
2
Investment Risks
5
Investment Limitation
7
NET ASSET VALUE
7
- ------------------------------------------------------
INVESTING IN THE FUND
7
- ------------------------------------------------------
Purchases and Redemptions
7
What Shares Cost
7
Dividends
8
FUND INFORMATION
8
- ------------------------------------------------------
Management of the Fund
8
Distribution of Fund Shares
9
Administration of the Fund
9
Brokerage Transactions
10
SHAREHOLDER INFORMATION
10
- ------------------------------------------------------
Voting Rights
10
TAX INFORMATION
11
- ------------------------------------------------------
Federal Taxes
11
State and Local Taxes
11
PERFORMANCE INFORMATION
11
- ------------------------------------------------------
APPENDIX
12
- ------------------------------------------------------
ADDRESSES
16
- ------------------------------------------------------
CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
THE FOLLOWING TABLE HAS BEEN AUDITED BY DELOITTE & TOUCHE LLP, THE
FUND'S
INDEPENDENT AUDITORS. THEIR REPORT, DATED FEBRUARY 10, 1995, ON THE
FUND'S
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1994, AND ON THE
FOLLOWING
TABLE FOR THE PERIOD PRESENTED, IS INCLUDED IN THE ANNUAL REPORT, WHICH
IS
INCORPORATED BY REFERENCE. THIS TABLE SHOULD BE READ IN CONJUNCTION WITH
THE
FUND'S FINANCIAL STATEMENTS AND NOTES THERETO, WHICH MAY BE OBTAINED
FROM THE
FUND.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1994*
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 10.00
- ------------------------------------------------------------------------
- -------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- -------------------
Net investment income
0.75
- ------------------------------------------------------------------------
- -------------------
Net realized and unrealized gain (loss) on investments
(1.12)
- ------------------------------------------------------------------------
- ------------------- -------
Total from investment operations
(0.37)
- ------------------------------------------------------------------------
- -------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- -------------------
Dividends to shareholders from net investment income
(0.75)
- ------------------------------------------------------------------------
- -------------------
Distributions in excess of net investment income
(0.01)(a)
- ------------------------------------------------------------------------
- ------------------- -------
Total distributions
(0.76)
- ------------------------------------------------------------------------
- ------------------- -------
NET ASSET VALUE, END OF PERIOD
$ 8.87
- ------------------------------------------------------------------------
- ------------------- -------
TOTAL RETURN**
(3.73%)
- ------------------------------------------------------------------------
- -------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- -------------------
Expenses
0.41%(c)
- ------------------------------------------------------------------------
- -------------------
Net investment income
9.11%(c)
- ------------------------------------------------------------------------
- -------------------
Expense waiver/reimbursement (b)
10.01%(c)
- ------------------------------------------------------------------------
- -------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- -------------------
Net assets, end of period (000 omitted)
$1,457
- ------------------------------------------------------------------------
- -------------------
Portfolio turnover rate
18%
- ------------------------------------------------------------------------
- -------------------
</TABLE>
* Reflects operations for the period from February 2, 1994 (date of
initial
public investment) to December 31, 1994. For the period from December
9, 1993
(start of business) to February 1, 1994, the Fund had no public
investment.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Distributions are determined in accordance with income tax
regulations
which may differ from generally accepted accounting principles.
These
distributions do not represent a return of capital for federal
income tax
purposes.
(b) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
(c) Computed on an annualized basis.
Further information about the Fund's performance is contained in the
Fund's
Annual Report, dated
December 31, 1994, which can be obtained free of charge.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Fund is a portfolio of the Trust which 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 annuity contracts and variable life insurance policies 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 investment objective of the Fund is to seek high current income. The
investment objective cannot be changed without approval of shareholders.
While
there is no assurance that the Fund will achieve its investment
objective, it
endeavors to do so by following the investment policies described in
this
prospectus.
INVESTMENT POLICIES
Unless stated otherwise, the Board of Trustees ("Trustees") can change
the
investment policies without the approval of shareholders. Shareholders
will be
notified before any material change becomes effective. The Fund
endeavors to
achieve its objective by investing primarily in a professionally
managed,
diversified portfolio of fixed income securities. The fixed income
securities in
which the Fund intends to invest are lower-rated corporate debt
obligations,
which are commonly referred to as "junk bonds." Some of these fixed
income
securities may involve equity features. Capital growth will be
considered, but
only when consistent with the investment objective of high current
income.
ACCEPTABLE INVESTMENTS. The Fund invests at least 65% of its assets in
lower-rated fixed income bonds. Under normal circumstances, the Fund
will not
invest more than 10% of the value of its total assets in equity
securities. The
prices of fixed income securities fluctuate inversely to the direction
of
interest rates. The fixed income securities in which the Fund invests
include,
but are not limited to:
preferred stocks;
bonds;
debentures;
notes;
equipment lease certificates; and
equipment trust certificates.
The securities in which the Fund may invest are generally rated BBB or
lower by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service
("Fitch") or
Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or are not
rated
but are determined by the Fund's investment adviser to be of comparable
quality.
Securities which are rated BBB or lower by S&P or Fitch or Baa or lower
by
Moody's have speculative characteristics. Changes in economic conditions
or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than highly rated bonds. A description
of the
rating categories is contained in the Appendix to this prospectus. There
is no
lower limit with respect to rating categories for securities in which
the Fund
may invest. See "Investment Risks" below.
REPURCHASE AGREEMENTS. The Funds will engage in repurchase agreements.
Repurchase agreements are arrangements in which banks, broker/dealers,
and other
recognized financial institutions sell U.S. government securities or
other
securities to the Fund and agree at the time of sale to repurchase them
at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the
original
seller does not repurchase the securities from the Fund, the Fund could
receive
less than the repurchase price on any sale of such securities.
In the event that such 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 found by the Fund's
adviser to
be creditworthy pursuant to guidelines established by the Trustees.
RESTRICTED AND ILLIQUID SECURITIES. 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 its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the
Fund may lend portfolio securities on a short-term or long-term basis,
or both,
up to one-third of the value of its total assets, to broker/dealers,
banks, or
other institutional borrowers of securities. This is a fundamental
policy which
may not be changed without shareholder approval. The Fund will only
enter into
loan arrangements with broker/dealers, banks, or other institutions
which the
investment adviser has determined are creditworthy under guidelines
established
by the Trustees and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the
securities
loaned at all times. 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.
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/less than the market value of the
securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
TEMPORARY INVESTMENTS. The Fund may invest temporarily in cash and short-
term
obligations for defensive purposes during times of unusual market
conditions.
Short-term obligations may include:
certificates of deposit;
commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by
Moody's,
or F-1 or F-2 by Fitch and variable rate demand master notes;
short-term notes;
obligations issued or guaranteed as to principal and interest by
the U.S.
government or any of its agencies or instrumentalities; and
repurchase agreements.
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.
INVESTMENT RISKS
The corporate debt obligations in which the Fund invests are usually not
in the
three highest rating categories of the nationally recognized statistical
rating
organizations (AAA, AA, or A for S&P or Fitch, and Aaa, Aa or A for
Moody's) but
are in the lower rating categories or are unrated but are of comparable
quality
and have speculative characteristics. Lower-rated or unrated bonds are
commonly
referred to as "junk bonds." There is no minimal acceptable rating for a
security to be purchased or held in the Fund's portfolio, and the Fund
may, from
to time, purchase or hold securities rated in the lowest rating
category. A
description of the rating categories is contained in the Appendix to
this
prospectus.
Lower-rated securities will usually offer higher yields than higher-
rated
securities. However, there is more risk associated with these
investments. This
is because of reduced creditworthiness and increased risk of default.
Lower-rated securities generally tend to reflect short-term corporate
and market
developments to a greater extent than higher-rated securities which
react
primarily to fluctuations in the general level of interest rates. Short-
term
corporate and market developments affecting the prices or liquidity of
lower-rated securities could include adverse news affecting major
issuers,
underwriters, or dealers in lower-rated securities. In addition, since
there are
fewer investors in lower-rated securities, it may be harder to sell the
securities at an optimum time. As a result of these factors, lower-rated
securities tend to have more price volatility and carry more risk to
principal
and income than higher-rated securities.
An economic downturn may adversely affect the value of some lower-rated
bonds.
Such a downturn may especially affect highly leveraged companies or
companies in
cyclically sensitive industries, where deterioration in a company's cash
flow
may impair its ability to meet its obligation to pay principal and
interest to
bondholders in a timely fashion. From time to time, as a result of
changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued.
As a
result of these restructurings, holders of lower-rated securities may
receive
less principal and interest than they had bargained for at the time such
bonds
were purchased.
In the event of a restructuring, the Fund may bear additional legal or
administrative expenses in order to maximize recovery from an issuer.
The secondary trading market for lower-rated bonds is generally less
liquid than
the secondary trading market for higher-rated bonds. In 1989,
legislation was
enacted that requires federally insured savings and loan associations to
divest
their holdings of lower-rated bonds by 1994. The reduction of the number
of
institutions empowered to purchase and hold lower-rated bonds could
have an adverse impact on the overall liquidity of the market. Adverse
publicity
and the perception of investors relating to issuers, underwriters,
dealers or
underlying business conditions, whether or not warranted by fundamental
analysis, may also affect the price or liquidity of lower-rated bonds.
On
occasion, therefore, it may become difficult to price or dispose of a
particular
security in the portfolio.
The Fund may, from time to time, own zero coupon bonds or pay-in-kind
securities. A zero coupon bond makes no periodic interest payments and
the
entire obligation becomes due only upon maturity. Pay-in-kind securities
make
periodic payments in the form of additional securities (as opposed to
cash). The
price of zero coupon bonds and pay-in-kind securities are generally more
sensitive to fluctuations in interest rates than are conventional bonds.
Additionally, federal tax law requires that interest on zero coupon
bonds and
pay-in-kind securities be reported as income to the Fund even though the
Fund
received no cash interest until the maturity or payment date of such
securities.
Many corporate debt obligations, including many lower-rated bonds,
permit the
issuers to call the security and thereby redeem their obligations
earlier than
the stated maturity dates. Issuers are more likely to call bonds during
periods
of declining interest rates. In these cases, if the Fund owns a bond
which is
called, the Fund will receive its return of principal earlier than
expected and
would likely be required to reinvest the proceeds at lower interest
rates, thus
reducing income to the Fund.
REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser
believes
that the risks of investing in lower-rated securities can be reduced.
The
professional portfolio management techniques used by the Fund to attempt
to
reduce these risks include:
CREDIT RESEARCH. The Fund's investment adviser will perform its
own credit
analysis in addition to using recognized rating agencies and other
sources,
including discussions with the issuer's management, the judgment of
other
investment analysts, and its own informed judgment. The adviser's
credit
analysis will consider the issuer's financial soundness, its
responsiveness
to changes in interest rates and business conditions, and its
anticipated
cash flow, interest, or dividend coverage and earnings. In
evaluating an
issuer, the adviser places special emphasis on the estimated
current value
of the issuer's assets rather than historical cost.
DIVERSIFICATION. The Fund invests in securities of many different
issuers,
industries, and economic sectors to reduce portfolio risk.
ECONOMIC ANALYSIS. The Fund's adviser will analyze current
developments
and trends in the economy and in the financial markets. When
investing in
lower-rated securities, timing and selection are critical, and
analysis of
the business cycle can be important.
INVESTMENT LIMITATION
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a
percentage of its cash value with an agreement to buy it back on
a set
date), or pledge securities except, under certain circumstances,
the Fund
may borrow money and engage in reverse repurchase agreements in
amounts
up to one-
third of the value of its total assets and pledge up to 15% of
the value
of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
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
- ------------------------------------------------------------------------
- --------
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 annuity contracts and variable
life
insurance policies. The use of Fund shares as investments for both
variable
annuity contracts and variable life insurance policies 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 monthly.
Shares of the Fund will begin earning dividends if owned on the 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
- ------------------------------------------------------------------------
- --------
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. An
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 .60 of 1% 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 are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
Mark E. Durbiano has been the Fund's portfolio manager since the
Fund
commenced operations. Mr. Durbiano joined Federated Investors in
1982 and
has been a Vice President of the Fund's investment adviser since
1988. Mr.
Durbiano is a Chartered Financial Analyst and received his M.B.A.
in
Finance from the University of Pittsburgh.
DISTRIBUTION OF 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 as
specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<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 Board of
Trustees.
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.
As of April 7, 1995, Aetna Life Insurance and Annuity, Hartford,
Connecticut,
owned 67.38% 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.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL TAXES
The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment
companies and to receive the special tax treatment afforded to such
companies.
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 specific 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, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
the
Fund's performance to certain indices.
APPENDIX
- ------------------------------------------------------------------------
- --------
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard &
Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal
although it is somewhat more susceptible to the adverse effects of
changes in
circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
more
likely to lead to a weakened capacity to pay interest and repay
principal for
debt in this category than in higher rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The
BB
rating category is also used for debt subordinated to senior debt that
is
assigned an actual or implied BBB rating.
B--Debt rated B has a greater vulnerability to default but currently has
the
capacity to meet interest payments and principal repayments. Adverse
business,
financial, or economic conditions will likely impair capacity or
willingness to
pay interest and repay principal.
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. In the event of
adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
The CCC rating category is also used for debt subordinated to senior
debt that
is assigned an actual or implied B or B-rating.
CC--The rating CC typically is applied to debt subordinated to senior
debt that
is assigned an actual or implied B or B-rating.
C--The rating C is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in default, and payment of interest and/or repayment
of
principal is in arrears.
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 Ca represent obligations which are speculative
in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and
issues so
rated can be regarded as having extremely poor prospects of ever
attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality.
The obligor has an exceptionally strong ability to pay interest and
repay
principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high quality.
The
obligor's ability to pay interest and repay principal is very strong,
although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA
and AA
categories are not significantly vulnerable to foreseeable future
developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality.
The
obligor's ability to pay interest and repay principal is considered to
be
strong, but may be more vulnerable to adverse changes in economic
conditions and
circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality.
The obligor's ability to pay interest and repay principal is considered
to be
adequate. Adverse changes in economic conditions and circumstances,
however, are
more likely to have adverse impact on these bonds, and therefore, impair
timely
payment.
BB--Bonds are considered speculative. The obligor's ability to pay
interest and
repay principal may be affected over time by adverse economic changes.
However,
business and financial alternatives can be identified which could assist
the
obligor in satisfying its debt service requirements.
B--Bonds are considered highly speculative. While bonds in this class
are
currently meeting debt service requirements, the probability of
continued timely
payment of principal and interest reflects the obligor's limited margin
of
safety and the need for reasonable business and economic activity
throughout the
life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may
lead to default. The ability to meet obligations requires an
advantageous
business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal
payments. Such
bonds are extremely speculative and should be valued on the basis of
their
ultimate recovery value in liquidation or reorganization of the obligor.
DDD
represents the highest potential for recovery on these bonds, and D
represents
the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue. Plus + or
Minus :
Plus or minus signs are used with a rating symbol to indicate the
relative
position of a credit within the rating category. Plus and minus signs,
however,
are not used in the AAA category.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
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 RATINGS
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 moderated 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., COMMERCIAL PAPER RATINGS
F-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having
the strongest degree of assurance for timely payment.
F-2--(Very Good Grade) Issues assigned this rating reflect an assurance
of
timely payment only slightly less in degree than the strongest issues.
ADDRESSES
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<TABLE>
<S> <C>
<C>
Insurance Management Series
Corporate Bond 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
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- -----------------------------------------------
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
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</TABLE>
CORPORATE BOND 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
458043403
3113009A (4/95)
Corporate Bond Fund
(A Portfolio of Insurance Management Series)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Corporate Bond Fund (the "Fund") 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 Policies 1
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 2
Lending of Portfolio Securities 2
Restricted and Illiquid Securities 2
Portfolio Turnover 2
Investment Limitations 3
Insurance Management Series Management 5
Fund Ownership 10
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 11
Administrative Services 11
Transfer Agent and Dividend
Disbursing Agent 11
Brokerage Transactions 11
Purchasing Shares 12
Determining Net Asset Value 12
Determining Value of Securities 12
Massachusetts Partnership Law 12
Tax Status 12
The Fund's Tax Status 12
Shareholder's Tax Status 13
Total Return 13
Yield 13
Performance Comparisons 13
Investment Objective and Policies
The Fund's investment objective is to seek high current income. The
investment objective cannot be changed without approval of shareholders.
Types of Investments
The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of fixed income
securities. Some of these fixed income securities may involve equity
features. Capital growth will be considered, but only when consistent
with the investment objective of high current income.
Corporate Debt Securities
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such
as conversion or exchange rights, warrants for the acquisition of
common stock of the same or a different issuer, participations
based on revenues, sales or profits, or the purchase of common
stock in a unit transaction (where corporate debt securities and
common stock are offered as a unit).
Equipment lease or trust certificates are secured obligations
issued in serial form, usually sold by transportation companies
such as railroads or airlines, to finance equipment purchases. The
certificate holders own a share of the equipment, which can be
resold if the issuer of the certificate defaults. The Fund does
not currently intend to invest more than 5% of its assets in
equipment lease certificates.
Equity Securities
Generally, less than 10% of the value of the Fund's total assets
will be invested in equity securities, including common stocks,
warrants, or rights. The Fund's investment adviser may choose to
exceed this 10% limitation if unusual market conditions suggest
such investments represent a better opportunity to reach the
Fund's investment objective.
Temporary Investments
The Fund may also invest in temporary investments for defensive
purposes during times of unusual market conditions.
