EQUITY
GROWTH
AND INCOME
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 458043502
G00433-04 (8/95)
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Equity Growth
and Income Fund, a portfolio of Insurance Management Series, which covers the
six-month period ended June 30, 1995. The Report begins with an investment
review by the portfolio manager, which is followed by a complete listing of the
fund's holdings as well as its financial statements.
As of June 30, 1995, the fund's portfolio of high-quality stocks included such
industrial giants as Ford, Mattel, Reebok, IBM, Chevron, Texaco, American
Express, Citicorp, Bristol-Myers Squibb, Du Pont, Caterpillar, General Electric,
Sears, and AT&T.
You'll be pleased to know that the fund recorded extremely strong performance
over the reporting period. Dividends paid to shareholders totaled $0.10 per
share. In addition, the fund's net asset value increased substantially--from
$9.74 on the first day of the reporting period to $11.28 on the last day of the
reporting period. As a result, the fund's total return for the reporting period
was 16.89%.* On June 30, 1995, its net assets stood at $14.5 million.
Thank you for participating in the growth and income-earning potential of
high-quality American companies. We'll continue to keep you up to date on your
progress. Your comments and suggestions are always welcome.
Sincerely,
J. Christopher Donahue
President
August 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
Performance information does not reflect the charges and expenses of a
variable annuity or variable life insurance contract.
INVESTMENT REVIEW
--------------------------------------------------------------------------------
Certain recent economic and market conditions have influenced our management of
Equity Growth and Income Fund. The economy is slowing, as predicted by most
economists and strategists. First quarter real gross domestic product ("GDP")
growth was about 2.7% (annual rate). That's down substantially from the last two
quarters of 1994, when GDP grew at a rate of over 4%--which was just too fast.
The question now is: Will growth slow further and will earnings be impacted? The
market has been concerned about this, and over the past few months less cyclical
companies have been doing somewhat better than cyclicals. We still see good
value in selected cyclicals because we don't think the economy shows any signs
of going into a recession in the near future. Aggregate corporate profits were
strong in the first quarter of 1995, and we expect that to continue, although
some cyclical areas will be affected by a sluggish economy.
Interest rates have had an effect on the stock market during the reporting
period. The long bond is now trading under 7.00%. It was as high as 8.15% in
late 1994. Certainly this decline in long-term interest rates has been an
important factor in the strength of the stock market over the past six months,
along with strong earnings growth. The debate among economists currently is
whether the Federal Reserve Board will ease or maintain short rates at current
levels over the next several months, but this will depend on how much the
economy slows.
Many U.S. companies, such as those which are large exporters or have substantial
international operations, have benefited from the weak dollar. This has been a
factor in our fundamental analysis of companies over the past year or so. We
have several holdings in companies which have substantial international
revenues. For example, Hewlett-Packard is very big overseas, with nearly $10
billion in sales in Europe alone last year. IBM is still getting more than half
their income from outside the U.S., and General Electric is also a very big
player internationally. These companies can actually benefit from the weakness
of the dollar.
Current investment themes in the portfolio include technology, the largest
sector in the fund. We're overweighted in this area relative to the S&P 500
Index ("S&P 500"). About 19% of the portfolio consists of technology stocks. The
S&P 500 has a weighting of about 12% in technology.
Hewlett Packard is still our biggest holding. The stock has performed well
recently, after the company reported excellent first quarter earnings.
Lockheed Martin, in which we have a sizable holding, is the result of the recent
merger of two large defense companies. This is indicative of what's going on in
aerospace and defense, and we've played this sector reasonably well. The
Department of Defense has allowed consolidation to take place among its
contractors in order to preserve the defense industrial base. Several companies
have been able to benefit by this because they can cut costs and enhance
profitability and cash flow.
Other technology stocks in the portfolio include some well-managed "defense
conglomerates" such as Raytheon and Rockwell. Both have substantial nondefense
businesses, which are doing very well.
One turnaround situation we have in information technology is IBM. The stock
declined substantially from 1990-1993, but, about a year ago, actions taken by
new management began to pay off. For the last four quarters, IBM's earnings have
exceeded expectations.
Finance is our second area of overweight. The portfolio has a 15% weighting in
financial stocks versus 11% for the S&P 500. We own several bank stocks such as
Citicorp and Bank of Boston. We also own Dean Witter Discover, which has a
strong position in the credit card business. Travelers Corporation, a financial
services conglomerate, which we have held for over three years, continues to do
well. The financial sector has been doing well recently since these stocks are
somewhat interest rate sensitive.