Certificates of Deposit
The Fund may invest in certificates of deposit of domestic and
foreign banks and savings and loans if they have capital, surplus,
and undivided profits of over $100,000,000, or if the principal
amount of the instrument is insured by the Bank Insurance Fund
("BIF") or the Savings Association Insurance Fund ("SAIF"), both
of which are administered by the Federal Deposit Insurance
Corporation. These instruments may include Eurodollar Certificates
of Deposit issued by foreign branches of U.S. or foreign banks,
Eurodollar Time Deposits which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks, Canadian
Time Deposits which are U.S. dollar-denominated deposits issued by
branches of major Canadian banks located in the United States, and
Yankee Certificates of Deposit which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks
and held in the United States.
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.
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. 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. 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 are
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.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of 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 cash equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
Restricted and Illiquid Securities
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the 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 ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees.
The Trustees may consider the following criteria in determining the
liquidity of certain restricted securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
- dealer undertakings to make a market in the security; and
- the nature of the security and the nature of the marketplace
trades.
Portfolio Turnover
Securities in the Fund's 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. Any such trading will increase
the Fund's portfolio turnover rate and transaction costs. The adviser to
the Fund does not anticipate that portfolio turnover will result in
adverse tax consequences.
For the period from February 2, 1994 (date of initial public investment)
to December 31, 1994, the portfolio turnover rate of the Fund was 18%.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of portfolio
securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as
a temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous, and then only in
amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase
agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are
made. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage purposes.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in any
one industry. However, the Fund may at any time invest 25% or more
of its total assets in cash or cash items and securities issued
and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted
by the Fund's investment objective and policies or the Trust's
Declaration of Trust.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
Diversification of Investments
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other
differences.
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 changes in these limitations become effective.
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 its assets in illiquid
securities, including, among others, repurchase agreements
providing for settlement more than seven days after notice and
certain restricted securities not determined by the Trustees to be
liquid.
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 of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
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.
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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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.
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.
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.; 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 Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; 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; 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; The Virtus Funds; World
Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April 7, 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: Lincoln Benefit Life Company
Universal Life/Variable owned approximately 29,599 shares (10.90%),
Lincoln Benefit Life Company owned approximately 50,331 shares (18.54%)
and AEtna Life Insurance and Annuity owned approximately 182,916 shares
(67.38%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Trust and
Trustee and Chairman 68 other investment
companies in
the Fund Complex
Thomas G. Bigley, $252 $20,688 for the Trust
and
Trustee 49 other investment
companies in
the Fund Complex
John T. Conroy, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
William J. Copeland, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
J. Christopher Donahue, $0 $0 for the Trust and
Trustee and President 14 other investment
companies in
the Fund Complex
James E. Dowd, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Lawrence D. Ellis, M.D., $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Edward L. Flaherty, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Peter E. Madden, $100 $90,563 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Gregor F. Meyer, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
John E. Murray, Jr., $0 $0 for the Trust and
Trustee 68 other investment
companies in
the Fund Complex
Wesley W. Posvar, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Marjorie P. Smuts, $252 $106,460 for the Trust
and
Trustee 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 six portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All 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 or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the period from December 9, 1993 (start of business) to December 31,
1994, the adviser earned advisory fees of $7,966, all of which was
waived.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from December 9, 1993 (start
of business) to December 31, 1994, the Fund incurred $52,398 in costs
for administrative services. 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 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 upon 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 upon 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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
For the period from December 9, 1993 (start of business) to December 31,
1994, the Fund paid $0 in brokerage commissions on brokerage
transactions.
Purchasing Shares
Shares of the Fund 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 of the Fund 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 Value of Securities
The values of the Fund's portfolio securities are determined as follows:
- for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities
exchange, if available;
- in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices;
- for bonds and other fixed income securities, at the last sale
price on a national securities exchange, if available; otherwise,
as determined by an independent pricing service;
- for unlisted equity securities, the latest mean prices;
- for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service; or
- for all other securities, at fair value as determined in good
faith by the Board of Trustees.
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 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.
Shareholder's Tax Status
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. 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 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 Fund's cumulative total return for the period from February 2, 1994
(date of initial public investment) to December 31, 1994, was (3.73%).
Cumulative total return reflects the Fund's total performance over a
specific period of time. The Fund's cumulative total return is
representative of only eleven months of Fund activity.
The average annual total return for 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, adjusted over the period by any additional shares, assuming the
monthly 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 for the thirty day period ended December 31, 1994 was
10.43%.
The yield for the Fund is determined 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 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 Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders. Also the yield does not
reflect the charges and expenses of an insurance contract. 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 and market value of portfolio
securities;
- changes in Fund expenses; and
- the relative amount of the Fund's cash flow.
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 yield and
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 index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the high current yield funds
category in advertising and sales literature.
- Lehman Brothers Government/Corporate (Total) Index is comprised of
approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi federal
corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine
years. Tracked by Lehman Brothers, Inc., the index calculates
total returns for one month, three month, twelve month, and ten
year periods and year-to-date.
- Lehman Brothers Government/Corporate (Long-Term) Index is composed
of the same types of issues as defined above. However, the average
maturity of the bonds included on this index approximates 22
years.
- Morningstar, Inc., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk adjusted returns. The maximum rating is five stars and
ratings are effective for two weeks.
Advertisements and sales literature for the Fund may quote total returns
which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment
in the Fund based on monthly 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 funds using the Lipper Analytical Services
money market instrument average.
458043403
3113009B (4/95)
PRIME MONEY FUND
(A PORTFOLIO OF INSURANCE MANAGEMENT SERIES)
PROSPECTUS
This prospectus offers shares of Prime Money Fund (the "Fund"), which is
a
diversified investment portfolio in Insurance Management Series (the
"Trust"),
an open-end management investment company. The Fund invests in money
market
instruments maturing in thirteen months or less to achieve current
income
consistent with stability of principal and liquidity. Shares of the Fund
may
only be sold to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable
annuity
contracts issued by insurance companies.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
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.
This prospectus contains the information you should read and know before
you
invest in the Fund through the variable annuity contracts and variable
life
insurance policies 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 FUNDING VEHICLES FOR LIFE
INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR
SUCH
CONTRACTS.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
FINANCIAL HIGHLIGHTS
1
- ------------------------------------------------------
GENERAL INFORMATION
2
- ------------------------------------------------------
INVESTMENT INFORMATION
2
- ------------------------------------------------------
Investment Objective
2
Investment Policies
2
Investment Risks
6
Investment Limitation
6
Regulatory Compliance
7
NET ASSET VALUE
7
- ------------------------------------------------------
INVESTING IN THE FUND
7
- ------------------------------------------------------
Purchases and Redemptions
7
What Shares Cost
8
Dividends
8
FUND INFORMATION
8
- ------------------------------------------------------
Management of the Fund
8
Distribution of Fund Shares
9
Administration of the Fund
9
Brokerage Transactions
10
SHAREHOLDER INFORMATION
10
- ------------------------------------------------------
Voting Rights
10
TAX INFORMATION
11
- ------------------------------------------------------
Federal Taxes
11
State and Local Taxes
11
PERFORMANCE INFORMATION
11
- ------------------------------------------------------
ADDRESSES
13
- ------------------------------------------------------
PRIME MONEY FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the
Fund's
independent auditors. Their report, dated February 10, 1995, on the
Fund's
financial statements for the year ended December 31, 1994, and on the
following
table for the period presented, is included in the Annual Report, which
is
incorporated by reference. This table should be read in conjunction with
the
Fund's financial statements and notes thereto, which may be obtained
from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1994*
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 1.00
- ------------------------------------------------------------------------
- -----------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- -----------------
Net investment income
0.01
- ------------------------------------------------------------------------
- -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- -----------------
Dividends to shareholders from net investment income
(0.01)
- ------------------------------------------------------------------------
- ----------------- -------
NET ASSET VALUE, END OF PERIOD
$ 1.00
- ------------------------------------------------------------------------
- ----------------- -------
TOTAL RETURN**
0.50%
- ------------------------------------------------------------------------
- -----------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- -----------------
Expenses
0.80%(a)
- ------------------------------------------------------------------------
- -----------------
Net investment income
4.26%(a)
- ------------------------------------------------------------------------
- -----------------
Expense waiver/reimbursement (b)
71.84%(a)
- ------------------------------------------------------------------------
- -----------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- -----------------
Net assets, end of period (000 omitted)
$ 552
- ------------------------------------------------------------------------
- -----------------
</TABLE>
* Reflects operations for the period from November 18, 1994 (date of
initial
public investment) to
December 31, 1994. For the period from December 10, 1993 (start of
business)
to
November 17, 1994, the Fund had no public investment.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
Further information about the Fund's performance is contained in the
Fund's
Annual Report, dated December 31, 1994, which can be obtained free of
charge.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Fund is a portfolio of the Trust which 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 annuity contracts and variable life insurance policies 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 investment objective of the Fund is to provide current income
consistent
with stability of principal and liquidity. The investment objective
cannot be
changed without approval of shareholders. While there is no assurance
that the
Fund will achieve its investment objective, it endeavors to do so by
following
the investment policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less. The
average
maturity of the money market instruments in the Fund's portfolio,
computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the
investment policies of the Fund may be changed by the Board of Trustees
(the
"Trustees") without the approval of shareholders. Shareholders will be
notified
before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high-quality money market
instruments that are either rated in one of the two highest short-term
rating
categories by one or more nationally recognized statistical rating
organizations
("NRSROs") or of comparable quality to securities having such ratings.
Examples
of these instruments include, but are not limited to:
domestic issues of corporate debt obligations, including variable
rate
demand notes;
commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);
certificates of deposit, demand and time deposits, bankers'
acceptances
and other instruments of domestic and foreign banks and other
deposit
institutions ("Bank Instruments");
short-term credit facilities, such as demand notes;
asset-backed securities;
obligations issued or guaranteed as to payment of principal and
interest
by the U.S. government or one of its agencies or
instrumentalities
("Government Securities");
repurchase agreements; and
other money market instruments.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-
term
corporate debt instruments that have variable or floating interest
rates
and provide the Fund with the right to tender the security for
repurchase
at its stated principal amount plus accrued interest. Such
securities
typically bear interest at a rate that is intended to cause the
securities
to trade at par. The interest rate may float or be adjusted at
regular
intervals (ranging from daily to annually), and is normally based
on a
published interest rate or interest rate index. Most variable rate
demand
notes allow the Fund to demand the repurchase of the security on
not more
than seven days prior notice. Other notes only permit the Fund to
tender
the security at the time of each interest rate adjustment or at
other fixed
intervals. See "Demand Features." The Fund treats variable rate
demand
notes as maturing on the later of the date of the next interest
adjustment
or the date on which the Fund may next tender the security for
repurchase.
BANK INSTRUMENTS. The Fund only invests in bank instruments either
issued
by an institution having capital, surplus and undivided profits
over $100
million or insured by the Bank Insurance Fund ("BIF") or the
Savings
Association Insurance Fund ("SAIF"). Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of
Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The Fund will
treat
securities credit enhanced with a bank's letter of credit as bank
instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term
borrowing
arrangements between a corporation and an institutional lender
(such as the
Fund) payable upon demand by either party. The notice period for
demand
typically ranges from one to seven days, and the party may demand
full or
partial payment. The Fund may also enter into, or acquire
participations
in, short-term revolving credit facilities with corporate
borrowers. Demand
notes and other short-term credit arrangements usually provide for
floating
or variable rates of interest.
ASSET-BACKED SECURITIES. Asset-backed securities are securities
issued by
special purpose entities whose primary assets consist of a pool of
loans or
accounts receivable. The securities may take the form of beneficial
interest in a special purpose trust, limited partnership interests
or
commercial paper or other debt securities issued by a special
purpose
corporation. Although the securities often have some form of credit
or
liquidity enhancement, payments on the securities depend
predominately upon
collections of the loans and receivables held by the issuer.
RATINGS. An NRSRO's two highest rating categories are determined without
regard
for sub-categories and gradations. For example, securities rated A-1 or
A-2 by
Standard & Poor's Ratings Group ("S&P"), Prime-1 or Prime-2 by Moody's
Investors
Service, Inc. ("Moody's"), or F-1 or F-2 by Fitch Investors Service,
Inc.
("Fitch") are all considered rated in one of the two highest short-term
rating
categories. The Fund will limit its investments in securities rated in
the
second highest short-term rating category (e.g., A-2 by S&P, Prime-2 by
Moody's
or F-2 by Fitch) to not more than 5% of its total assets, with not more
than 1%
invested in the securities of any one issuer. The Fund will follow
applicable
regulations in determining whether a security rated by more than one
NRSRO can
be treated as being in one of the two highest short-term rating
categories;
currently, such securities
must be rated by two NRSROs in one of their two highest rating
categories. See
"Regulatory Compliance."
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks,
broker/dealers, and other recognized financial institutions sell U.S.
government
securities or other securities to the Fund and agree at the time of sale
to
repurchase them at a mutually agreed upon time and price. The Fund or
its
custodian will take possession of the securities subject to repurchase
agreements, and these securities will be marked to market daily. To the
extent
that the original seller does not repurchase the securities from the
Fund, the
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such 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 to be
creditworthy pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may
have been
credit enhanced by a guaranty, letter of credit or insurance. The Fund
typically
evaluates the credit quality and ratings of credit-enhanced securities
based
upon the financial condition and ratings of the party providing the
credit
enhancement (the "credit enhancer"), rather than the issuer. Generally,
the Fund
will not treat credit-enhanced securities as having been issued by the
credit
enhancer for diversification purposes. However, under certain
circumstances,
applicable regulations may require the Fund to treat the securities as
having
been issued by both the issuer and the credit enhancer. The bankruptcy,
receivership or default of the credit enhancer will adversely affect the
quality
and marketability of the underlying security.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and
standby commitments ("demand features") to purchase the securities at
their
principal amount (usually with accrued interest) within a fixed period
(usually
seven days) following a demand by the Fund. The demand feature may be
issued by
the issuer of the underlying securities, a dealer in the securities or
by
another third party, and may not be transferred separately from the
underlying
security. The Fund uses these arrangements to provide the Fund with
liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the
demand
feature, or a default on the underlying security or other event that
terminates
the demand feature before its exercise, will adversely affect the
liquidity of
the underlying security. Demand features that are exercisable even after
a
payment default on the underlying security may be treated as a form of
credit
enhancement.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% 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 10% of its net assets.
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, up to one-third of the value of its total assets to
broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental
policy
which may not be changed without shareholder approval. The Fund will
only enter
into loan arrangements with broker/dealers, banks, or other institutions
which
the adviser has determined are creditworthy under guidelines established
by the
Trustees and will receive collateral in the form of cash or U.S.
government
securities equal to at least 100% of the value of the securities loaned
at all
times. 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.
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/less than the market value of the
securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
CONCENTRATION OF INVESTMENTS. The Fund will invest 25% or more of its
total
assets in commercial paper issued by finance companies. The finance
companies in
which the Fund intends to invest can be divided into two categories,
commercial
finance companies and consumer finance companies. Commercial finance
companies
are principally engaged in lending to corporations or other businesses.
Consumer
finance companies are primarily engaged in lending to individuals.
Captive
finance companies or finance subsidiaries which exist to facilitate the
marketing and financial activities of their parent will, for purposes of
industry concentration, be classified by the Fund in the industry of its
parent
corporation.
In addition, the Fund may invest more than 25% of the value of its total
assets
in cash or cash items, securities issued or guaranteed by the U.S.
government,
its agencies, or instrumentalities, or instruments secured by these
money market
instruments, such as repurchase agreements.
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.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, CCPs, and Europaper are subject to somewhat
different
risks than domestic obligations of domestic banks. Examples of these
risks
include international, economic and political developments, foreign
governmental
restrictions that may adversely affect the payment of principal or
interest,
foreign withholding or other taxes on interest income, difficulties in
obtaining
or enforcing a judgment against the issuing bank, and the possible
impact of
interruptions in the flow of international currency transactions.
Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks
issuing
these instruments, or their domestic or foreign branches, are not
necessarily
subject to the same regulatory requirements that apply to domestic
banks, such
as reserve requirements, loan limitations, examinations, accounting,
auditing,
and recordkeeping, and the public availability of information. These
factors
will be carefully considered by the Fund's adviser in selecting
investments for
the Fund.
INVESTMENT LIMITATION
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a
percentage of its cash value with an agreement to buy it back on
a set
date), or pledge securities except, under certain circumstances,
the Fund
may borrow money and engage in reverse repurchase agreements in
amounts
up to one-third of the value of its total assets and pledge up to
15% of
the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
this
prospectus and its Statement of Additional Information, in order to
comply with
applicable laws and regulations, including the provisions of and
regulations
under the Investment Company Act of 1940, as amended. In particular, the
Fund
will comply with the various requirements of Rule 2a-7 which regulates
money
market mutual funds. For example, with limited exceptions, Rule 2a-7
prohibits
the investment of more than 5% of the Fund's total assets in the
securities of
any one issuer, although the Fund's investment limitations only requires
such 5%
diversification with respect to 75% of its assets. The Fund will invest
more
than 5% of its assets in any one issuer only under the circumstances
permitted
by Rule 2a-7. The Fund will also determine the effective maturity of its
investments, as well as its ability to consider a security as having
received
the requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may
change these operational policies to reflect changes in the laws and
regulations
without the approval of its shareholders.
NET ASSET VALUE
- ------------------------------------------------------------------------
- --------
The Fund attempts to stabilize the net asset value of its shares at
$1.00 by
valuing the portfolio securities using the amortized cost method. The
net asset
value per share of the Fund is determined by subtracting total
liabilities from
total assets and dividing by the number of shares outstanding.
The Fund cannot guarantee that its net asset value will always remain at
$1.00
per share.
INVESTING IN THE FUND
- ------------------------------------------------------------------------
- --------
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 annuity contracts and variable
life
insurance policies. The use of Fund shares as investments for both
variable
annuity contracts and variable life insurance policies 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 daily and paid monthly.
Shares of the Fund begin earning dividends on the day that the Fund
receives
federal funds. Dividends of the Fund are automatically reinvested in
additional
shares of such 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, sale, or exchange of portfolio
instruments, for
which it receives an annual fee from the Fund.