In manufacturing, we're overweighted. We own Caterpillar and Deere, both of
which experienced a good first quarter. FMC Corporation is our largest holding
in this sector, and we also have a position in Textron, a conglomerate that's
restructuring to enhance shareholder value.
Another area that looks attractive is natural gas, and the recent purchase of
Burlington Resources in the fund is a natural gas play. Natural gas prices have
been under pressure, but, on an asset value basis, the stock is very cheap.
Enron, another holding, is also a play in natural gas.
In the consumer services sector, we purchased Gannett, which owns USA Today, a
daily publication that has finally turned profitable. USA Today is leveraging
their consumer franchise, entering the international arena and adding services.
The company features substantial leverage with continued growth, good cash flow
and an excellent newspaper operation that's national in scope.
Eastman Chemical is another recent purchase. A specialty chemical company, it is
the world's leading manufacturer of PET (polyethylene terephthalate), a plastic
used to make soda bottles and other packaging. It's capacity--constrained, and
there is limited capacity coming on line. So, we don't think that the earnings
have peaked on a cyclical or secular basis.
Regarding the outlook for various market sectors over the next six months,
consumer-related stocks continue to be a difficult place to find attractive
values. Manufacturing, technology, and finance stocks will probably be more
rewarding, assuming a slowing economy doesn't eventually turn into a recession.
We're still looking for companies that are well run and shareholder oriented,
with a strategy for enhancing shareholder value. We want to buy these stocks
when our quantitative disciplines indicate that they are attractively priced,
i.e., undervalued.
One of the things that we're doing that management believes is significant is
the fact that we're now able to do more fundamental research and company
contact. We have added a number of analysts to our equity research group over
the past year. Since fundamental analysis is an important pact of our process,
we can look at more companies in greater detail than ever before.
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN EQUITY GROWTH AND INCOME FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Equity Growth and Income Fund (the "Fund") from February 10, 1994 (start of
performance) to June 30, 1995, compared to the Standard and Poor's 500 Index
(S&P 500)+ and the Lipper Growth and Income Funds Average (LGIFA).
[GRAPHIC REPRESENTATION "A" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the LGIFA have been adjusted to
reflect reinvestment of dividends on securities in the index and
average.
+The S&P 500 is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
The index is unmanaged.
++The LGIFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales loads. However, total
return is reported net of expenses or other fees that the SEC requires to be
reflected in a fund's performance.
EQUITY GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<S> <S> <C>
COMMON STOCKS--84.3%
-------------------------------------------------------------------------------------
CONSUMER DURABLES--4.9%
-------------------------------------------------------------------------------------
5,100 Eastman Kodak Co. $ 309,187
-------------------------------------------------------------------------------------
6,400 Ford Motor Co. 190,400
-------------------------------------------------------------------------------------
8,000 Mattel, Inc. 208,000
------------------------------------------------------------------------------------- -------------
Total 707,587
------------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--7.9%
-------------------------------------------------------------------------------------
3,300 Avon Products, Inc. 221,100
-------------------------------------------------------------------------------------
5,000 IBP, Inc. 217,500
-------------------------------------------------------------------------------------
5,200 Philip Morris Cos., Inc. 386,750
-------------------------------------------------------------------------------------
3,800 RJR Nabisco Holdings Corp. 105,925
-------------------------------------------------------------------------------------
6,300 Reebok International Ltd. 214,200
------------------------------------------------------------------------------------- -------------
Total 1,145,475
------------------------------------------------------------------------------------- -------------
CONSUMER SERVICES--0.9%
-------------------------------------------------------------------------------------
2,400 Gannett Co., Inc. 130,200
------------------------------------------------------------------------------------- -------------
ELECTRONIC TECHNOLOGY--13.7%
-------------------------------------------------------------------------------------
6,300 Hewlett-Packard Co. 469,350
-------------------------------------------------------------------------------------
3,800 Intel Corp. 240,587
-------------------------------------------------------------------------------------
1,900 International Business Machines Corp. 182,400
-------------------------------------------------------------------------------------
4,100 Litton Industries, Inc. 151,188
-------------------------------------------------------------------------------------
6,800 Lockheed Martin Corp. 429,250
-------------------------------------------------------------------------------------
3,200 Raytheon Co. 248,400
-------------------------------------------------------------------------------------
5,800 Rockwell International Corp. 265,350
------------------------------------------------------------------------------------- -------------
Total 1,986,525
------------------------------------------------------------------------------------- -------------
ENERGY MINERALS--7.2%
-------------------------------------------------------------------------------------
3,300 Burlington Resources, Inc. 121,687
-------------------------------------------------------------------------------------
5,000 Chevron Corp. 233,125
-------------------------------------------------------------------------------------
</TABLE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
ENERGY MINERALS--CONTINUED
-------------------------------------------------------------------------------------
3,600 Mapco, Inc. $ 208,800
-------------------------------------------------------------------------------------