ADVISORY FEES. The adviser receives an annual investment advisory
fee
equal to .50 of 1% 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 are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
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>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<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
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.
SHAREHOLDER INFORMATION
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- --------
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's 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.
As of April 7, 1995, Aetna Life Insurance and Annuity, Hartford,
Connecticut,
owned 79.11% 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.
TAX INFORMATION
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- --------
FEDERAL TAXES
The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment
companies and to receive the special tax treatment afforded to such
companies.
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
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- --------
From time to time the Fund advertises yield and effective yield.
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.
The yield represents the annualized rate of income earned on an
investment in
the Fund over a seven day period. It is the annualized dividends earned
during
the period on the investment, shown as a percentage of the investment.
The
effective yield is calculated similarly to the yield, but, when
annualized, the
income earned on an investment in the Fund is assumed to be reinvested
daily.
The effective yield will be slightly higher than the yield because of
the
compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total
return. Total
return represents the change, over a specified period of time, in the
value of
an investment in the Fund after reinvesting all income distributions. It
is
calculated by dividing that change by the initial investment and is
expressed as
a percentage.
From time to time, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
the
Fund's performance to certain indices.
ADDRESSES
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- --------
<TABLE>
<S> <C>
<C>
Insurance Management Series
Prime Money 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
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- ---------------------------------------------
Custodian
State Street Bank
P.O. Box 8604
and Trust Company
Boston, Massachusetts 02266-8604
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- ---------------------------------------------
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
- ------------------------------------------------------------------------
- ---------------------------------------------
</TABLE>
PRIME MONEY 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
458043106
3113011A (4/95)
Prime Money Fund
(A Portfolio of Insurance Management Series)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Prime Money Fund (the "Fund") 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 Policies 1
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Lending of Portfolio Securities 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Investment Limitations 3
Insurance Management Series Management 5
Fund Ownership 10
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 11
Administrative Services 11
Transfer Agent and Dividend
Disbursing Agent 11
Brokerage Transactions 11
Purchasing Shares 12
Determining Net Asset Value 12
Use of the Amortized Cost Method 12
Massachusetts Partnership Law 13
Tax Status 13
The Fund's Tax Status 13
Shareholder's Tax Status 13
Yield 13
Effective Yield 14
Performance Comparisons 14
Investment Objective and Policies
The Fund's investment objective is to provide current income consistent
with stability of principal and liquidity. The investment objective
cannot be changed without approval of shareholders.
Types of Investments
The Fund invests exclusively in money market instruments which mature in
397 days or less and which include, but are not limited to, high-quality
commercial paper and variable rate master demand notes, bank
instruments, and U.S. government obligations.
Bank Instruments
In addition to domestic bank obligations such as certificates of
deposit, demand and time deposits, savings shares, and bankers'
acceptances, the Fund may invest in:
- Eurodollar Certificates of Deposit issued by foreign branches
of
U.S. or foreign banks;
- Eurodollar Time Deposits, which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks;
- Canadian Time Deposits, which are U.S. dollar-denominated
deposits issued by branches of major Canadian banks located in
the U.S.; and
- Yankee Certificates of Deposit, which are U.S. dollar-
denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the U.S.
U.S. Government Obligations
The types of U.S. government obligations in which the Fund may
invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations
issued and/or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
- Farmers Home Administration;
- Federal Home Loan Banks;
- Federal Home Loan Mortgage Corporation;
- Federal National Mortgage Association;
- Government National Mortgage Association; and
- Student Loan Marketing Association.
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. 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. 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 are
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.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
brokers/dealers, banks, or other institutional borrowers of 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. The
Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
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 assets are marked to
market daily and maintained until the transaction is settled.
Restricted and Illiquid Securities
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the 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 ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees.
The Trustees may 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.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of portfolio
securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as
a temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous, and then only in
amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase
agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are
made. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage purposes.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry
other than finance companies. However, the Fund may at any time
invest 25% or more of its total assets in cash or cash items and
securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding money market
instruments, corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other
transactions which are permitted by the Fund's investment
objective and policies or the Trust's Declaration of Trust.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
Diversification of Investments
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer.
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 changes in these limitations become effective.
Investing in Restricted Securities
The Fund will not invest more than 10% 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 10% of its net assets in
illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after
notice and certain restricted securities not determined by the
Trustees to be liquid.
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 of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
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.
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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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.
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.
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.; 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 Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; 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; 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; The Virtus Funds; World
Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April 7 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: National Home Life Insurance
Company owned approximately 711,424 shares (20.89%) and AEtna Life
Insurance and Annuity owned approximately 2,694,746 shares (79.11%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Trust and
Trustee and Chairman 68 other investment
companies in
the Fund Complex
Thomas G. Bigley, $252 $20,688 for the Trust
and
Trustee 49 other investment
companies in
the Fund Complex
John T. Conroy, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
William J. Copeland, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
J. Christopher Donahue, $0 $0 for the Trust and
Trustee and President 14 other investment
companies in
the Fund Complex
James E. Dowd, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Lawrence D. Ellis, M.D., $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Edward L. Flaherty, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Peter E. Madden, $100 $90,563 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Gregor F. Meyer, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
John E. Murray, Jr., $0 $0 for the Trust and
Trustee 68 other investment
companies in
the Fund Complex
Wesley W. Posvar, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Marjorie P. Smuts, $252 $106,460 for the Trust
and
Trustee 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 six portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All 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 or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the period from December 10, 1993 (start of business) to December
31, 1994, the adviser earned advisory fees of $287, all of which was
waived.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from December 10, 1993
(start of business) to December 31, 1994, the Fund incurred $14,041 in
costs for administrative services. 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 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 upon 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 upon 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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
For the period from December 10, 1993 (start of business) to December
31, 1994, the Fund paid $0 in brokerage commissions on brokerage
transactions.
Purchasing Shares
Shares of the Fund 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 of the Fund is explained in the
prospectus under "Purchases and Redemptions" and "What Shares Cost."
Determining Net Asset Value
The Fund attempts to stabilize the value of a share at $1.00. The days
on which net asset value is calculated by the Fund are described in the
prospectus.
Use of the Amortized Cost Method
The Trustees have decided that the best method for determining the value
of portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at
current market value.
The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule 2a-
7 (the "Rule") promulgated by the Securities and Exchange Commission
under the Investment Company Act of 1940. Under the Rule, the Trustees
must establish procedures reasonably designed to stabilize the net asset
value per share, as computed for purposes of distribution and
redemption, at $1.00 per share, taking into account current market
conditions and the Fund's investment objective. Under the Rule, the Fund
is permitted to purchase instruments which are subject to demand
features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding 397 calendar days on
no more than 30 days' notice. A standby commitment entitles the Fund to
achieve same-day settlement and to receive an exercise price equal to
the amortized cost of the underlying instrument plus accrued interest at
the time of exercise.
Monitoring Procedures
The Trustees' procedures include monitoring the relationship
between the amortized cost value per share and the net asset value
per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there
is a difference of more than 0.5 of 1% between the two values. The
Trustees will take any steps they consider appropriate (such as
redemption in kind or shortening the average portfolio maturity)
to minimize any material dilution or other unfair results arising
from differences between the two methods of determining net asset
value.
Investment Restrictions
The Rule requires that the Fund limit its investments to
instruments that, in the opinion of the Trustees, present minimal
credit risks and have received the requisite rating from one or
more nationally recognized statistical rating organizations. If
the instruments are not rated, the Trustees must determine that
they are of comparable quality. The Rule also requires the Fund to
maintain a dollar-weighted average portfolio maturity (not more
than 90 days) appropriate to the objective of maintaining a stable
net asset value of $1.00 per share. In addition, no instrument
with a remaining maturity of more than thirteen months can be
purchased by the Fund.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to
90 days or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities
to take advantage of short-term market variations. This policy may, from
time to time, result in high portfolio turnover. Under the amortized
cost method of valuation, neither the amount of daily income nor the net
asset value is affected by any unrealized appreciation or depreciation
of the portfolio.
In periods of declining interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value computed as above may tend
to be higher than a similar computation made by using a method of
valuation based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares
of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market
prices and estimates.
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 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.
Shareholder's Tax Status
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. 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 contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
Yield
The Fund calculates its yield daily, based upon the seven days ending on
the day of the calculation, called the "base period." This yield is
computed by:
- determining the net change in the value of a hypothetical account
with a balance of one share at the beginning of the base period,
with the net change excluding capital changes but including the
value of any additional shares purchased with dividends earned
from the original one share and all dividends declared on the
original and any purchased shares;
- dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and
- multiplying the base period return by 365/7.
The Fund's yield for the seven-day period ended December 31, 1994 was
4.16%.
Effective Yield
The Fund's effective yield is computed by compounding the unannualized
base period return by:
- adding 1 to the base period return;
- raising the sum to the 365/7th power; and
- subtracting 1 from the result.
The Fund's effective yield for the seven-day period ended December 31,
1994 was 4.25%.
Effective yield does not reflect the charges and expense of a variable
annuity contract. 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 a 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 and market value of portfolio
securities;
- changes in Fund expenses; and
- the relative amount of the Fund's cash flow.
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 index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund used in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "money market instruments
funds" category in advertising and sales literature.
- Bank Rate Monitor National Index, Miami Beach, Florida, is a
financial reporting service which publishes weekly average rates
of 50 leading bank and thrift institution money market deposit
accounts. The rates published in the index are an average of the
personal account rates offered on the Wednesday prior to the date
of publication by ten of the largest banks and thrifts in each of
the five largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the
lowest rate is used. Rates are subject to change at any time
specified by the institution.
- Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day
compound (effective) yield. From time to time, the Fund will quote
its Money ranking in advertising and sales literature.
Advertisements and other sales literature for the Fund may refer to
total return. Total return is the historic change in the value of an
investment in the Fund based on the monthly reinvestment of dividends
over a specified period of time.
458043106
3113011B (4/95)
UTILITY FUND
(A PORTFOLIO OF INSURANCE MANAGEMENT SERIES)
PROSPECTUS
This prospectus offers shares of Utility Fund (the "Fund"), which is a
diversified investment portfolio in the Insurance Management Series (the
"Trust"), an open-end, diversified management investment company. The
Fund
invests in equity and debt securities of utility companies to achieve
high
current income and moderate capital appreciation. 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 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 annuity contracts and variable
life
insurance policies offered by the 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 FUNDING VEHICLES FOR LIFE
INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR
SUCH
CONTRACTS.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
FINANCIAL HIGHLIGHTS
1
- ------------------------------------------------------
GENERAL INFORMATION
2
- ------------------------------------------------------
INVESTMENT INFORMATION
2
- ------------------------------------------------------
Investment Objective
2
Investment Policies
2
Investment Limitation
5
NET ASSET VALUE
6
- ------------------------------------------------------
INVESTING IN THE FUND
6
- ------------------------------------------------------
Purchases and Redemptions
6
What Shares Cost
6
Dividends
7
FUND INFORMATION
7
- ------------------------------------------------------
Management of the Fund
7
Distribution of Fund Shares
8
Administration of the Fund
8
Brokerage Transactions
9
SHAREHOLDER INFORMATION
9
- ------------------------------------------------------
Voting Rights
9
TAX INFORMATION
10
- ------------------------------------------------------
Federal Taxes
10
State and Local Taxes
10
PERFORMANCE INFORMATION
10
- ------------------------------------------------------
ADDRESSES
11
- ------------------------------------------------------
UTILITY FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the
Fund's
independent auditors. Their report, dated February 10, 1995, on the
Fund's
financial statements for the year ended December 31, 1994, and on the
following
table for the period presented, is included in the Annual Report, which
is
incorporated by reference. This table should be read in conjunction with
the
Fund's financial statements and notes thereto, which may be obtained
from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1994*
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 9.48
- ------------------------------------------------------------------------
- ------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- ------------------
Net investment income
0.34
- ------------------------------------------------------------------------
- ------------------
Net realized and unrealized gain (loss) on investments
(0.19)
- ------------------------------------------------------------------------
- ------------------ -------
Total from investment operations
0.15
- ------------------------------------------------------------------------
- ------------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- ------------------
Dividends to shareholders from net investment income
(0.34)
- ------------------------------------------------------------------------
- ------------------ -------
NET ASSET VALUE, END OF PERIOD
$ 9.29
- ------------------------------------------------------------------------
- ------------------ -------
TOTAL RETURN**
1.12%
- ------------------------------------------------------------------------
- ------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- ------------------
Expenses
0.60%(a)
- ------------------------------------------------------------------------
- ------------------
Net investment income
4.77%(a)
- ------------------------------------------------------------------------
- ------------------
Expense waiver/reimbursement (b)
54.83%(a)
- ------------------------------------------------------------------------
- ------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- ------------------
Net assets, end of period (000 omitted)
$ 974
- ------------------------------------------------------------------------
- ------------------
Portfolio turnover rate
73%
- ------------------------------------------------------------------------
- ------------------
</TABLE>
* Reflects operations for the period from April 14, 1994 (date of
initial
public investment)
to December 31, 1994. For the period from December 9, 1993 (start of
business) to April 13, 1994, the net investment income was
distributed to
the Fund's adviser.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense
and net
investment income ratios shown above.
Further information about the Fund's performance is contained in the
Fund's
Annual Report, dated December 31, 1994, which can be obtained free of
charge.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Fund is a portfolio of the Trust which 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 this
Fund.
Shares of the Fund are sold only to insurance companies as funding
vehicles for
variable annuity contracts and variable life insurance policies 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 investment objective of the Fund is to achieve high current income
and
moderate capital appreciation. The investment objective cannot be
changed
without approval of shareholders. While there is no assurance that the
Fund will
achieve its investment objective, it endeavors to do so by following the
policies described in this prospectus.
INVESTMENT POLICIES
The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of equity and debt
securities of
utility companies. Unless indicated otherwise, the investment policies
may be
changed by the Board of Trustees ("Trustees") without shareholder
approval.
Shareholders will be notified before any material change in these
policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term, the economy will continue to expand
and
develop and that this economic growth will be reflected in the growth of
the
revenues and earnings of utility companies. The Fund intends to achieve
its
investment objective by investing in equity and debt securities of
utility
companies that produce, transmit, or distribute gas and electric energy
as well
as those companies that provide communications facilities, such as
telephone and
telegraph companies. Under normal market conditions, the Fund will
invest at
least 65% of its total assets in securities of utility companies.
COMMON STOCKS. The Fund invests primarily in common stocks of
utility
companies selected by the Fund's investment adviser on the basis of
traditional research techniques, including assessment of earnings
and
dividend growth prospects and of the risk and volatility of the
company's
industry. However, other factors, such as product position, market
share,
or profitability will also be considered by the Fund's investment
adviser.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the
securities of
foreign issuers which are freely traded on United States securities
exchanges or in the over-the-counter market in the form of
depositary
receipts as well as securities of foreign issuers that trade on
foreign
stock exchanges. Securities of a foreign issuer may present greater
risks
in the form of nationalization, confiscation, domestic
marketability, or
other national or international restrictions. As a matter of
practice, the
Fund will not invest in the securities of a foreign issuer if any
such risk
appears to the investment adviser to be substantial.
OTHER SECURITIES. The Fund may invest in preferred stocks,
corporate
bonds, notes, and warrants of these companies and in cash, U.S.
government
securities, and money market instruments in proportions determined
by its
investment adviser.
RESTRICTED AND ILLIQUID SECURITIES. 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 its net assets.
TEMPORARY INVESTMENTS. The Fund may also invest temporarily in cash,
cash items,
and short-term instruments, including notes and commercial paper, for
liquidity
and during times of unusual market conditions for defensive purposes.
Cash items
may include obligations such as:
certificates of deposit (including those issued by domestic and
foreign
branches of FDIC insured banks);
obligations issued or guaranteed as to principal and interest by
the U.S.
government or any of its agencies or instrumentalities;
and repurchase agreements.
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, up to one-third of the value of its total assets to
broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental
policy
which may not be changed without the approval of shareholders. The Fund
will
only enter into loan arrangements with broker/dealers, banks, or other
institutions which the investment adviser has determined are
creditworthy under
guidelines established by the Trustees and will receive collateral equal
to at
least 100% of the value of the securities loaned at all times. 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.
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 the transaction 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/less than the market value of the
securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
PUT AND CALL OPTIONS. The Fund may purchase put options on its portfolio
securities. These options will be used as a hedge to attempt to protect
securities which the Fund holds against decreases in value. The Fund
will only
purchase puts on portfolio securities which are traded on a recognized
exchange.
The Fund may also write call options on all or any portion of its
portfolio to
generate income for the Fund. The Fund will write call options on
securities
either held in its portfolio or for which it has the right to obtain
without
payment of further consideration or for which it has segregated cash in
the
amount of any additional consideration. The call options which the Fund
writes
must be listed on a recognized options exchange. Although the Fund
reserves the
right to write covered call options on its entire portfolio, it will not
write
such options on more than 25% of its total assets unless a higher limit
is
authorized by its Trustees.
FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio
of
long-term debt securities against changes in interest rates. Financial
futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of
the U.S. government at a certain time in the future. The seller of the
contract
agrees to make delivery of the type of instrument called for in the
contract and
the buyer agrees to take delivery of the instrument at the specified
future
time.
The Fund may also write call options and purchase put options on
financial
futures contracts as a hedge to attempt to protect securities in its
portfolio
against decreases in value. When the Fund writes a call option on a
futures
contract, it is undertaking the obligation of selling a futures contract
at a
fixed price at any time during a specified period if the option is
exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund
is
entitled (but not obligated) to sell a futures contract at the fixed
price
during the life of the option.