3,800 Texaco, Inc. 249,375
-------------------------------------------------------------------------------------
11,800 USX Corp. 233,050
------------------------------------------------------------------------------------- -------------
Total 1,046,037
------------------------------------------------------------------------------------- -------------
FINANCE--12.4%
-------------------------------------------------------------------------------------
700 Allstate Corp. 30,363
-------------------------------------------------------------------------------------
3,500 American Express Co. 122,937
-------------------------------------------------------------------------------------
5,900 Bank of Boston Corp. 221,250
-------------------------------------------------------------------------------------
5,422 Citicorp 313,802
-------------------------------------------------------------------------------------
4,300 Dean Witter, Discover & Co. 202,100
-------------------------------------------------------------------------------------
1,900 First Interstate Bancorp 152,475
-------------------------------------------------------------------------------------
4,600 Mellon Bank Corp. 191,475
-------------------------------------------------------------------------------------
3,500 NationsBank Corp. 187,688
-------------------------------------------------------------------------------------
4,100 Providian Corp. 148,625
-------------------------------------------------------------------------------------
5,150 Travelers Group, Inc. 225,313
------------------------------------------------------------------------------------- -------------
Total 1,796,028
------------------------------------------------------------------------------------- -------------
HEALTH TECHNOLOGY--5.3%
-------------------------------------------------------------------------------------
2,700 American Home Products Corp. 208,912
-------------------------------------------------------------------------------------
4,600 Becton, Dickinson & Co. 267,950
-------------------------------------------------------------------------------------
4,300 Bristol-Myers Squibb Co. 292,937
------------------------------------------------------------------------------------- -------------
Total 769,799
------------------------------------------------------------------------------------- -------------
INDUSTRIAL SERVICES--2.2%
-------------------------------------------------------------------------------------
6,300 Baker Hughes, Inc. 129,150
-------------------------------------------------------------------------------------
4,100 Western Atlas, Inc. 181,938
------------------------------------------------------------------------------------- -------------
Total 311,088
------------------------------------------------------------------------------------- -------------
NON-ENERGY MINERALS--1.8%
-------------------------------------------------------------------------------------
4,400 Phelps Dodge Corp. 259,600
------------------------------------------------------------------------------------- -------------
</TABLE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
<C> <S> <C>
PROCESS INDUSTRIES--5.0%
-------------------------------------------------------------------------------------
4,000 Du Pont (E.I.) de Nemours & Co. $ 275,000
-------------------------------------------------------------------------------------
2,900 Eastman Chemical Co. 172,550
-------------------------------------------------------------------------------------
11,000 Praxair, Inc. 275,000
------------------------------------------------------------------------------------- -------------
Total 722,550
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--11.6%
-------------------------------------------------------------------------------------
2,800 Caterpillar, Inc. 179,900
-------------------------------------------------------------------------------------
1,900 Deere & Co. 162,687
-------------------------------------------------------------------------------------
4,700 FMC Corp. 316,075
-------------------------------------------------------------------------------------
5,200 General Electric Co. 293,150
-------------------------------------------------------------------------------------
1,700 ITT Corp. 199,750
-------------------------------------------------------------------------------------
1,900 Loews Corp. 229,900
-------------------------------------------------------------------------------------
5,100 Textron, Inc. 296,438
------------------------------------------------------------------------------------- -------------
Total 1,677,900
------------------------------------------------------------------------------------- -------------
RETAIL TRADE--4.7%
-------------------------------------------------------------------------------------
8,500 American Stores Co. 239,063
-------------------------------------------------------------------------------------
7,300 Sears, Roebuck & Co. 437,088
------------------------------------------------------------------------------------- -------------
Total 676,151
------------------------------------------------------------------------------------- -------------
TECHNOLOGY SERVICES--2.3%
-------------------------------------------------------------------------------------
7,700 General Motors Corp., Class E 334,950
------------------------------------------------------------------------------------- -------------
UTILITIES--4.4%
-------------------------------------------------------------------------------------
6,300 AT&T Corp. 334,687
-------------------------------------------------------------------------------------
3,500 Enron Corp. 122,938
-------------------------------------------------------------------------------------
8,100 MCI Communications Corp. 178,200
------------------------------------------------------------------------------------- -------------
Total 635,825
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $11,238,841) 12,199,715
------------------------------------------------------------------------------------- -------------
</TABLE>
EQUITY GROWTH AND INCOME FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <S> <C>
PREFERRED STOCKS--0.9%
---------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--0.8%
-------------------------------------------------------------------------------------
19,500 RJR Nabisco Holdings Corp., Conv. Pfd., Series C, $.60 $ 119,438
------------------------------------------------------------------------------------- -------------
FINANCE--0.1%
-------------------------------------------------------------------------------------
793 Citicorp, PERCS, Series 15, $1.22 16,058
------------------------------------------------------------------------------------- -------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $135,384) 135,496
------------------------------------------------------------------------------------- -------------
*REPURCHASE AGREEMENTS--13.8%
---------------------------------------------------------------------------------------------------
$ 2,000,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 (at amortized
cost) 2,000,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $13,374,225)(A) $ 14,335,211
------------------------------------------------------------------------------------- -------------
</TABLE>
* The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(a) The cost of investments for federal tax purposes amounts to $13,374,225. The
net unrealized appreciation on a federal tax cost basis amounts to $960,986,
and is comprised of $982,995 appreciation and $22,009 depreciation at June
30, 1995.
The following acronym is used throughout this portfolio:
PERCS--Preferred Equity Redemption Cumulative Stock
Note: The categories of investments are shown as a percentage of net assets
($14,456,703) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
EQUITY GROWTH AND INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 2,000,000
-----------------------------------------------------------------------------------
Investments in securities 12,335,211
----------------------------------------------------------------------------------- -------------
Total investments in securities, at value
(identified and tax cost $13,374,225) $ 14,335,211
--------------------------------------------------------------------------------------------------
Cash 2,083
--------------------------------------------------------------------------------------------------
Income receivable 23,207
--------------------------------------------------------------------------------------------------
Receivable for shares sold 91,100
--------------------------------------------------------------------------------------------------
Prepaid Expenses 5,102
-------------------------------------------------------------------------------------------------- -------------
Total assets 14,456,703
--------------------------------------------------------------------------------------------------
LIABILITIES: --
-------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 1,281,341 shares outstanding $ 14,456,703
-------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------------------------
Paid-in capital $ 13,526,665
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) on investments 960,986
--------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (33,734)
--------------------------------------------------------------------------------------------------
Undistributed net investment income 2,786
-------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 14,456,703
-------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($14,456,703 / 1,281,341 shares outstanding) $11.28
-------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
EQUITY GROWTH AND INCOME FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------------------------
Interest $ 40,590
----------------------------------------------------------------------------------------------------
Dividends 73,302
---------------------------------------------------------------------------------------------------- ------------
Total Income 113,892
----------------------------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------------------------------------
Investment advisory fee $ 25,097
----------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
----------------------------------------------------------------------------------------
Custodian fees 21,946
----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 7,059
----------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
----------------------------------------------------------------------------------------
Auditing fees 3,878
----------------------------------------------------------------------------------------
Legal fees 1,001
----------------------------------------------------------------------------------------
Portfolio accounting fees 10,667
----------------------------------------------------------------------------------------
Share registration costs 1,267
----------------------------------------------------------------------------------------
Printing and postage 4,525
----------------------------------------------------------------------------------------
Insurance premiums 1,991
----------------------------------------------------------------------------------------
Miscellaneous 4,801
---------------------------------------------------------------------------------------- ----------
Total expenses 145,210
----------------------------------------------------------------------------------------
Deduct--
----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 25,097
-----------------------------------------------------------------------------
Reimbursement of other operating expenses 91,627 116,724
----------------------------------------------------------------------------- --------- ----------
Net expenses 28,486
---------------------------------------------------------------------------------------------------- ------------
Net investment income 85,406
---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (19,546)
----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 962,337
---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain (loss) on investments 942,791
---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ 1,028,197
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
EQUITY GROWTH AND INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------
Net investment income $ 85,406 $ 15,142
-----------------------------------------------------------------
Net realized gain (loss) on investment ($19,546 net loss and
$11,469 net loss, respectively, as computed for
federal income tax purposes) (19,546) (14,187)
-----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 962,337 (1,351)
----------------------------------------------------------------- ---------------------- -----------------------
Change in assets resulting from operations 1,028,197 (396)
----------------------------------------------------------------- ---------------------- -----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