The Fund may not purchase or sell futures contracts or related options
if
immediately thereafter the sum of the amount of margin deposits on the
Fund's
existing futures positions and premiums paid for related options would
exceed 5%
of the market value of the Fund's total assets. When the Fund purchases
futures
contracts, an amount of cash and cash equivalents, equal to the
underlying
commodity value of the futures contracts (less any related margin
deposits),
will be deposited in a segregated account with the Fund's custodian (or
the
broker, if legally permitted) to collateralize the position and thereby
insure
that the use of such futures contracts is unleveraged.
RISKS. When the Fund uses financial futures and options on
financial
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not
correlate perfectly with the prices of the securities in the Fund's
portfolio. This may cause the futures contract and any related
options to
react differently than the portfolio securities to market changes.
In
addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such
as
interest rate movements. In these events, the Fund may lose money
on the
futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the
investment
adviser will consider liquidity before entering into futures and
options
transactions, there is no assurance that a liquid secondary market
on an
exchange 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.
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.
INVESTMENT LIMITATION
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a
percentage of its cash value with an agreement to buy it back on
a set
date), or pledge securities except, under certain circumstances,
the Fund
may borrow money and engage in reverse repurchase agreements in
amounts
up to one-third of the value of its total assets and pledge up to
15% of
the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
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
- ------------------------------------------------------------------------
- --------
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 annuity contracts and variable
life
insurance policies. The use of Fund shares as investments for both
variable
annuity contracts and variable life insurance policies 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 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 conflict 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 monthly.
Shares of the Fund will begin earning dividends if owned on the 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
- ------------------------------------------------------------------------
- --------
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 and sale of portfolio instruments, for
which it
receives an annual fee from the Fund.
ADVISORY FEES. The Fund's adviser receives an annual investment
advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The
adviser
may voluntarily choose to waive a portion of its fees 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 are approximately $70 billion. Federated
Investors,
which was founded in 1956 as Federated Investors, Inc., develops
and
manages mutual funds primarily for the financial industry.
Federated
Investors' track record of competitive performance and its
disciplined,
risk averse investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions,
individual
shareholders also have access to this same level of investment
expertise.
Christopher H. Wiles has been the Fund's portfolio manager since
the Fund
commenced operations. Mr. Wiles joined Federated Investors in 1990
and has
been a Vice President of the Fund's investment adviser since 1992.
Mr.
Wiles served as Assistant Vice President of the Fund's investment
adviser
from 1990 until 1992. Mr. Wiles was a portfolio manager at Mellon
Bank from
1986 until 1990. Mr. Wiles is a Chartered Financial Analyst and
received
his M.B.A. in Finance from Cleveland State University.
Linda A. Duessel has been the Fund's portfolio manager since April
1995.
Ms. Duessel joined Federated Investors in 1991 as an Assistant Vice
President of the Fund's investment adviser. Ms. Duessel was
employed at
Westinghouse Credit Corporation from 1983 to 1991, serving in a
variety of
positions which culminated in her being named Vice
President/Portfolio
Manager in the Merchant Banking Group in 1990. Ms Duessel served as
a
Senior Staff Accountant at Arthur Young & Company from 1979 to
1982. Ms.
Duessel received her M.S.I.A. from Carnegie Mellon University. Ms.
Duessel
is a Certified Public Accountant and a Chartered Financial Analyst.
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>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<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.
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's or
the Fund's operations 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.
As of April 7, 1995, Aetna Life Insurance and Annuity, Hartford,
Connecticut,
owned 39.35%, and Life of Virginia, Richmond, Virginia, owned 40.77% 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.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL TAXES
The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment
companies and to receive the special tax treatment afforded to such
companies.
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 specific 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, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
the
Fund's performance to certain indices.
ADDRESSES
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<TABLE>
<S> <C>
<C>
Insurance Management Series
Utility Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Investment Adviser
Federated Advisers
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Custodian
State Street Bank and
P.O. Box 8604
Trust Company
Boston, Massachusetts 02266-8604
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Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
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Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, Massachusetts 02110-1617
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</TABLE>
UTILITY 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
458043205
3113008A (4/95)
Utility Fund
(A Portfolio of Insurance Management Series)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Utility Fund (the "Fund") 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 Policies 1
U.S. Government Obligations 1
When-Issued and Delayed
Delivery Transactions 1
Lending of Portfolio Securities 1
Repurchase Agreements 1
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Portfolio Turnover 2
Investment Limitations 3
Insurance Management Series Management 5
Fund Ownership 10
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 11
Administrative Services 11
Transfer Agent and Dividend
Disbursing Agent 11
Brokerage Transactions 11
Purchasing Shares 12
Determining Net Asset Value 12
Determining Value of Securities 12
Massachusetts Partnership Law 12
Tax Status 12
The Fund's Tax Status 12
Shareholder's Tax Status 13
Total Return 13
Yield 13
Performance Comparisons 13
Investment Objective and Policies
The Fund's investment objective is to achieve high current income and
moderate capital appreciation. The investment objective cannot be
changed without approval of shareholders. The Fund endeavors to achieve
its investment objective by investing primarily in a professionally
managed, diversified portfolio of equity and debt securities of utility
companies.
U.S. Government Obligations
The Fund may also invest in U.S. government obligations which generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury
bills, notes, and bonds) and obligations issued and/or guaranteed by
U.S. government agencies or instrumentalities. These securities are
backed by:
- the full faith and credit of the U.S. Treasury;
- the issuer's right to borrow an amount limited to a specific line
of credit from the U.S. Treasury;
- the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
- the credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
- Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
- Farmers Home Administration;
- Federal Home Loan Banks;
- Federal Home Loan Mortgage Corporation;
- Federal National Mortgage Association;
- Government National Mortgage Association; and
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. 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. 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 are
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.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of 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. The
Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
Repurchase Agreements
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or other securities to the Fund and agree at the time of sale
to repurchase them at a mutually agreed upon time and price. The Fund or
its custodian will take possession of the securities subject to
repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that such
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 to be
creditworthy pursuant to guidelines established by the Trustees.
Reverse Repurchase Agreements
The Fund may also 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.
Restricted and Illiquid Securities
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the 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 ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees.
The Trustees may consider the following criteria in determining the
liquidity of certain restricted securities:
- the frequency of trades and quotes for the security;
- the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
- dealer undertakings to make a market in the security; and
- the nature of the security and the nature of the marketplace
trades. Portfolio Turnover
Portfolio Turnover
Securities in the Fund's 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. Any such trading will increase
the Fund's portfolio turnover rate and transaction costs. The adviser to
the Fund does not anticipate that portfolio turnover will result in
adverse tax consequences.
For the period from April 14, 1994 (date of initial public investment)
to December 31, 1994, the portfolio turnover rate of the Fund was 73%.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of portfolio
securities. The deposit or payment by the Fund of initial or
variation margin in connection with futures contracts or related
options transactions is not considered the purchase of a security
on margin.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as
a temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous, and then only in
amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase
agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are
made. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage purposes.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing. For purposes
of this limitation, the following are not deemed to be pledges:
margin deposits for the purchase and sale of futures contracts and
related options, any segregation or collateral arrangements made
in connection with options activities or the purchase of
securities on a when-issued basis.
Concentration of Investments
The Fund will not purchase securities, if, as a result of such
purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry
other than the utilities industry. However, the Fund may at any
time invest 25% or more of its total assets in cash or cash items
and securities issued and/or guaranteed by the U.S. government,
its agencies or instrumentalities.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except that the Fund may
purchase and sell futures and stock index futures contracts and
related options.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted
by the Fund's investment objective and policies or the Trust's
Declaration of Trust.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
Diversification of Investments
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other
differences.
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 changes in these limitations become effective.
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 its net assets in
illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after
notice, over-the-counter options, and certain restricted
securities not determined by the Trustees to be liquid.
Investing in Put Options
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5%
of the Fund's total assets would be invested in premiums on open
put option positions.
Writing Covered Call Options
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or
after segregating cash in the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
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.
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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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.
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.
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.; 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 Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; 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; 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; The Virtus Funds; World
Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April 7 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: Lincoln Benefit Life Company
owned approximately 88,153 shares (15.97%), AEtna Life Insurance and
Annuity owned approximately 218,199 shares (39.53%) and Life of Virginia
owned approximately 225,059 shares (40.77%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Trust and
Trustee and Chairman 68 other investment
companies in
the Fund Complex
Thomas G. Bigley, $252 $20,688 for the Trust
and
Trustee 49 other investment
companies in
the Fund Complex
John T. Conroy, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
William J. Copeland, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
J. Christopher Donahue, $0 $0 for the Trust and
Trustee and President 14 other investment
companies in
the Fund Complex
James E. Dowd, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Lawrence D. Ellis, M.D., $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Edward L. Flaherty, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Peter E. Madden, $100 $90,563 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Gregor F. Meyer, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
John E. Murray, Jr., $0 $0 for the Trust and
Trustee 68 other investment
companies in
the Fund Complex
Wesley W. Posvar, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Marjorie P. Smuts, $252 $106,460 for the Trust
and
Trustee 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 six portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All 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 or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the period from December 9, 1993 (start of business) to December 31,
1994, the adviser earned advisory fees of $2,077, all of which was
waived.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from December 9, 1993 (start
of business) to December 31, 1994, the Fund incurred $73,289 in costs
for administrative services. 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 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 upon 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 upon 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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
For the period from December 9, 1993 (start of business) to December 31,
1994, the Fund paid $476 in brokerage commissions on brokerage
transactions.
Purchasing Shares
Shares of the Fund 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 of the Fund 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 Value of Securities
The values of the Fund's portfolio securities are determined as follows:
- for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities
exchange, if available;
- in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices;
- for bonds and other fixed income securities, at the last sale
price on a national securities exchange, if available; otherwise,
as determined by an independent pricing service;
- for unlisted equity securities, the latest mean prices;
- for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service; or
- for all other securities, at fair value as determined in good
faith by the Board of Trustees.
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 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.
Shareholder's Tax Status
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. 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 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 Fund's cumulative total return for the period from April 14, 1994
(date of initial public investment) to December 31, 1994 was 1.12%.
Cumulative total return reflects the Fund's total performance over a
specific period of time. The Fund's cumulative total return is
representative of eight months of Fund activity.
The average annual total return for 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, adjusted over the period by any additional shares, assuming the
monthly 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 for the thirty day period ended December 31, 1994 was
4.74%.
The yield for the Fund is determined 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 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 Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders. Also, the yield does not
reflect the charges and expenses of an insurance contract. 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 and market value of portfolio
securities;
- changes in Fund expenses; and
- the relative amount of the Fund's cash flow.
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 yield and
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 index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the "utility funds" category in
advertising and sales literature.
- Dow Jones Industrial Average ("DJIA") is an unmanaged index
representing share prices of major industrial corporations, public
utilities, and transportation companies. Produced by the Dow Jones
& Company, it is cited as a principal indicator of market
conditions.
- Standard & Poor's Daily Stock Price Index of 500 Common Stocks, a
composite index of common stocks in industry, transportation,
financial, and public utility companies, can be used to compare
the total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the S&P index assumes reinvestment
of all dividends paid by stocks listed on its index. Taxes due on
any of these distributions are not included, nor are brokerage or
other fees calculated in S&P figures.
- Standard & Poor's Utility Index is an unmanaged index of common
stocks from forty different utilities. This index indicates daily
changes in the price of the stocks. The index also provides
figures for changes in price from the beginning of the year to
date, and for a twelve month period.
- Dow Jones Utility Index is an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six
month period. The index also provides the highs and lows for each
of the past five years.
- Morningstar, Inc., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and other sales literature for 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 monthly 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 funds using the Lipper Analytical Services
money market average.
458043205
3113008B (4/95)
U.S. GOVERNMENT BOND FUND
(A PORTFOLIO OF INSURANCE MANAGEMENT SERIES)
PROSPECTUS
This prospectus offers shares of U.S. Government Bond Fund (the "Fund"),
which
is a diversified investment portfolio in Insurance Management Series
(the
"Trust"), an open-end, diversified management investment company. The
Fund seeks
current income by investing in a professionally managed, diversified
portfolio
limited to U.S. government securities. 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
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 variable annuity contracts and variable life
insurance policies 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 FUNDING VEHICLES FOR LIFE
INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR
SUCH
CONTRACTS.
Prospectus dated April 30, 1995
TABLE OF CONTENTS
- ------------------------------------------------------------------------
- --------
FINANCIAL HIGHLIGHTS
1
- ------------------------------------------------------
GENERAL INFORMATION
2
- ------------------------------------------------------
INVESTMENT INFORMATION
2
- ------------------------------------------------------
Investment Objective
2
Investment Policies
2
Investment Limitations
5
NET ASSET VALUE
5
- ------------------------------------------------------
INVESTING IN THE FUND
6
- ------------------------------------------------------
Purchases and Redemptions
6
What Shares Cost
6
Dividends
6
FUND INFORMATION
7
- ------------------------------------------------------
Management of the Fund
7
Distribution of Fund Shares
8
Administration of the Fund
8
Brokerage Transactions
9
SHAREHOLDER INFORMATION
9
- ------------------------------------------------------
Voting Rights
9
TAX INFORMATION
9
- ------------------------------------------------------
Federal Taxes
9
State and Local Taxes
10
PERFORMANCE INFORMATION
10
- ------------------------------------------------------
ADDRESSES
11
- ------------------------------------------------------
U.S. GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------
- --------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
The following table has been audited by Deloitte & Touche LLP, the
Fund's
independent auditors. Their report, dated February 10, 1995, on the
Fund's
financial statements for the year ended December 31, 1994, and on the
following
table for the period presented, is included in the Annual Report, which
is
incorporated by reference. This table should be read in conjunction with
the
Fund's financial statements and notes thereto, which may be obtained
from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1994*
<S>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD
$ 9.99
- ------------------------------------------------------------------------
- -----------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------
- -----------------
Net investment income
0.27
- ------------------------------------------------------------------------
- ----------------- -------
Total from investment operations
0.27
- ------------------------------------------------------------------------
- -----------------
LESS DISTRIBUTIONS
- ------------------------------------------------------------------------
- -----------------
Dividends to shareholders from net investment income
(0.27)
- ------------------------------------------------------------------------
- ----------------- -------
NET ASSET VALUE, END OF PERIOD
$ 9.99
- ------------------------------------------------------------------------
- ----------------- -------
TOTAL RETURN**
2.62%
- ------------------------------------------------------------------------
- -----------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------------------
- -----------------
Expenses
0.48%(a)
- ------------------------------------------------------------------------
- -----------------
Net investment income
3.99%(a)
- ------------------------------------------------------------------------
- -----------------
Expense waiver/reimbursement (b)
32.83%(a)
- ------------------------------------------------------------------------
- -----------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
- -----------------
Net assets, end of period (000 omitted)
$1,244
- ------------------------------------------------------------------------
- -----------------
Portfolio turnover rate
0%
- ------------------------------------------------------------------------
- -----------------
</TABLE>
* Reflects operations for the period from March 29, 1994 (date of
initial
public investment) to
December 31, 1994. For the period from December 8, 1993 (start of
business)
to March 28, 1994, net investment income was distributed to the Fund's
adviser.
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and
net
investment income ratios shown above.
Further information about the Fund's performance is contained in the
Fund's
Annual Report, dated December 31, 1994, which can be obtained free of
charge.
GENERAL INFORMATION
- ------------------------------------------------------------------------
- --------
The Fund is a portfolio of the Trust which 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 this
Fund.
Shares of the Fund are sold only to insurance companies as funding
vehicles for
variable annuity contracts and variable life insurance policies 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 investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders.
While
there is no assurance that the Fund will achieve its investment
objective, it
endeavors to do so by following the investment policies described in
this
prospectus.
INVESTMENT POLICIES
Under normal circumstances, the Fund pursues its investment objective by
investing at least 65% of the value of its total assets in securities
issued or
guaranteed as to payment of principal and interest by the U.S.
government, its
agencies or instrumentalities. For purposes of this 65% statement, the
Fund will
consider collateralized mortgage obligations issued by U.S. government
agencies
or instrumentalities to be U.S. government securities. Unless indicated
otherwise, the investment policies may be changed by the Board of
Trustees
("Trustees") without the approval of the shareholders. Shareholders will
be
notified before any material change becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in securities which are primary
or
direct obligations of the U.S. government or its agencies or
instrumentalities,
or which are guaranteed by the U.S. government, its agencies or
instrumentalities, and in certain collateralized mortgage obligations
("CMOs"),
described below, and repurchase agreements.
The U.S. government securities in which the Fund invests include:
direct obligations of the U.S. Treasury, such as U.S. Treasury
bills,
notes, and bonds; and
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives;
Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal
National
Mortgage Association; Government National Mortgage Association;
Export-Import Bank of the United States; Commodity Credit
Corporation;
Federal Financing Bank; The Student Loan Marketing Association;
National
Credit Union Administration; and Tennessee Valley Authority.
Some obligations issued or guaranteed by agencies or instrumentalities
of the
U.S. government, such as Government National Mortgage Association
participation
certificates, are backed by the full faith and credit of the U.S.
Treasury. No
assurances can be given that the U.S. government will provide financial
support
to other agencies or instrumentalities, since it is not obligated to do
so.
These instrumentalities are supported by:
the issuer's right to borrow an amount limited to a specific line
of
credit from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase
certain
obligations of an agency or instrumentality; or
the credit of the agency or instrumentality.
The Fund may also invest in CMOs which are rated AAA by a nationally
recognized
statistical rating agency and which are issued by private entities such
as
investment banking firms and companies related to the construction
industry. The
CMOs in which the Fund may invest may be: (i) privately issued
securities which
are collateralized by pools of mortgages in which each mortgage is
guaranteed as
to payment of principal and interest by an agency or instrumentality of
the U.S.
government; (ii) privately issued securities which are collateralized by
pools
of mortgages in which payment of principal and interest are guaranteed
by the
issuer and such guarantee is collateralized by U.S. government
securities; and
(iii) other privately issued securities in which the proceeds of the
issuance
are invested in mortgage-backed securities and payment of the principal
and
interest are supported by the credit of an agency or instrumentality of
the U.S.
government. The mortgage-related securities provide for a periodic
payment
consisting of both interest and principal. The interest portion of these
payments will be distributed by the Fund as income, and the capital
portion will
be reinvested.