-----------------------------------------------------------------
Distributions from net investment income (83,117) (14,647)
----------------------------------------------------------------- ---------------------- -----------------------
SHARE TRANSACTIONS--
-----------------------------------------------------------------
Proceeds from sale of Shares 13,078,375 3,287,097
-----------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 83,117 7,346
-----------------------------------------------------------------
Cost of Shares redeemed (2,049,899) (879,370)
----------------------------------------------------------------- ---------------------- -----------------------
Change in net assets resulting from share
transactions 11,111,593 2,415,073
----------------------------------------------------------------- ---------------------- -----------------------
Change in net assets 12,056,673 2,400,030
-----------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------
Beginning of period 2,400,030 --
----------------------------------------------------------------- ---------------------- -----------------------
End of period (including undistributed net investment income of
$2,786 and $495, respectively) $ 14,456,703 $ 2,400,030
----------------------------------------------------------------- ---------------------- -----------------------
</TABLE>
*For the period from December 9, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
EQUITY GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.74 $ 10.00
--------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------------------------
Net investment income 0.10 0.19
--------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 1.54 (0.26)
-------------------------------------------------------------- ------- -------
Total from investment operations 1.64 (0.07)
--------------------------------------------------------------
LESS DISTRIBUTIONS
--------------------------------------------------------------
Distributions from net investment income (0.10) (0.19)
-------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 11.28 $ 9.74
-------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 16.89% (0.70%)
--------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------
Expenses 0.85%(c) 0.54%(c)
--------------------------------------------------------------
Net investment income 2.55%(c) 2.58%(c)
--------------------------------------------------------------
Expense waiver/reimbursement (d) 3.49%(c) 25.42%(c)
--------------------------------------------------------------
SUPPLEMENTAL DATA
--------------------------------------------------------------
Net assets, end of period (000 omitted) $14,457 $ 2,400
--------------------------------------------------------------
Portfolio turnover 13% 32%
--------------------------------------------------------------
</TABLE>
(a) 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.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
EQUITY GROWTH AND INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
1. ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end management investment
company. The Trust consists of six diversified portfolios. The financial
statements included herein present only those of Equity Growth and Income Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term securities are generally valued at the prices provided by an
independent pricing service. Short-term securities with remaining
maturities of sixty days or less at the time of purchase may be stated at
amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. At December 31,
1994, the Fund, for federal tax purposes, had a capital loss carryforward
of $11,469, which will reduce the Fund's taxable income arising from future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2002.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
<S> <C> <C>
Shares sold 1,225,431 334,265
----------------------------------------------------------------
Shares issued to shareholders in payment
of distributions declared 7,566 752
----------------------------------------------------------------
Shares redeemed (198,046) (88,626)
---------------------------------------------------------------- ------------ ----------
Net change resulting from Fund
share transactions 1,034,951 246,391
---------------------------------------------------------------- ------------ ----------
</TABLE>
* For the period from December 9, 1993, (start of business) to December 31,
1994.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.75 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($16,348) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational and start-up
administrative expenses during the five year period following December 15, 1993
(date the Fund became effective). For the period ended June 30, 1995, the Fund
paid $2,180 and $4,201, respectively, pursuant to this agreement.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 9,995,788
---------------------------------------------------------------------------------------------------- ------------
SALES $ 769,735
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and
other information.
UTILITY
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779 [RECYCLE LOGO]
Cusip 458043205
G00433-03 (8/95)
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Utility Fund,
a portfolio of Insurance Management Series, which covers the six-month period
ended June 30, 1995. The Report begins with an investment review by the
portfolio manager, which is followed by a complete listing of the fund's
holdings as well as its financial statements.
The fund invests primarily in a portfolio of utility stocks to help your money
earn income--and pursue a moderate level of growth. The fund may also invest a
portion of its assets in stocks from other types of companies selected for their
ability to pay regular dividends.
During the period covered by this report, the fund paid dividends of $0.22 per
share, and recorded a total return of 9.50%*. On June 30, 1995, net assets stood
at $10.3 million.
Thank you for selecting this fund to participate in the earning power of utility
stocks. We'll continue to keep you up to date on your progress. As always, we
welcome your comments and suggestions.
Sincerely,
J. Christopher Donahue
President
August 15, 1995
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.
INVESTMENT REVIEW
--------------------------------------------------------------------------------
Utilities have continued their recovery from the depths of 1994's correction.
The Standard & Poor's Utility Index is now up 14.28% in the first half of 1995,
and the Dow Jones Utility average is up 14.15%.* This rally corresponds with the
fact that long-term interest rates have declined from 7.87% to 6.62%. The reason
for this rally in interest rates is the belief that the Federal Reserve Board
has successfully engineered a "soft landing" in which the economy slows (but
continues growing), interest rates stabilize, and inflation remains low.
Within the utility sector, natural gas stocks were the best performers gaining
19.43%, while telecommunication stocks and electric stocks were up 13.62% and
14.07%, respectively. The Utility Fund lagged these strong advances and was up
only 9.50%** in total return during the first half of 1995. Meanwhile, the
average utility fund was up 11.11% according to Lipper Analytical Services. For
the one year period ended June 30, 1995, the Utility Fund was up 13.34%,** while
the average utility fund according to Lipper Analytical Services was up 12.11%.
The reason for our lagging such a strong market rally is the same reason we
outperformed so admirably on the downside in 1994 . . . lower interest rate
sensitivity. Our goal is to provide defensive/conservative investors with equity
market exposure at the lowest possible level of risk. This means lowering the
largest utility risk factor which is interest rate risk. Over the years we have
lowered interest rate risk through our holdings in non-utility securities,
namely convertibles and natural resource companies. In the first half of 1995,
our approximately 25% weighting in non-utilities made it very difficult for us
to keep up with the strong advances in the interest rate sensitive utility
stocks. After such a strong first half rally in interest rates, we believe that
our defensive positioning is more warranted than ever.
In the utility sectors, we are still overweighted in natural gas stocks, but are
in the process of taking some of our gains and lowering our exposure. In
telecommunications, we are continuing to underweight the baby bells while
overweighting long-distance and international telecoms. In electrics, we have
begun to increase our exposure in some of the higher yielding electrics which
appear to be oversold due to fears of competition. Two new additions in the
electric group are Public Service Enterprises and Texas Utilities.
Overall, 1995 is off to a great start, and we believe that the fund will
continue to keep pace with any further advances while still providing superior
downside protection during the inevitable correction.
* These indices are unmanaged.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.
UTILITY FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN UTILITY FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Utility Fund (the "Fund") from February 10, 1994 (start of performance) to June
30, 1995, compared to the Standard and Poor's 500 Index (S&P 500)+, and the
Standard and Poor's Utility Index (SPUX).+
[GRAPHIC REPRESENTATION "B" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 and the SPUX have been adjusted to
reflect reinvestment of dividends on securities in the indices.
+The S&P 500 and the SPUX are not adjusted to reflect sales loads,
expenses, or other fees that the SEC requires to be reflected in the
Fund's performance. The indices are unmanaged.
UTILITY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--67.7% -------------------------------------------------------------------------------------
UTILITIES--37.7%
-------------------------------------------------------------------------------------
6,000 Baltimore Gas & Electric Co. $ 150,000
-------------------------------------------------------------------------------------
8,600 CMS Energy Corp. 211,775
-------------------------------------------------------------------------------------
7,500 Cinergy Corp. 196,875
-------------------------------------------------------------------------------------
7,400 DPL, Inc. 163,725
-------------------------------------------------------------------------------------
8,500 DQE, Inc. 199,750
-------------------------------------------------------------------------------------
3,500 Duke Power Co. 145,250
-------------------------------------------------------------------------------------
5,500 FPL Group, Inc. 212,437
-------------------------------------------------------------------------------------
4,100 Florida Progress Corp. 128,125
-------------------------------------------------------------------------------------
6,300 General Public Utilities 187,425
-------------------------------------------------------------------------------------
500 Hong Kong Telecommunications Ltd., ADR 9,937
-------------------------------------------------------------------------------------
7,700 Illinova Corp. 195,387
-------------------------------------------------------------------------------------
5,700 NIPSCO Industries, Inc. 193,800
-------------------------------------------------------------------------------------
6,400 National Power Co. PLC, ADR 79,200
-------------------------------------------------------------------------------------
8,800 Pacificorp 165,000
-------------------------------------------------------------------------------------
15,000 Peco Energy Co. 414,375
-------------------------------------------------------------------------------------
8,500 Pinnacle West Capital Corp. 208,250
-------------------------------------------------------------------------------------
4,400 Public Service Enterprises Group, Inc. 122,100
-------------------------------------------------------------------------------------
8,500 Southern Co. 190,188
-------------------------------------------------------------------------------------
2,700 Telefonic de Espana, ADR 104,625