Mortgage-backed securities may be subject to certain prepayment risks
because
the underlying mortgage loans may be prepaid without penalty or premium.
Prepayment risks on mortgage-backed securities tend to increase during
periods
of declining mortgage interest rates because many borrowers refinance
their
mortgages to take advantage of favorable rates. At the time the Fund
reinvests
the proceeds, it may receive a rate of interest which is actually lower
than the
rate of interest paid on those securities.
REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements.
Repurchase
agreements are arrangements in which banks, broker/dealers, and other
recognized
financial institutions sell U.S. government securities or other
securities to
the Fund and agree at the time of sale to repurchase them at a mutually
agreed
upon time and price. The Fund or its custodian will take possession of
the
securities subject to repurchase agreements and these securities will be
marked
to market daily. To the extent that the original seller does not
repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price
on any sale of such securities. In the event that such 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
Funds will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers, which
are found
by the Fund's adviser to be creditworthy pursuant to guidelines
established by
the Trustees.
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 portfolio securities on a short-term or a long-term basis,
or
both, up to one-third of the value of its total assets to
broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental
policy
which may not be changed without shareholder approval. The Fund will
only enter
into loan arrangements with broker/dealers, banks, or other institutions
which
the investment adviser has determined are creditworthy under guidelines
established by the Trustees and will receive collateral equal to at
least 100%
of the value of the securities loaned in the form of cash or U.S.
government
securities. 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.
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/less than the market value of the
securities
on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities
at later
dates. The Fund may realize short-term profits or losses upon the sale
of such
commitments.
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.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a
percentage of its cash value with an agreement to buy it back on
a set
date), or pledge securities except, under certain circumstances,
the Fund
may borrow money and engage in reverse repurchase agreements in
amounts
up to one-third of the value of its total assets and pledge up to
15% of
the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
The following limitation, however, may be changed by the Trustees
without
shareholder approval. Shareholders will be notified before any material
change
in this limitation becomes effective.
The Fund will not:
invest more than 10% of its total assets in securities of other
investment companies.
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
- ------------------------------------------------------------------------
- --------
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 annuity contracts and variable
life
insurance policies. The use of Fund shares as investments for both
variable
annuity contracts and variable life insurance policies 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 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 monthly.
Shares of the Fund will begin earning dividends if owned on the 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
- ------------------------------------------------------------------------
- --------
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. An
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 .60 of 1% of the Fund's average daily net assets. The
adviser
may voluntarily 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 are
approximately $70 billion. Federated Investors, which was founded
in 1956
as Federated Investors, Inc., develops and manages mutual funds
primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions
nationwide.
Through these same client institutions, individual shareholders
also have
access to this same level of investment expertise.
Kathleen M. Foody-Malus has been the Fund's portfolio manager since
the
Fund commenced operations. Ms. Foody-Malus joined Federated
Investors in
1983 and has been a Vice President of the Fund's investment adviser
since
1993. Ms. Foody-Malus served as an Assistant Vice President of the
investment adviser from 1990 until 1992, and from 1986 until 1989
she acted
as
an investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.
James D. Roberge has been the Fund's portfolio manager since March
1995.
Mr. Roberge joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since October 1994.
Prior to
this, Mr. Roberge served as an Assistant Vice President of the
Fund's
investment adviser. From 1990 until 1992, Mr. Roberge acted as an
investment analyst. Mr. Roberge is a Chartered Financial Analyst
and
received his M.B.A. in Finance from The University of Pennsylvania
in 1990.
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
MAXIMUM 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
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.
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 the 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.
As of April 10, 1995, tna Life Insurance and Annuity, Hartford,
Connecticut,
owned 26.97%, and TransAmerica Occidental Life Insurance Company, Los
Angeles,
California, owned 42.75%, 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.
TAX INFORMATION
- ------------------------------------------------------------------------
- --------
FEDERAL TAXES
The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment
companies and to receive the special tax treatment afforded to such
companies.
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 specific 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, advertisements for the Fund may refer to ratings,
rankings,
and other information in certain financial publications and/or compare
the
Fund's performance to certain indices.
ADDRESSES
- ------------------------------------------------------------------------
- --------
<TABLE>
<S> <C>
<C>
Insurance Management Series
U.S. Government Bond 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 and
P.O. Box 8604
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
- ------------------------------------------------------------------------
- -----------------------------------------------
</TABLE>
U.S. GOVERNMENT
BOND 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
458043304
3113007A (4/95)
U.S. Government Bond Fund
(A Portfolio of Insurance Management Series)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of U.S. Government Bond Fund (the "Fund") 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 Policies 1
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Lending of Portfolio Securities 1
Restricted and Illiquid Securities 2
Reverse Repurchase Agreements 2
Portfolio Turnover 2
Investment Limitations 3
Insurance Management Series Management 5
Fund Ownership 10
Trustees Compensation 10
Trustee Liability 11
Investment Advisory Services 11
Adviser to the Fund 11
Advisory Fees 11
Administrative Services 11
Transfer Agent and
Dividend Disbursing Agent 11
Brokerage Transactions 11
Purchasing Shares 12
Determining Net Asset Value 12
Determining Value of Securities 12
Massachusetts Partnership Law 12
Tax Status 12
The Fund's Tax Status 12
Shareholder's Tax Status 13
Total Return 13
Yield 13
Performance Comparisons 13
Investment Objective and Policies
The Fund's investment objective is to provide current income. The
investment objective cannot be changed without the approval of
shareholders. Current income includes, in general, discount earned on
U.S. Treasury bills and agency discount notes, interest earned on all
other U.S. government securities, and short-term capital gains.
Types of Investments
The Fund invests in securities which are primary or direct obligations
of the U.S. government or its agencies or instrumentalities, or which
are guaranteed by the U.S. government, its agencies or instrumentalities
and in certain collateralized mortgage obligations, described below, and
repurchase agreements.
Collateralized Mortgage Obligations (CMOs)
Privately issued CMOs generally represent an ownership interest in
federal agency mortgage pass-through securities such as those
issued by the Government National Mortgage Association. The terms
and characteristics of the mortgage instruments may vary among
pass-through mortgage loan pools.
The market for such CMOs has expanded considerably since its
inception. The size of the primary issuance market and the active
participation in the secondary market by securities dealers and
other investors make government-related pools highly liquid.
Stripped Mortgage-Related Securities
Some of the mortgage-related securities purchased by the Fund may
represent an interest solely in the principal repayments or solely
in the interest payments on mortgage-backed securities (stripped
mortgage-backed securities or "SMBSs"). Due to the possibility of
prepayments on the underlying mortgages, SMBSs may be more
interest-rate sensitive than other securities purchased by the
Fund. If prevailing interest rates fall below the level at which
SMBSs were issued, there may be substantial prepayment on the
underlying mortgages, leading to the relatively early prepayment
of principal-only SMBSs and a reduction in the amount of payment
made to holders of interest-only SMBSs. It is possible that the
Fund might not recover its original investment on interest-only
SMBSs if there are substantial prepayments on the underlying
mortgages. Therefore, interest-only SMBSs generally increase in
value as interest rates rise and decrease in value as interest
rates fall, counter to changes in value experienced by most fixed
income securities. The Fund's adviser intends to use this
characteristic of interest-only SMBSs to reduce the effects of
interest rate changes on the value of the Fund's portfolio, while
continuing to pursue current income.
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. 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. 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 are
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.
Lending of Portfolio Securities
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of 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 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. The Fund does
not have the right to vote securities on loan, but would terminate the
loan and regain the right to vote if that were considered important with
respect to the investment.
Restricted and Illiquid Securities
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the 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 ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
nonexclusive 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 SEC has left the question of
determining the liquidity of all restricted securities to the Trustees.
The Trustees may 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.
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.
Portfolio Turnover
Securities in the Fund's 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 length of time a
particular security may have been held. The Fund's policy of managing
its portfolio of U.S. government securities, including the sale of
securities held for a short period of time, to achieve its investment
objective of current income may result in high portfolio turnover. The
Fund will not attempt to set or meet a portfolio turnover rate as any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objective.
For the period from March 29, 1994 (date of initial public investment)
to December 31, 1994, the portfolio turnover rate of the Fund was 0%.
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of portfolio
securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as
a temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities
is deemed to be inconvenient or disadvantageous, and then only in
amounts not in excess of one-third of the value of its total
assets; provided that, while borrowings and reverse repurchase
agreements outstanding exceed 5% of the Fund's total assets, any
such borrowings will be repaid before additional investments are
made. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage purposes.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amount borrowed or 15% of the
value of total assets at the time of borrowing.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in any
one industry. However, the Fund may at any time invest 25% or more
of its total assets in cash or cash items and securities issued
and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
Diversification of Investments
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other
differences.
Investing in Real Estate
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
Investing in Commodities
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
Underwriting
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
Lending Cash or Securities
The Fund will not lend any of its assets, except portfolio
securities up to one-third of the value of its total assets. This
shall not prevent the Fund from purchasing or holding corporate or
U.S. government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, entering into
repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objective and policies or the
Trust's Declaration of Trust.
In addition, the Fund will not purchase more than 10% of any class of
the outstanding voting securities of any one issuer. For these purposes,
the Fund considers common stock and all preferred stock of an issuer
each as a single class regardless of priorities, series, designations,
or other differences.
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 changes in these limitations becomes effective.
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, among others, repurchase
agreements providing for settlement more than seven days after
notice, and certain restricted securities not determined by the
Trustees to be liquid.
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 of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
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.
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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, 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.
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.
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.; 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 Term Trust, Inc. - 1999; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Money
Market Management, Inc.; Money Market Obligations Trust; Money Market
Trust; 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; 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; The Virtus Funds; World
Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April 10 1995, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: Lincoln Benefit Life Company
owned approximately 45,905 shares (20.83%), AEtna Life Insurance and
Annuity owned approximately 59,424 shares (26.97%) and TransAmerica
Occidental Life Insurance Company owned approximately 94,192 shares
(42.75%).
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue, $0 $0 for the Trust and
Trustee and Chairman 68 other investment
companies in
the Fund Complex
Thomas G. Bigley, $252 $20,688 for the Trust
and
Trustee 49 other investment
companies in
the Fund Complex
John T. Conroy, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
William J. Copeland, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
J. Christopher Donahue, $0 $0 for the Trust and
Trustee and President 14 other investment
companies in
the Fund Complex
James E. Dowd, $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Lawrence D. Ellis, M.D., $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Edward L. Flaherty, Jr., $276 $117,202 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Peter E. Madden, $100 $90,563 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Gregor F. Meyer, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
John E. Murray, Jr., $0 $0 for the Trust and
Trustee 68 other investment
companies in
the Fund Complex
Wesley W. Posvar, $252 $106,460 for the Trust
and
Trustee 64 other investment
companies in
the Fund Complex
Marjorie P. Smuts, $252 $106,460 for the Trust
and
Trustee 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 six portfolios.
+The information is provided for the last calendar year.
Trustee Liability
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers. It is a subsidiary
of Federated Investors. All 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 or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Advisory Fees
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the period from December 8, 1993 (start of business) to December 31,
1994, the adviser earned advisory fees of $2,605, all of which was
waived.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus. For the period from December 8, 1993 (start
of business) to December 31, 1994, the Fund incurred $63,015 in costs
for administrative services. 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 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 upon 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 upon 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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses.
For the period from December 8, 1993 (start of business) to December 31,
1994, the Fund paid $0 in brokerage commissions on brokerage
transactions.
Purchasing Shares
Shares of the Fund 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 of the Fund 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 Value of Securities
The values of the Fund's portfolio securities are determined as follows:
- for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities
exchange, if available;
- in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices;
- for bonds and other fixed income securities, at the last sale
price on a national securities exchange, if available otherwise,
as determined by an independent pricing service;
- for unlisted equity securities, the latest mean prices;
- for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service; or
- for all other securities, at fair value as determined in good
faith by the Board of Trustees.
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 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.
Shareholder's Tax Status
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. 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 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 Fund's cumulative total return for the period from March 29, 1994
(date of initial public investment) to December 31, 1994, was 2.62%.
Cumulative total return reflects a fund's total performance over a
specific period of time. The Fund's cumulative total return is
representative of only nine months of Fund activity.
The average annual total return for 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, adjusted over the period by any additional shares, assuming the
monthly 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 did not calculate a thirty-day yield for the period ended
December 31, 1994.
The yield for the Fund is determined 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 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 Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders. Also, the yield does not
reflect the charges and expenses of an insurance contract. 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 and market value of portfolio
securities;
- changes in Fund expenses; and
- the relative amount of the Fund's cash flow.
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 yield and
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 index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
- Lipper Analytical Services, Inc., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund
will quote its Lipper ranking in the growth and income funds
category in advertising and sales literature.
- Lehman Brothers Government/Corporate (Total) Index is comprised of
approximately 5,000 issues which include non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine
years. Tracked by Lehman Brothers, the index calculates total
returns for one month, three month, twelve month, and ten year
periods, and year-to-date.
- Lehman Brothers Government/Corporate (Long-Term) Index is composed
of the same types of issues as defined above. However, the average
maturity of the bonds included in this index approximates 22
years.
- Morningstar, Inc., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and other sales literature for 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 quarterly 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 funds using the Lipper Analytical
Services money market instruments average.
458043304
3113007B (4/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) 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) To be
filed
with 4-6 month update;
(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)
(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)
(vi) Conformed copy of Exhibit F to
Investment Advisory Contract; (6)
(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)
+ 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).
(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).
(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) Not Applicable;
(8) Conformed copy of Custodian Contract; +
(9) (i) Conformed copy of Administrative
Services Agreement+
(ii) Conformed copy of Agreement for Fund
Accounting, Shareholder Recordkeeping and
Custody Services Procurement; +
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered; (2)
(11) Conformed copy of Consent of Independent
Auditors; +
(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)
(17) (i) Copy of Financial Data Schedule of
Equity Growth and Income Fund; +
(ii) Copy of Financial Data Schedule of
Utility Fund; +
(iii) Copy of Financial Data Schedule of U.S.
Government Bond Fund; +
(iv) Copy of Financial Data Schedule of
Corporate Bond Fund; +
(v) Copy of Financial Data Schedule of
Prime Money Fund; +;
(18) Not applicable
(19) Conformed copy of Power of Attorney; (5)
Item 25. Persons Controlled by or Under Common Control with
Registrant:
None
+ 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).
(5) Response is incorporated by reference to Registrant's Post-
Effective
Amendment No. 4 on Form N-1A filed February 22, 1995. (File Nos.
33-
69268 and 811-80420).
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of March 24, 1995
Shares of beneficial interest
(no par value)
Equity Growth and Income Fund 6
Utility Fund 7
U.S. Government Bond Fund 8
Corporate Bond Fund 6
Prime Money Fund 4
International Stock Fund 0
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.
The remaining Officers of the investment adviser are:
William D.
Dawson, III, 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, Gregory M. Melvin, 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; 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
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; 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; Insight Institutional Series, Inc.;
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.; The Medalist
Funds; 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; Short-Term Municipal Trust;
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; 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 Vice
President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice
President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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
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
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
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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 Corp.
Pittsburgh, PA 15222-3779
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
Joseph L. Epstein 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
David C. Glabicki 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
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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 Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns 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 Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. 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
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
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant
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 Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles 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
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower 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 Federated Investors Tower
Transfer Agent, Dividend Pittsburgh, PA 15222-3779
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 8604
Trust Company Boston, Massachusetts 02266-8604
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 International Stock Fund, using financial
statements for
International Stock Fund, which need not be certified,
within four
to six months from the effective date of Post-Effective
Amendment
No. 3.
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 21st day of April, 1995.
INSURANCE MANAGEMENT SERIES
BY: /s/G. Andrew Bonnewell
G. Andrew Bonnewell, Assistant Secretary
Attorney in Fact for John F. Donahue
April 21, 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
April 21, 1995 For the Persons
ASSISTANT SECRETARY Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
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 11 under Form N-1A
Exhibit 23 under Item 601/Reg
SK
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 6 to Registration Statement No. 33-69268 of Insurance
Management Series, of our reports dated February 10, 1995 appearing in
the Annual Reports to Shareholders of Prime Money Fund, Equity Growth
and Income Fund, U.S. Government Bond Fund, Corporate Bond Fund, Utility
Fund (portfolios of Insurance Management Series) for the year ended
December 31, 1994, and to the references to us under the heading
"Financial Highlights" in the Prospectus, which are a part of such
Registration Statement.
By: DELOITTE & TOUCHE
Deloitte & Touche
Boston, Massachusetts
April 18, 1995
Exhibit 6 (vi) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
Exhibit F
to the
Distributor's Contract
Insurance Management Series
International Stock Fund
In consideration of the mutual covenants set forth in the
Distributor's Contract dated December 1, 1993 between Insurance
Management Series and Federated Securities Corp., Insurance Management
Series executes and delivers this Exhibit on behalf of the Fund first
set forth in this Exhibit.
Witness the due execution hereof this 1st day of March, 1995.