-------------------------------------------------------------------------------------
2,500 Texas Utilities Co. 85,938
-------------------------------------------------------------------------------------
6,400 Utilicorp United, Inc. 180,000
-------------------------------------------------------------------------------------
8,400 Westcoast Energy, Inc. 123,900
-------------------------------------------------------------------------------------
6,300 Western Resources, Inc. 194,513
------------------------------------------------------------------------------------- -------------
Total 3,862,575
------------------------------------------------------------------------------------- -------------
</TABLE>
UTILITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
ENERGY MINERALS--1.4%
-------------------------------------------------------------------------------------
2,000 Exxon Corp. $ 141,250
------------------------------------------------------------------------------------- -------------
FINANCE--3.2%
-------------------------------------------------------------------------------------
5,700 Meditrust, REIT 194,512
-------------------------------------------------------------------------------------
4,600 Simon Property Group, Inc., REIT 115,575
-------------------------------------------------------------------------------------
1,500 South West Property Trust, Inc., REIT 17,250
------------------------------------------------------------------------------------- -------------
Total 327,337
------------------------------------------------------------------------------------- -------------
MAJOR U.S. TELECOMMUNICATIONS--10.9%
-------------------------------------------------------------------------------------
4,600 AT&T Corp. 244,375
-------------------------------------------------------------------------------------
2,500 BellSouth Corp. 158,750
-------------------------------------------------------------------------------------
5,200 GTE Corp. 177,450
-------------------------------------------------------------------------------------
5,200 Pacific Telesis Group 139,100
-------------------------------------------------------------------------------------
4,600 SBC Communications, Inc. 219,075
-------------------------------------------------------------------------------------
4,100 U.S. West, Inc. 170,663
------------------------------------------------------------------------------------- -------------
Total 1,109,413
------------------------------------------------------------------------------------- -------------
NATURAL GAS DISTRIBUTION--5.2%
-------------------------------------------------------------------------------------
2,700 Consolidated Natural Gas Co. 101,925
-------------------------------------------------------------------------------------
8,000 MCN Corp. 158,000
-------------------------------------------------------------------------------------
8,900 Pacific Enterprises 218,050
-------------------------------------------------------------------------------------
2,800 UGI Corp. 59,150
------------------------------------------------------------------------------------- -------------
Total 537,125
------------------------------------------------------------------------------------- -------------
OIL/GAS TRANSMISSION--6.9%
-------------------------------------------------------------------------------------
5,100 Enron Corp. 179,137
-------------------------------------------------------------------------------------
4,000 Enron Global Power & Pipelines, L.L.C. 95,000
-------------------------------------------------------------------------------------
2,600 Panhandle Eastern Corp. 63,375
-------------------------------------------------------------------------------------
8,500 Sonat, Inc. 259,250
-------------------------------------------------------------------------------------
3,500 Williams Companies, Inc. (The) 122,063
------------------------------------------------------------------------------------- -------------
Total 718,825
------------------------------------------------------------------------------------- -------------
</TABLE>
UTILITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
OTHER TELEPHONE/COMMUNICATIONS--1.2%
-------------------------------------------------------------------------------------
3,600 Southern New England Telecommunications $ 126,900
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--1.2%
-------------------------------------------------------------------------------------
6,800 Hanson PLC, ADR 119,850
------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $6,716,658) 6,943,275
------------------------------------------------------------------------------------- -------------
PREFERRED STOCKS--16.7%
---------------------------------------------------------------------------------------------------
CONSUMER DURABLES--0.8%
-------------------------------------------------------------------------------------
5,300 Kaufman & Broad Homes Corp., Conv. Pfd., Series B 82,150
------------------------------------------------------------------------------------- -------------
CONSUMER NON-DURABLES--1.8%
-------------------------------------------------------------------------------------
29,800 RJR Nabisco Holdings Corp., Conv. Pfd., Series C 182,525
------------------------------------------------------------------------------------- -------------
ELECTRIC UTILITIES--1.2%
-------------------------------------------------------------------------------------
2,750 Niagara Mohawk Power Corp., ARPS, Series C 64,625
-------------------------------------------------------------------------------------
400 Texas Utilities Electric Co., ARPS, Series A 35,200
-------------------------------------------------------------------------------------