ATTEST: Insurance Management Series
John W. McGonigle By: J. C. Donahue
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
S. Elliott Cohan By: John W. McGonigle
Secretary Executive Vice President
(SEAL)
Exhibit 9 (i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first
day of March, 1994, between those investment companies listed on Exhibit
1, as may be amended from time to time, having their principal office
and place of business at Federated Investors Tower, Pittsburgh PA 15222-
3779 (individually referred to herein as "Fund" and collectively
referred to as "Funds), on behalf of the portfolios of the Funds, and
Federated Administrative Services, a Delaware business trust (herein
called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to
provide them with Administrative Services (as herein defined), and FAS
is willing to render such services;
WHEREAS, the Funds are registered as open-end management
investment companies under the Investment Company Act of 1940, as
amended (the "1940 Act"), with authorized and issued shares of capital
stock or beneficial interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual
covenants set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS
as Administrator of the Funds on the terms and conditions set forth in
this Agreement; and FAS hereby accepts such appointment and agrees to
perform the services and duties set forth in Section 2 of this Agreement
in consideration of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Funds' Boards of Trustees or Directors,
as applicable (the "Boards"), FAS will provide facilities, equipment,
and personnel to carry out the following administrative services for
operation of the business and affairs of the Funds and each of their
portfolios:
(a) prepare, file, and maintain the
Funds' governing documents and any amendments thereto,
including the Declaration of Trust or Articles of
Incorporation, as appropriate,(which has already been
prepared and filed), the By-laws and minutes of meetings of
their Boards, Committees, and shareholders;
(b) prepare and file with the
Securities and Exchange Commission and the appropriate
state securities authorities the registration statements
for the Funds and the Funds' shares and all amendments
thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such
other documents all as may be necessary to enable the Funds
to make continuous offerings of their shares, as
applicable;
(c) prepare, negotiate, and
administer contracts on behalf of the Funds with, among
others, each Fund's investment adviser, distributor,
custodian, and transfer agent, subject to any applicable
restrictions of the Boards or the 1940 Act;
(d) supervise the Funds' custodians
in the maintenance of the Funds' general ledgers and in the
preparation of the Funds' financial statements, including
oversight of expense accruals and payments, the
determination of the net asset value of the Funds and the
declaration and payment of dividends and other
distributions to shareholders;
(e) calculate performance data of the
Funds for dissemination to information services covering
the investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the operations
of the Funds' custodians and transfer agents;
(h) coordinate the layout and
printing of publicly disseminated prospectuses and reports;
(i) perform internal audit
examinations in accordance with a charter to be adopted by
FAS and the Funds;
(j) assist with the design,
development, and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination,
appointment, or election as officers of the Funds, who will
be responsible for the management of certain of the Funds'
affairs as determined by the Funds' Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on matters
concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall
agree in writing to perform for the Funds hereunder, shall hereafter be
referred to as "Administrative Services." Administrative Services shall
not include any duties, functions, or services to be performed for any
Fund by such Fund's investment adviser, distributor, custodian, transfer
agent, or shareholder service agent, pursuant to their respective
agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred
in providing office space, equipment, and personnel as may be necessary
or convenient to provide the Administrative Services to the Fund,
including the compensation of FAS employees who serve on the Funds'
Boards, or as officers of the Funds. Each Fund shall be responsible for
all other expenses incurred by FAS on behalf of such Fund, including
without limitation postage and courier expenses, printing expenses,
travel expenses, registration fees, filing fees, fees of outside counsel
and independent auditors, insurance premiums, fees payable to members of
such Fund's Board who are not FAS employees, and trade association dues.
4. Compensation. For the Administrative Services provided,
each Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee
at an annual rate, payable daily, as specified below, based upon the
total assets of all of the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250
million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during
any year of this Agreement be less than, or be paid at a rate less than
would aggregate, $125,000, per individual Fund, with an additional
$30,000 for each class of shares added to any such Fund after the date
hereof.
5. Standard of Care.
(a) FAS shall not be liable for any
error of judgment or mistake of law or for any loss
suffered by any Fund in connection with the matters to
which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Agreement. FAS shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for such Fund)
on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice.
Any person, even though also an officer, trustee, partner,
employee or agent of FAS, who may be or become a member of
such Fund's Board, officer, employee or agent of any Fund,
shall be deemed, when rendering services to such Fund or
acting on any business of such Fund (other than services or
business in connection with the duties of FAS hereunder) to
be rendering such services to or acting solely for such
Fund and not as an officer, trustee, partner, employee or
agent or one under the control or direction of FAS even
though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this
Agreement with respect to each Fund shall commence on the date hereof,
and extend for a period of one year, renewable annually by the approval
of the Board of Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which an enforcement of the change,
waiver, discharge or termination is sought.
8. Limitations of Liability of Trustees or Officers,
Employees, Agents and Shareholders of the Funds. FAS is expressly put
on notice of the limitation of liability as set forth in the Declaration
of Trust of each Fund that is a Massachusetts business trust and agrees
that the obligations assumed by each such Fund pursuant to this
Agreement shall be limited in any case to such Fund and its assets and
that FAS shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or Agents
of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders of
FAS. The execution and delivery of this Agreement have been authorized
by the Trustees of FAS and signed by an authorized officer of FAS,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon
any of the Trustees or shareholders of FAS, but bind only the trust
property of FAS as provided in the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder
shall be in writing (including facsimile communication) and shall be
duly given if delivered to any Fund at the following address: Federated
Investors Tower, Pittsburgh, PA 15222-3779, Attention: President and
if delivered to FAS at Federated Investors Tower, Pittsburgh, PA 15222-
3779, Attention: President.
11. Miscellaneous. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior agreement
with respect to the subject hereof whether oral or written. The
captions in this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Section 5,
hereof, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and shall
be governed by Pennsylvania law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the Investment Company
Act of 1940 or any rule or regulation promulgated by the Securities and
Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall
together constitute one and the same instrument.
13. Assignment; Successors. This Agreement shall not be assigned
by any party without the prior written consent of FAS, in the case of
assignment by any Fund, or of the Funds, in the case of assignment by
FAS, except that any party may assign to a successor all of or a
substantial portion of its business to a party controlling, controlled
by, or under common control with such party. Nothing in this Section 14
shall prevent FAS from delegating its responsibilities to another entity
to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Insurance Management Series
Exhibit 9(ii) under
Form N-1A
Exhibit 10 under Item
601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of December 1, 1994, by and between those
investment companies listed on Exhibit 1 as may be amended from time
to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on
behalf of the portfolios (individually referred to herein as a "Fund"
and collectively as "Funds") of the Trust, and FEDERATED SERVICES
COMPANY, a Delaware business trust, having its principal office and
place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended (the "1940 Act"), with authorized and issued shares of capital
stock or beneficial interest ("Shares"); and
WHEREAS, the Trust may desire to retain the Company to provide
certain pricing, accounting and recordkeeping services for each of the
Funds, including any classes of shares issued by any Fund ("Classes")
if so indicated on Exhibit 1, and the Company is willing to furnish
such services; and
WHEREAS, the Trust may desire to appoint the Company as its
transfer agent, dividend disbursing agent if so indicated on Exhibit
1, and agent in connection with certain other activities, and the
Company desires to accept such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent
to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the
Company desires to accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct
the Company to subcontract for the performance of certain of its
duties and responsibilities hereunder to State Street Bank and Trust
Company or another agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for
those investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual
covenants herein contained, and intending to be legally bound hereby,
the parties hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing
and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company
accepts such appointment and agrees to furnish the services herein set
forth in return for the compensation as provided in Article 3 of this
Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Trust's Board of
Trustees or Directors ("Board"), the Company will assist the Trust
with regard to fund accounting for the Trust, and/or the Funds, and/or
the Classes, and in connection therewith undertakes to perform the
following specific services;
A. Value the assets of the Funds using: primarily, market
quotations, including the use of matrix pricing, supplied by
the independent pricing services selected by the Company in
consultation with the adviser, or sources selected by the
adviser, and reviewed by the board; secondarily, if a
designated pricing service does not provide a price for a
security which the Company believes should be available by
market quotation, the Company may obtain a price by calling
brokers designated by the investment adviser of the fund
holding the security, or if the adviser does not supply the
names of such brokers, the Company will attempt on its own
to find brokers to price those securities; thirdly, for
securities for which no market price is available, the
Pricing Committee of the Board will determine a fair value
in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The
Company's obligations with regard to the prices received
from outside pricing services and designated brokers or
other outside sources, is to exercise reasonable care in the
supervision of the pricing agent. The Company is not the
guarantor of the securities prices received from such agents
and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net
asset value per share of such Fund or Class when the
calculations are based upon such prices. All of the above
sources of prices used as described are deemed by the
Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices
used in calculating the net asset value of the fund, for its
use in preparing exception reports for those prices on which
the adviser has comment. Further, upon receipt of the
exception reports generated by the adviser, the Company
diligently pursues communication regarding exception reports
with the designated pricing agents.
B. Determine the net asset value per share of each Fund and/or
Class, at the time and in the manner from time to time
determined by the Board and as set forth in the Prospectus
and Statement of Additional Information ("Prospectus") of
each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and
financial records of the Trust, including for each Fund,
and/or Class, as required under Section 31(a) of the 1940
Act and the Rules thereunder in connection with the services
provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the
1940 Act the records to be maintained by Rule 31a-1 under
the 1940 Act in connection with the services provided by the
Company. The Company further agrees that all such records it
maintains for the Trust are the property of the Trust and
further agrees to surrender promptly to the Trust such
records upon the Trust's request;
G. At the request of the Trust, prepare various reports or
other financial documents required by federal, state and
other applicable laws and regulations; and
H. Such other similar services as may be reasonably requested
by the Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services
rendered pursuant to Section One of this Agreement in
accordance with the fees agreed upon from time to time
between the parties hereto. Such fees do not include out-of-
pocket disbursements of the Company for which the Funds
shall reimburse the Company upon receipt of a separate
invoice. Out-of-pocket disbursements shall include, but
shall not be limited to, the items agreed upon between the
parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear
the cost of: custodial expenses; membership dues in the
Investment Company Institute or any similar organization;
transfer agency expenses; investment advisory expenses;
costs of printing and mailing stock certificates,
Prospectuses, reports and notices; administrative expenses;
interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental
agencies; fees of Trustees or Directors of the Trust;
independent auditors expenses; Federated Administrative
Services and/or Federated Administrative Services, Inc.
legal and audit department expenses billed to Federated
Services Company for work performed related to the Trust,
the Funds, or the Classes; law firm expenses; or other
expenses not specified in this Article 3 which may be
properly payable by the Funds and/or classes.
C. The compensation and out-of-pocket expenses shall be accrued
by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon
request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a
duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
E. The fee for the period from the effective date of this
Agreement with respect to a Fund or a Class to the end of
the initial month shall be prorated according to the
proportion that such period bears to the full month period.
Upon any termination of this Agreement before the end of any
month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month
period. For purposes of determining fees payable to the
Company, the value of the Fund's net assets shall be
computed at the time and in the manner specified in the
Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person
or persons as the Company may believe to be particularly
suited to assist it in performing services under this
Section One. Such person or persons may be third-party
service providers, or they may be officers and employees who
are employed by both the Company and the Funds. The
compensation of such person or persons shall be paid by the
Company and no obligation shall be incurred on behalf of the
Trust, the Funds, or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement,
the Trust hereby appoints the Company to act as, and the Company
agrees to act as, transfer agent and dividend disbursing agent for
each Fund's Shares, and agent in connection with any accumulation,
open-account or similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic
investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more person or persons as the
Board shall have from time to time authorized. Each such writing shall
set forth the specific transaction or type of transaction involved.
Oral instructions will be deemed to be Proper Instructions if (a) the
Company reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such instructions
with respect to the transaction involved, and (b) the Trust, or the
Fund, and the Company promptly cause such oral instructions to be
confirmed in writing. Proper Instructions may include communications
effected directly between electro-mechanical or electronic devices
provided that the Trust, or the Fund, and the Company are satisfied
that such procedures afford adequate safeguards for the Fund's assets.
Proper Instructions may only be amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Trust
as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the
purchase of shares and promptly deliver payment and
appropriate documentation therefore to the custodian of
the relevant Fund, (the "Custodian"). The Company shall
notify the Fund and the Custodian on a daily basis of
the total amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the
Fund's current Prospectus, the Company shall compute
and issue the appropriate number of Shares of each Fund
and/or Class and hold such Shares in the appropriate
Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder
or its agent requests a certificate, the Company, as
Transfer Agent, shall countersign and mail by first
class mail, a certificate to the Shareholder at its
address as set forth on the transfer books of the
Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the
purchase of Shares of the Fund and/or Class is returned
unpaid for any reason, the Company shall debit the
Share account of the Shareholder by the number of
Shares that had been credited to its account upon
receipt of the check or other order, promptly mail a
debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the
amount paid for such Shares exceeds proceeds of the
redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund
and/the Class or its distributor will reimburse the
Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of
any distribution to Shareholders, the Company shall act
as Dividend Disbursing Agent for the Funds in
accordance with the provisions of its governing
document and the then-current Prospectus of the Fund.
The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As
the Dividend Disbursing Agent, the Company shall, on or
before the payment date of any such distribution,
notify the Custodian of the estimated amount required
to pay any portion of said distribution which is
payable in cash and request the Custodian to make
available sufficient funds for the cash amount to be
paid out. The Company shall reconcile the amounts so
requested and the amounts actually received with the
Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any
such distribution or dividend, appropriate credits
shall be made to the Shareholder's account, for
certificated Funds and/or Classes, delivered where
requested; and
(2) The Company shall maintain records of account for each
Fund and Class and advise the Trust, each Fund and
Class and its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and
redemption directions and, if such redemption requests
comply with the procedures as may be described in the
Fund Prospectus or set forth in Proper Instructions,
deliver the appropriate instructions therefor to the
Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests
processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption
proceeds from the Custodian with respect to any
redemption, the Company shall pay or cause to be paid
the redemption proceeds in the manner instructed by the
redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other
request for redemption does not comply with the
procedures for redemption approved by the Fund, the
Company shall promptly notify the Shareholder of such
fact, together with the reason therefor, and shall
effect such redemption at the price applicable to the
date and time of receipt of documents complying with
said procedures.
(4) The Company shall effect transfers of Shares by the
registered owners thereof.
(5) The Company shall identify and process abandoned
accounts and uncashed checks for state escheat
requirements on an annual basis and report such actions
to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each
Fund, and/or Class, and maintain pursuant to applicable
rules of the Securities and Exchange Commission ("SEC")
a record of the total number of Shares of the Fund
and/or Class which are authorized, based upon data
provided to it by the Fund, and issued and outstanding.
The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number
of Shares which are authorized and issued and
outstanding, but shall have no obligation when
recording the issuance of Shares, except as otherwise
set forth herein, to monitor the issuance of such
Shares or to take cognizance of any laws relating to
the issue or sale of such Shares, which functions shall
be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records
pursuant to applicable rules of the SEC relating to the
services to be performed hereunder in the form and
manner as agreed to by the Trust or the Fund to include
a record for each Shareholder's account of the
following:
(a) Name, address and tax identification number (and
whether such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account,
including dividends paid and date and price for all
transactions;
(d) Any stop or restraining order placed against the
account;
(e) Information with respect to withholding in the case
of a foreign account or an account for which
withholding is required by the Internal Revenue
Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any
Shareholder holding certificates;
(h) Any information required in order for the Company
to perform the calculations contemplated or
required by this Agreement.
(3) The Company shall preserve any such records required to
be maintained pursuant to the rules of the SEC for the
periods prescribed in said rules as specifically noted
below. Such record retention shall be at the expense of
the Company, and such records may be inspected by the
Fund at reasonable times. The Company may, at its
option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in
the Company's files, records and documents created and
maintained by the Company pursuant to this Agreement,
which are no longer needed by the Company in
performance of its services or for its protection. If
not so turned over to the Fund, such records and
documents will be retained by the Company for six years
from the year of creation, during the first two of
which such documents will be in readily accessible
form. At the end of the six year period, such records
and documents will either be turned over to the Fund or
destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding
in each state for "blue sky" purposes as determined
according to Proper Instructions delivered from
time to time by the Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption
fees, or other transaction- or sales-related
payments;
(f) Such other information as may be agreed upon from
time to time.
(2) The Company shall prepare in the appropriate form, file
with the Internal Revenue Service and appropriate state
agencies, and, if required, mail to Shareholders, such
notices for reporting dividends and distributions paid
as are required to be so filed and mailed and shall
withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and
regulations.
(3) In addition to and not in lieu of the services set
forth above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant,
agent in connection with accumulation, open-account
or similar plans (including without limitation any
periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder
reports and Prospectuses to current Shareholders,
withholding taxes on accounts subject to back-up or
other withholding (including non-resident alien
accounts), preparing and filing reports on U.S.
Treasury Department Form 1099 and other appropriate
forms required with respect to dividends and
distributions by federal authorities for all
Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts,
preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to
monitor the total number of Shares of each Fund
and/or Class sold in each state ("blue sky
reporting"). The Fund shall by Proper Instructions
(i) identify to the Company those transactions and
assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the
classification of transactions for each state on
the system prior to activation and thereafter
monitor the daily activity for each state. The
responsibility of the Company for each Fund's
and/or Class's state blue sky registration status
is limited solely to the recording of the initial
classification of transactions or accounts with
regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as
provided above.
F. Other Duties
(1) The Company shall answer correspondence from
Shareholders relating to their Share accounts and such
other correspondence as may from time to time be
addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists,
mail proxy cards and other material supplied to it by
the Fund in connection with Shareholder Meetings of
each Fund; receive, examine and tabulate returned
proxies, and certify the vote of the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check
forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping
account of, such certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or
their classes' Prospectus and for complying with all applicable
requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the 1940 Act and any laws, rules and regulations
of government authorities having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of
blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share
certificates shall be properly signed, manually or by
facsimile, if authorized by the Trust and shall bear the seal
of the Trust or facsimile thereof; and notwithstanding the
death, resignation or removal of any officer of the Trust
authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the
Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration
of any dividend or distribution on account of any Fund's
shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company
an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or
amended from time to time. Such fees may be changed from time
to time subject to written agreement between the Trust and the
Company. Pursuant to information in the Fund Prospectus or
other information or instructions from the Fund, the Company
may sub-divide any Fund into Classes or other sub-components
for recordkeeping purposes. The Company will charge the Fund
the same fees for each such Class or sub-component the same as
if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items
agreed upon between the parties, as may be added to or amended
from time to time. In addition, any other expenses incurred by
the Company at the request or with the consent of the Trust
and/or the Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued
by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon
request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a
duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section
Two may be assigned by either party without the written consent of the
other party.
A. This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors
and assigns.
B. The Company may without further consent on the part of the
Trust subcontract for the performance hereof with (A) State
Street Bank and its subsidiary, Boston Financial Data
Services, Inc., a Massachusetts Trust ("BFDS"), which is
duly registered as a transfer agent pursuant to
Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended, or any succeeding statute ("Section 17A(c)(1)"), or
(B) a BFDS subsidiary duly registered as a transfer agent
pursuant to Section 17A(c)(1), or (C) a BFDS affiliate, or
(D) such other provider of services duly registered as a
transfer agent under Section 17A(c)(1) as Company shall
select; provided, however, that the Company shall be as
fully responsible to the Trust for the acts and omissions of
any subcontractor as it is for its own acts and omissions;
or
C. The Company shall upon instruction from the Trust
subcontract for the performance hereof with an Agent
selected by the Trust, other than BFDS or a provider of
services selected by Company, as described in (2) above;
provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the
Agent.
SECTION THREE: Custody Services Procurement.
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets
the criteria established in Section 17(f) of the 1940 Act and (ii) has
been approved by the Board as eligible for selection by the Company as
a custodian (the "Eligible Custodian"). The Company accepts such
appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
A. evaluate the nature and the quality of the custodial
services provided by the Eligible Custodian;
B. employ the Eligible Custodian to serve on behalf of the
Trust as Custodian of the Trust's assets substantially on
the terms set forth as the form of agreement in Exhibit 2;
C. negotiate and enter into agreements with the Custodians for
the benefit of the Trust, with the Trust as a party to each
such agreement. The Company shall not be a party to any
agreement with any such Custodian;
D. establish procedures to monitor the nature and the quality
of the services provided by the Custodians;
E. continuously monitor the nature and the quality of services
provided by the Custodians; and
F. periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature
and amount of disbursement made on account of the Trust with
respect to each custodial agreement; and (iii) such other
information as the Board shall reasonably request to enable
it to fulfill its duties and obligations under Sections
17(f) and 36(b) of the 1940 Act and other duties and
obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three
of this Agreement, the Trust and/or the Fund agree to pay
the Company an annual fee as agreed upon between the
parties.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items
agreed upon between the parties, as may be added to or amended
from time to time. In addition, any other expenses incurred by
the Company at the request or with the consent of the Trust
and/or the Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued
by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon
request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be
adjusted from time to time, shall be dated and signed by a
duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
Article 12. Representations.
The Company represents and warrants that it has obtained all
required approvals from all government or regulatory authorities
necessary to enter into this arrangement and to provide the services
contemplated in Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the
following documents:
(1) A copy of the Charter and By-Laws of the Trust and all
amendments thereto;
(2) A copy of the resolution of the Board of the Trust
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share
certificates of the Trust or the Funds in the forms
approved by the Board of the Trust with a certificate
of the Secretary of the Trust as to such approval;
(4) All account application forms and other documents
relating to Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing
the original issuance of each Fund's, and/or Class's
Shares;
(2) Each Registration Statement filed with the SEC and
amendments thereof and orders relating thereto in
effect with respect to the sale of Shares of any Fund,
and/or Class;
(3) A certified copy of each amendment to the governing
document and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Custodian
and agents for fund accountant, custody services
procurement, and shareholder recordkeeping or transfer
agency services;
(5) Specimens of all new Share certificates representing
Shares of any Fund, accompanied by Board resolutions
approving such forms;
(6) Such other certificates, documents or opinions which
the Company may, in its discretion, deem necessary or
appropriate in the proper performance of its duties;
and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and
in good standing under the laws of the State of
Delaware.
(2) It is duly qualified to carry on its business in the
State of Delaware.
(3) It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations
under this Agreement.
(5) It has and will continue to have access to the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
(6) It is in compliance with federal securities law
requirements and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing
and in good standing under the laws of its state of
organization;
(2) It is empowered under applicable laws and by its
Charter and By-Laws to enter into and perform its
obligations under this Agreement;
(3) All corporate proceedings required by said Charter and
By-Laws have been taken to authorize it to enter into
and perform its obligations under this Agreement;
(4) The Trust is an open-end investment company registered
under the 1940 Act; and
(5) A registration statement under the 1933 Act will be
effective, and appropriate state securities law filings
have been made and will continue to be made, with
respect to all Shares of each Fund being offered for
sale.
Article 15. Standard of Care and Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in
carrying out the provisions of this Contract. The Company shall
be entitled to rely on and may act upon advice of counsel (who
may be counsel for the Trust) on all matters, and shall be
without liability for any action reasonably taken or omitted
pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations,
and is in good faith and without negligence.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund
shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents employees and
affiliates, harmless against any and all losses, damages,
costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-
adviser or other party contracted by or approved by the
Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in
proper form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf
of the Fund, its Shareholders or investors
regarding the purchase, redemption or transfer of
Shares and Shareholder account information;
(b) are received by the Company from independent
pricing services or sources for use in valuing the
assets of the Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other
third parties contracted by or approved by the
Trust of Fund for use in the performance of
services under this Agreement;
(d) have been prepared and/or maintained by the Fund or
its affiliates or any other person or firm on
behalf of the Trust.
(3) The reliance on, or the carrying out by the Company or
its agents or subcontractors of Proper Instructions of
the Trust or the Fund.
(4) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations of
any state that such Shares be registered in such state
or in violation of any stop order or other
determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares
in such state.
Provided, however, that the Company shall not be
protected by this Article 15.A. from liability for any
act or omission resulting from the Company's willful
misfeasance, bad faith, negligence or reckless disregard
of its duties of failure to meet the standard of care set
forth in 15.A. above.
C. Reliance
At any time the Company may apply to any officer of the Trust
or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the
services to be performed by the Company under this Agreement,
and the Company and its agents or subcontractors shall not be
liable and shall be indemnified by the Trust or the appropriate
Fund for any action reasonably taken or omitted by it in
reliance upon such instructions or upon the opinion of such
counsel provided such action is not in violation of applicable
federal or state laws or regulations. The Company, its agents
and subcontractors shall be protected and indemnified in
recognizing stock certificates which are reasonably believed to
bear the proper manual or facsimile signatures of the officers
of the Trust or the Fund, and the proper countersignature of
any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party
of such assertion, and shall keep the other party advised with
respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to
participate with the party seeking indemnification in the
defense of such claim. The party seeking indemnification shall
in no case confess any claim or make any compromise in any case
in which the other party may be required to indemnify it except
with the other party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses
associated with the movement of records and materials will be borne by
the Trust or the appropriate Fund. Additionally, the Company reserves
the right to charge for any other reasonable expenses associated with
such termination. The provisions of Article 15 shall survive the
termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the
Charter. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this
Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth
of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-
3779, or to such other address as the Trust or the Company may
hereafter specify, shall be deemed to have been properly delivered or
given hereunder to the respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer of
the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or Shareholders of
the Trust, but bind only the appropriate property of the Fund, or
Class, as provided in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Company and signed by an authorized officer of
the Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or Shareholders of
the Company, but bind only the property of the Company as provided in
the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the
parties hereto except by the specific written consent of the other
party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to such
successor agent at the office of the Company all properties of the
Trust held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or
before the date when such termination shall become effective, then the
Company shall have the right to deliver to a bank or trust company,
which is a "bank" as defined in the 1940 Act, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown
by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such
bank or trust company shall be the successor of the Company under this
Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a result
of work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility
of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the
prior written consent of the other party, except that either party may
assign to a successor all of or a substantial portion of its business,
or to a party controlling, controlled by, or under common control with
such party. Nothing in this Article 28 shall prevent the Company from
delegating its responsibilities to another entity to the extent
provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void
or unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their names and on their behalf under their seals by
and through their duly authorized officers, as of the day and year
first above written.
ATTEST: INVESTMENT COMPANIES
(listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
12/15/93 INSURANCE MANAGEMENT SERIES
12/15/93 Equity Growth and Income Fund
12/15/93 Corporate Bond Fund
12/15/93 Prime Money Fund
12/15/93 Utility Fund
12/15/93 U.S. Government Bond Fund
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Shareholder Recordkeeping
Custody Services Procurement
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property of the
Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares
7
2.6 Availability of Federal Funds
7
2.7 Collection of Income
7
2.8 Payment of Fund Moneys
8
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased.
9
2.10 Payments for Repurchases or Redemptions of Shares of a
Fund 9
2.11 Appointment of Agents
10
2.12 Deposit of Fund Assets in Securities System
10
2.13 Segregated Account
12
2.14 Joint Repurchase Agreements
13
2.15 Ownership Certificates for Tax Purposes
13
2.16 Proxies
13
2.17 Communications Relating to Fund Portfolio Securities
13
2.18 Proper Instructions
14
2.19 Actions Permitted Without Express Authority
14
2.20 Evidence of Authority
15
2.21 Notice to Trust by Custodian Regarding Cash Movement.
15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income
15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors
16
6. Reports to Trust by Independent Public Accountants/Auditors
17
7. Compensation of Custodian
17
8. Responsibility of Custodian
17
9. Effective Period, Termination and Amendment
19
10. Successor Custodian
20
11. Interpretive and Additional Provisions
21
12. Massachusetts Law to Apply
22
13. Notices 22
14. Counterparts
22
15. Limitations of Liability
22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such
other form of organization as may be indicated, on behalf of the
portfolios (hereinafter collectively called the "Funds" and individually
referred to as a "Fund") of the Trust, having its principal place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-
3779, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian", and
FEDERATED SERVICES COMPANY, a Delaware business trust company, having
its principal place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania, 15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the
assets of each of the Funds of the Trust. Except as otherwise
expressly provided herein, the securities and other assets of each
of the Funds shall be segregated from the assets of each of the
other Funds and from all other persons and entities. The Trust
will deliver to the Custodian all securities and cash owned by the
Funds and all payments of income, payments of principal or capital
distributions received by them with respect to all securities
owned by the Funds from time to time, and the cash consideration
received by them for shares ("Shares") of beneficial
interest/capital stock of the Funds as may be issued or sold from
time to time. The Custodian shall not be responsible for any
property of the Funds held or received by the Funds and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of
Section 2.18), the Custodian shall from time to time employ one or
more sub-custodians upon the terms specified in the Proper
Instructions, provided that the Custodian shall have no more or
less responsibility or liability to the Trust or any of the Funds
on account of any actions or omissions of any sub-custodian so
employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1 Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash
property, including all securities owned by each Fund, other
than securities which are maintained pursuant to Section
2.12 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S.
Department of the Treasury, collectively referred to herein
as "Securities System", or securities which are subject to a
joint repurchase agreement with affiliated funds pursuant to
Section 2.14. The Custodian shall maintain records of all
receipts, deliveries and locations of such securities,
together with a current inventory thereof, and shall conduct
periodic physical inspections of certificates representing
stocks, bonds and other securities held by it under this
Contract in such manner as the Custodian shall determine
from time to time to be advisable in order to verify the
accuracy of such inventory. With respect to securities held
by any agent appointed pursuant to Section 2.11 hereof, and
with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may
rely upon certificates from such agent as to the holdings of
such agent and from such sub-custodian as to the holdings of
such sub-custodian, it being understood that such reliance
in no way relieves the Custodian of its responsibilities
under this Contract. The Custodian will promptly report to
the Trust the results of such inspections, indicating any
shortages or discrepancies uncovered thereby, and take
appropriate action to remedy any such shortages or
discrepancies.
2.2 Delivery of Securities. The Custodian shall release and
deliver securities owned by a Fund held by the Custodian or
in a Securities System account of the Custodian only upon
receipt of Proper Instructions, which may be continuing
instructions when deemed appropriate by the parties, and
only in the following cases:
(1) Upon sale of such securities for the account of a Fund
and receipt of payment therefor;
(2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered
into by the Trust;
(3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section
2.12 hereof;
(4) To the depository agent in connection with tender or
other similar offers for portfolio securities of a
Fund, in accordance with the provisions of Section 2.17
hereof;
(5) To the issuer thereof or its agent when such securities
are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or
other consideration is to be delivered to the
Custodian;
(6) To the issuer thereof, or its agent, for transfer into
the name of a Fund or into the name of any nominee or
nominees of the Custodian or into the name or nominee
name of any agent appointed pursuant to Section 2.11 or
into the name or nominee name of any sub-custodian
appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the
new securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of a
Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street
delivery custom"; provided that in any such case, the
Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities
prior to receiving payment for such securities except
as may arise from the Custodian's own failure to act in
accordance with the standard of reasonable care or any
higher standard of care imposed upon the Custodian by
any applicable law or regulation if such above-stated
standard of reasonable care were not part of this
Contract;
(8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization
or readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any
deposit agreement; provided that, in any such case, the
new securities and cash, if any, are to be delivered to
the Custodian;
(9) In the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants,
rights or similar securities or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(10)For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of
adequate collateral in the form of (a) cash, in an
amount specified by the Trust, (b) certificated
securities of a description specified by the Trust,
registered in the name of the Fund or in the name of a
nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance
with Section 2.12 hereof;
(11)For delivery as security in connection with any
borrowings requiring a pledge of assets by a Fund, but
only against receipt of amounts borrowed, except that
in cases where additional collateral is required to
secure a borrowing already made, further securities may
be released for the purpose;
(12)For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and
a broker-dealer registered under the Securities
Exchange Act of 1934, as amended, (the "Exchange Act")
and a member of The National Association of Securities
Dealers, Inc. ("NASD"), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any
similar organization or organizations, regarding escrow
or other arrangements in connection with transactions
for a Fund;
(13)For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and
a Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization
or organizations, regarding account deposits in
connection with transaction for a Fund;
(14)Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such
Transfer Agent or to the holders of shares in
connection with distributions in kind, in satisfaction
of requests by holders of Shares for repurchase or
redemption; and
(15)For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Executive
Committee of the Trust on behalf of a Fund signed by an
officer of the Trust and certified by its Secretary or
an Assistant Secretary, specifying the securities to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be
made.
2.3 Registration of Securities. Securities held by the
Custodian (other than bearer securities) shall be registered
in the name of a particular Fund or in the name of any
nominee of the Fund or of any nominee of the Custodian which
nominee shall be assigned exclusively to the Fund, unless
the Trust has authorized in writing the appointment of a
nominee to be used in common with other registered
investment companies affiliated with the Fund, or in the
name or nominee name of any agent appointed pursuant to
Section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of a Fund under the
terms of this Contract shall be in "street name" or other
good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a
separate bank account or accounts in the name of each Fund,
subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in
such account or accounts, subject to the provisions hereof,
all cash received by it from or for the account of each
Fund, other than cash maintained in a joint repurchase
account with other affiliated funds pursuant to Section 2.14
of this Contract or by a particular Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be
deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust
company shall be qualified to act as a custodian under the
1940 Act and that each such bank or trust company and the
funds to be deposited with each such bank or trust company
shall be approved by vote of a majority of the Board of
Trustees/Directors ("Board") of the Trust. Such funds shall
be deposited by the Custodian in its capacity as Custodian
for the Fund and shall be withdrawable by the Custodian only
in that capacity. If requested by the Trust, the Custodian
shall furnish the Trust, not later than twenty (20) days
after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on
the daily cash report for that day rendered to the Trust.
2.5 Payments for Shares. The Custodian shall make such
arrangements with the Transfer Agent of each Fund, as will
enable the Custodian to receive the cash consideration due
to each Fund and will deposit into each Fund's account such
payments as are received from the Transfer Agent. The
Custodian will provide timely notification to the Trust and
the Transfer Agent of any receipt by it of payments for
Shares of the respective Fund.
2.6 Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian shall
make federal funds available to the Funds as of specified
times agreed upon from time to time by the Trust and the
Custodian in the amount of checks, clearing house funds, and
other non-federal funds received in payment for Shares of
the Funds which are deposited into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis all
income and other payments with respect to registered
securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the
securities business, and shall collect on a timely
basis all income and other payments with respect to
bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or
its agent thereof and shall credit such income, as
collected, to each Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian
shall detach and present for payment all coupons and
other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income
due the Funds on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the
responsibility of the Trust. The Custodian will have
no duty or responsibility in connection therewith,
other than to provide the Trust with such information
or data as may be necessary to assist the Trust in
arranging for the timely delivery to the Custodian of
the income to which each Fund is properly entitled.
(2) The Custodian shall promptly notify the Trust whenever
income due on securities is not collected in due course
and will provide the Trust with monthly reports of the
status of past due income unless the parties otherwise
agree.
2.8 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay
out moneys of each Fund in the following cases only:
(1) Upon the purchase of securities, futures contracts or
options on futures contracts for the account of a Fund
but only (a) against the delivery of such securities,
or evidence of title to futures contracts, to the
Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and
has been designated by the Custodian as its agent for
this purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, (b)
in the case of a purchase effected through a Securities
System, in accordance with the conditions set forth in
Section 2.12 hereof or (c) in the case of repurchase
agreements entered into between the Trust and any other
party, (i) against delivery of the securities either in
certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to
repurchase such securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2
hereof;
(3) For the redemption or repurchase of Shares of a Fund
issued by the Trust as set forth in Section 2.10
hereof;
(4) For the payment of any expense or liability incurred by
a Fund, including but not limited to the following
payments for the account of the Fund: interest; taxes;
management, accounting, transfer agent and legal fees;
and operating expenses of the Fund, whether or not such
expenses are to be in whole or part capitalized or
treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund
declared pursuant to the governing documents of the
Trust;
(6) For payment of the amount of dividends received in
respect of securities sold short;
(7) For any other proper purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of
a resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to
be made.
2.9 Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase
of securities for the account of a Fund is made by the
Custodian in advance of receipt of the securities purchased,
in the absence of specific written instructions from the
Trust to so pay in advance, the Custodian shall be
absolutely liable to the Fund for such securities to the
same extent as if the securities had been received by the
Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to
the limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the
Trust pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available
for payment to holders of shares of such Fund who have
delivered to the Transfer Agent a request for redemption or
repurchase of their shares including without limitation
through bank drafts, automated clearinghouse facilities, or
by other means. In connection with the redemption or
repurchase of Shares of the Funds, the Custodian is
authorized upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove)
any other bank or trust company which is itself qualified
under the 1940 Act and any applicable state law or
regulation, to act as a custodian, as its agent to carry out
such of the provisions of this Section 2 as the Custodian
may from time to time direct; provided, however, that the
appointment of any agent shall not relieve the Custodian of
its responsibilities or liabilities hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian
may deposit and/or maintain securities owned by the Funds in
a clearing agency registered with the Securities and
Exchange Commission ("SEC") under Section 17A of the
Exchange Act, which acts as a securities depository, or in
the book-entry system authorized by the U.S. Department of
the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with
applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep securities of each Fund in a
Securities System provided that such securities are
represented in an account ("Account") of the Custodian
in the Securities System which shall not include any
assets of the Custodian other than assets held as a
fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities
of the Funds which are maintained in a Securities
System shall identify by book-entry those securities
belonging to each Fund;
(3) The Custodian shall pay for securities purchased for
the account of each Fund upon (i) receipt of advice
from the Securities System that such securities have
been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the
account of a Fund upon (i) receipt of advice from the
Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System of
transfers of securities for the account of a Fund shall
identify the Fund, be maintained for the Fund by the
Custodian and be provided to the Trust at its request.
Upon request, the Custodian shall furnish the Trust
confirmation of each transfer to or from the account of
a Fund in the form of a written advice or notice and
shall furnish to the Trust copies of daily transaction
sheets reflecting each day's transactions in the
Securities System for the account of a Fund.
(4) The Custodian shall provide the Trust with any report
obtained by the Custodian on the Securities System's
accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received the initial
certificate, required by Section 9 hereof;
(6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable to the
Trust for any loss or damage to a Fund resulting from
use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian
or any of its agents or of any of its or their
employees or from failure of the Custodian or any such
agent to enforce effectively such rights as it may have
against the Securities System; at the election of the
Trust, it shall be entitled to be subrogated to the
rights of the Custodian with respect to any claim
against the Securities System or any other person which
the Custodian may have as a consequence of any such
loss or damage if and to the extent that a Fund has not
been made whole for any such loss or damage.
(7) The authorization contained in this Section 2.12 shall
not relieve the Custodian from using reasonable care
and diligence in making use of any Securities System.
2.13Segregated Account. The Custodian shall upon receipt of
Proper Instructions establish and maintain a segregated
account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by
the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the
Trust, the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any futures
commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or
other arrangements in connection with transactions for a
Fund, (ii) for purpose of segregating cash or government
securities in connection with options purchased, sold or
written for a Fund or commodity futures contracts or options
thereon purchased or sold for a Fund, (iii) for the purpose
of compliance by the Trust or a Fund with the procedures
required by any release or releases of the SEC relating to
the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate
purposes, but only, in the case of clause (iv), upon receipt
of, in addition to Proper Instructions, a certified copy of
a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the
Secretary or an Assistant Secretary, setting forth the
purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain
any assets of a Fund and any affiliated funds which are
subject to joint repurchase transactions in an account
established solely for such transactions for the Fund and
its affiliated funds. For purposes of this Section 2.14,
"affiliated funds" shall include all investment companies
and their portfolios for which subsidiaries or affiliates of
Federated Investors serve as investment advisers,
distributors or administrators in accordance with applicable
exemptive orders from the SEC. The requirements of
segregation set forth in Section 2.1 shall be deemed to be
waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian
shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments with
respect to securities of a Fund held by it and in connection
with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities
are registered otherwise than in the name of a Fund or a
nominee of a Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall
promptly deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such
securities.
2.17Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of
calls and maturities of securities and expirations of rights
in connection therewith and notices of exercise of call and
put options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust all written
information received by the Custodian from issuers of the
securities whose tender or exchange is sought and from the
party (or his agents) making the tender or exchange offer.
If the Trust desires to take action with respect to any
tender offer, exchange offer or any other similar
transaction, the Trust shall notify the Custodian in writing
at least three business days prior to the date on which the
Custodian is to take such action. However, the Custodian
shall nevertheless exercise its best efforts to take such
action in the event that notification is received three
business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout
this Section 2 means a writing signed or initialed by one or
more person or persons as the Board shall have from time to
time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a)
the Custodian reasonably believes them to have been given by
a person previously authorized in Proper Instructions to
give such instructions with respect to the transaction
involved, and (b) the Trust promptly causes such oral
instructions to be confirmed in writing. Upon receipt of a
certificate of the Secretary or an Assistant Secretary as to
the authorization by the Board of the Trust accompanied by a
detailed description of procedures approved by the Board,
Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices
provided that the Board and the Custodian are satisfied that
such procedures afford adequate safeguards for a Fund's
assets.
2.19Actions Permitted Without Express Authority. The Custodian
may in its discretion, without express authority from the
Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to
its duties under this Contract, provided that all such
payments shall be accounted for to the Trust in such
form that it may be allocated to the affected Fund;
(2) surrender securities in temporary form for securities
in definitive form;
(3) endorse for collection, in the name of a Fund, checks,
drafts and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the
securities and property of each Fund except as
otherwise directed by the Trust.
2.20Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed
by it to be genuine and to have been properly executed on
behalf of a Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of the Trust as
conclusive evidence (a) of the authority of any person to
act in accordance with such vote or (b) of any determination
of or any action by the Board pursuant to the Declaration of
Trust/Articles of Incorporation as described in such vote,
and such vote may be considered as in full force and effect
until receipt by the Custodian of written notice to the
contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of
any receipt of cash, income or payments to the Trust and the
release of cash or payment by the Trust.
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Board of
the Trust to keep the books of account of each Fund and/or compute
the net asset value per share of the outstanding Shares of each
Fund or, if directed in writing to do so by the Trust, shall
itself keep such books of account and/or compute such net asset
value per share. If so directed, the Custodian shall also
calculate daily the net income of a Fund as described in the
Fund's currently effective prospectus and Statement of Additional
Information ("Prospectus") and shall advise the Trust and the
Transfer Agent daily of the total amounts of such net income and,
if instructed in writing by an officer of the Trust to do so,
shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of
the net asset value per share and the daily income of a Fund shall
be made at the time or times described from time to time in the
Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to
its activities and obligations under this Contract in such manner
as will meet the obligations of the Trust and the Funds under the
1940 Act, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, and specifically including
identified cost records used for tax purposes. All such records
shall be the property of the Trust and shall at all times during
the regular business hours of the Custodian be open for inspection
by duly authorized officers, employees or agents of the Trust and
employees and agents of the SEC. In the event of termination of
this Contract, the Custodian will deliver all such records to the
Trust, to a successor Custodian, or to such other person as the
Trust may direct. The Custodian shall supply daily to the Trust a
tabulation of securities owned by a Fund and held by the Custodian
and shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust and the
Custodian, include certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may
from time to time request, to obtain from year to year favorable
opinions from each Fund's independent public accountants/auditors
with respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic
reports, or any other reports to the SEC and with respect to any
other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust
may reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient
scope and in sufficient detail, as may reasonably be required by
the Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to
time between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was
not part of this Contract. The Custodian shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for
the Trust) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice,
provided that such action is not in violation of applicable
federal or state laws or regulations, and is in good faith and
without negligence. Subject to the limitations set forth in
Section 15 hereof, the Custodian shall be kept indemnified by the
Trust but only from the assets of the Fund involved in the issue
at hand and be without liability for any action taken or thing
done by it in carrying out the terms and provisions of this
Contract in accordance with the above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any
case the Trust may be asked to indemnify or save the Custodian
harmless, the Trust shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is
further understood that the Custodian will use all reasonable care
to identify and notify the Trust promptly concerning any situation
which presents or appears likely to present the probability of
such a claim for indemnification. The Trust shall have the option
to defend the Custodian against any claim which may be the subject
of this indemnification, and in the event that the Trust so elects
it will so notify the Custodian and thereupon the Trust shall take
over complete defense of the claim, and the Custodian shall in
such situation initiate no further legal or other expenses for
which it shall seek indemnification under this Section. The
Custodian shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to
indemnify the Custodian except with the Trust's prior written
consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in
accordance with a separate Agreement entered into between the
Custodian and the Trust.
If the Trust requires the Custodian to take any action with
respect to securities, which action involves the payment of money
or which action may, in the reasonable opinion of the Custodian,
result in the Custodian or its nominee assigned to a Fund being
liable for the payment of money or incurring liability of some
other form, the Custodian may request the Trust, as a prerequisite
to requiring the Custodian to take such action, to provide
indemnity to the Custodian in an amount and form satisfactory to
the Custodian.
Subject to the limitations set forth in Section 15 hereof, the
Trust agrees to indemnify and hold harmless the Custodian and its
nominee from and against all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
(referred to herein as authorized charges) incurred or assessed
against it or its nominee in connection with the performance of
this Contract, except such as may arise from it or its nominee's
own failure to act in accordance with the standard of reasonable
care or any higher standard of care which would be imposed upon
the Custodian by any applicable law or regulation if such above-
stated standard of reasonable care were not part of this Contract.
To secure any authorized charges and any advances of cash or
securities made by the Custodian to or for the benefit of a Fund
for any purpose which results in the Fund incurring an overdraft
at the end of any business day or for extraordinary or emergency
purposes during any business day, the Trust hereby grants to the
Custodian a security interest in and pledges to the Custodian
securities held for the Fund by the Custodian, in an amount not to
exceed 10 percent of the Fund's gross assets, the specific
securities to be designated in writing from time to time by the
Trust or the Fund's investment adviser. Should the Trust fail to
make such designation, or should it instruct the Custodian to make
advances exceeding the percentage amount set forth above and
should the Custodian do so, the Trust hereby agrees that the
Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the
Trust instructing their purchase shall be considered the requisite
description and designation of the property so pledged for
purposes of the requirements of the Uniform Commercial Code.
Should the Trust fail to cause a Fund to repay promptly any
authorized charges or advances of cash or securities, subject to
the provision of the second paragraph of this Section 8 regarding
indemnification, the Custodian shall be entitled to use available
cash and to dispose of pledged securities and property as is
necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of the Trust
has approved the initial use of a particular Securities System as
required in each case by Rule 17f-4 under the 1940 Act; provided
further, however, that the Trust shall not amend or terminate this
Contract in contravention of any applicable federal or state
regulations, or any provision of the Declaration of Trust/Articles
of Incorporation, and further provided, that the Trust may at any
time by action of its Board (i) substitute another bank or trust
company for the Custodian by giving notice as described above to
the Custodian, or (ii) immediately terminate this Contract in the
event of the appointment of a conservator or receiver for the
Custodian by the appropriate banking regulatory agency or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote
of the Board of the Trust, deliver at the office of the Custodian
and transfer such securities, funds and other properties in
accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Board shall have been
delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which is a "bank"
as defined in the 1940 Act, (delete "doing business ...
Massachusetts" unless SSBT is the Custodian) doing business in
Boston, Massachusetts, of its own selection, having an aggregate
capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all securities,
funds and other properties held by the Custodian and all
instruments held by the Custodian relative thereto and all other
property held by it under this Contract for each Fund and to
transfer to separate accounts of such successor custodian all of
each Fund's securities held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination
hereof owing to failure of the Trust to procure the certified copy
of the vote referred to or of the Board to appoint a successor
custodian, the Custodian shall be entitled to fair compensation
for its services during such period as the Custodian retains
possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations
of the Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian
and the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract
as may in their joint opinion be consistent with the general tenor
of this Contract. Any such interpretive or additional provisions
shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or state
regulations or any provision of the Declaration of Trust/Articles
of Incorporation. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an
amendment of this Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth
of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and
other writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779,
or to the Custodian at address for SSBT only: 225 Franklin
Street, Boston, Massachusetts, 02110, or to such other address as
the Trust or the Custodian may hereafter specify, shall be deemed
to have been properly delivered or given hereunder to the
respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust
of those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant
Fund and its assets and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the
relevant Fund, from any other Fund or its shareholders or from the
Trustees, Officers, employees or agents of the Trust, or any of
them. In addition, in connection with the discharge and
satisfaction of any claim made by the Custodian against the Trust,
for whatever reasons, involving more than one Fund, the Trust
shall have the exclusive right to determine the appropriate
allocations of liability for any such claim between or among the
Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed effective as of the 1st day of
December, 1993.
ATTEST: INVESTMENT COMPANIES
/s/John G. McGonigle_________ By /s/John G.
Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti,
Jr._________________
(Assistant) Secretary Typed Name: Frank J. Sidoti,
Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber______ By /s/ James J.
Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
</TABLE>
<TABLE>
<S> <C>
CONTRACT
DATE INVESTMENT COMPANY
12/15/93 Insurance Management Series
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> Insurance Management Series
Corporate Bond Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 1,628,898
<INVESTMENTS-AT-VALUE> 1,463,750
<RECEIVABLES> 52,793
<ASSETS-OTHER> 1,882
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,518,425
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 61,482
<TOTAL-LIABILITIES> 61,482
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,636,503
<SHARES-COMMON-STOCK> 164,270
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2,064
<ACCUMULATED-NET-GAINS> (12,348)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (165,148)
<NET-ASSETS> 1,456,943
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 126,422
<OTHER-INCOME> 0
<EXPENSES-NET> 5,411
<NET-INVESTMENT-INCOME> 121,011
<REALIZED-GAINS-CURRENT> (12,348)
<APPREC-INCREASE-CURRENT> (165,148)
<NET-CHANGE-FROM-OPS> (56,485)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 121,011
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 2,064
<NUMBER-OF-SHARES-SOLD> 257,641
<NUMBER-OF-SHARES-REDEEMED> 95,666
<SHARES-REINVESTED> 2,295
<NET-CHANGE-IN-ASSETS> 1,456,943
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,966
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 138,363
<AVERAGE-NET-ASSETS> 1,252,723
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.750
<PER-SHARE-GAIN-APPREC> (1.120)
<PER-SHARE-DIVIDEND> 0.750
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.010
<PER-SHARE-NAV-END> 8.870
<EXPENSE-RATIO> 41
<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 and Income Fund
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 3,385,320
<INVESTMENTS-AT-VALUE> 3,383,969
<RECEIVABLES> 73,055
<ASSETS-OTHER> 2,466
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,459,490
<PAYABLE-FOR-SECURITIES> 1,044,687
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,773
<TOTAL-LIABILITIES> 1,059,460
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,415,073
<SHARES-COMMON-STOCK> 246,391
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 495
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (14,187)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,351)
<NET-ASSETS> 2,400,030
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18,307
<OTHER-INCOME> 0
<EXPENSES-NET> 3,165
<NET-INVESTMENT-INCOME> 15,142
<REALIZED-GAINS-CURRENT> (14,187)
<APPREC-INCREASE-CURRENT> (1,351)
<NET-CHANGE-FROM-OPS> (396)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 14,647
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 334,265
<NUMBER-OF-SHARES-REDEEMED> 88,626
<SHARES-REINVESTED> 752
<NET-CHANGE-IN-ASSETS> 2,400,030
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,397
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 152,194
<AVERAGE-NET-ASSETS> 643,626
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.190
<PER-SHARE-GAIN-APPREC> (0.260)
<PER-SHARE-DIVIDEND> 0.190
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.740
<EXPENSE-RATIO> 54
<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> 12-Mos
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 1,249,854
<INVESTMENTS-AT-VALUE> 1,249,854
<RECEIVABLES> 3,063
<ASSETS-OTHER> 5,735
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,258,652
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 14,888
<TOTAL-LIABILITIES> 14,888
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,243,770
<SHARES-COMMON-STOCK> 124,552
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,243,764
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 20,839
<OTHER-INCOME> 0
<EXPENSES-NET> 2,077
<NET-INVESTMENT-INCOME> 18,762
<REALIZED-GAINS-CURRENT> (6)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 18,756
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 18,762
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 152,142
<NUMBER-OF-SHARES-REDEEMED> 38,790
<SHARES-REINVESTED> 1,200
<NET-CHANGE-IN-ASSETS> 1,143,762
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,605
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 144,800
<AVERAGE-NET-ASSETS> 506,576
<PER-SHARE-NAV-BEGIN> 9.990
<PER-SHARE-NII> 0.270
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.270
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 9.990
<EXPENSE-RATIO> 48
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> UTILITY FUND
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-END> Dec-31-1994
<INVESTMENTS-AT-COST> 1,047,237
<INVESTMENTS-AT-VALUE> 1,039,219
<RECEIVABLES> 51,623
<ASSETS-OTHER> 1,037
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,091,879
<PAYABLE-FOR-SECURITIES> 100,142
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 17,567
<TOTAL-LIABILITIES> 117,709
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 993,053
<SHARES-COMMON-STOCK> 104,906
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 16
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,881)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (8,018)
<NET-ASSETS> 974,170
<DIVIDEND-INCOME> 12,736
<INTEREST-INCOME> 2,123
<OTHER-INCOME> 0
<EXPENSES-NET> 1,652
<NET-INVESTMENT-INCOME> 13,207
<REALIZED-GAINS-CURRENT> (10,881)
<APPREC-INCREASE-CURRENT> (8,018)
<NET-CHANGE-FROM-OPS> (5,692)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 13,191
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 126,510
<NUMBER-OF-SHARES-REDEEMED> 22,611
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<TABLE> <S> <C>
<S> <C>
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<NAME> Insurance Management Series
Prime Money Fund
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