330 Texas Utilities Electric Co., ARPS, Series B 31,103
------------------------------------------------------------------------------------- -------------
Total 130,928
------------------------------------------------------------------------------------- -------------
ENERGY MINERALS--1.3%
-------------------------------------------------------------------------------------
1,800 Occidental Petroleum Corp., Conv. Pfd. 102,825
-------------------------------------------------------------------------------------
600 USX Corp., ARPS 29,775
------------------------------------------------------------------------------------- -------------
Total 132 600
------------------------------------------------------------------------------------- -------------
FINANCE--2.8%
-------------------------------------------------------------------------------------
1,300 Allstate Corp., Conv. Pfd. 52,975
-------------------------------------------------------------------------------------
200 Sunamerica, Inc., ARPS, Series C 20,200
-------------------------------------------------------------------------------------
4,700 Sunamerica, Inc., Conv. Pfd., Series D 216,200
------------------------------------------------------------------------------------- -------------
Total 289,375
------------------------------------------------------------------------------------- -------------
NON-ENERGY MINERALS--1.5%
-------------------------------------------------------------------------------------
3,100 Reynolds Metals Co., PRIDES 149,575
------------------------------------------------------------------------------------- -------------
</TABLE>
UTILITY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
---------------------------------------------------------------------------------------------------
NON-U.S. UTILITIES--2.0%
-------------------------------------------------------------------------------------
4,000 Cointel, Telefonica de Argentina SA, PRIDES $ 209,000
------------------------------------------------------------------------------------- -------------
OIL/GAS TRANSMISSION--1.5%
-------------------------------------------------------------------------------------
750 Enserch Corp., ARPS, Series E 69,375
-------------------------------------------------------------------------------------
1,250 Williams Companies, Inc. (The), Conv. Pfd. 78,906
------------------------------------------------------------------------------------- -------------
Total 148,281
------------------------------------------------------------------------------------- -------------
PROCESS INDUSTRIES--1.7%
-------------------------------------------------------------------------------------
7,100 James River Corp. of Virginia, DECS, Series P 175,725
------------------------------------------------------------------------------------- -------------
PRODUCER MANUFACTURING--2.1%
-------------------------------------------------------------------------------------
13,800 Westinghouse Electric Corp., PEPS, Series C 209,967
------------------------------------------------------------------------------------- -------------
TOTAL PREFERRED STOCKS (IDENTIFIED COST, $1,654,753) 1,710,126
------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--5.0%
---------------------------------------------------------------------------------------------------
CONSUMER SERVICES--1.6%
-------------------------------------------------------------------------------------
$ 325,000 Rogers Communications, Inc., Conv. Deb., 2.00%, 11/26/2005 168,188
------------------------------------------------------------------------------------- -------------
ENERGY MINERALS--0.6%
-------------------------------------------------------------------------------------
50,000 Pennzoil Co., Conv. Deb., 6.50%, 1/15/2003 59,415
------------------------------------------------------------------------------------- -------------
FINANCE--0.2%
-------------------------------------------------------------------------------------
15,000 Equitable Cos., Inc., Conv. Sub. Deb., 6.125%, 12/15/2024 15,506
------------------------------------------------------------------------------------- -------------
HEALTH TECHNOLOGY--1.3%
-------------------------------------------------------------------------------------
350,000 Roche Holdings, Inc., Conv. LYON, 7.00% accrual, 4/20/2010 139,125
------------------------------------------------------------------------------------- -------------
NON-U.S. UTILITIES--1.3%
-------------------------------------------------------------------------------------
140,000 Telekom Malaysia Berhad, Conv. Bond, 4.00%, 10/3/2004 134,400
------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $507,630) 516,634
------------------------------------------------------------------------------------- -------------
</TABLE>
<TABLE>
<S> <S> <C>
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------------------------------------------
(A)REPURCHASE AGREEMENTS--9.8%
---------------------------------------------------------------------------------------------------
1,005,000 J.P. Morgan & Co., Inc., 6.125%, dated 6/30/1995, due 7/3/1995
(AT AMORTIZED COST) $ 1,005,000
------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $9,884,041)(B) 10,175,035
------------------------------------------------------------------------------------- -------------
</TABLE>
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(b) The cost for federal tax purposes amounts to $9,884,041. The net unrealized
appreciation on federal tax cost basis amounts to $290,994 which is
comprised of $329,817 appreciation and $38,823 depreciation at June 30,
1995.
Note: The categories of investments are shown as a percentage of net assets
($10,256,077) at June 30, 1995.
The following acronyms are used throughout this portfolio:
ADR--American Depository Receipt
ARPS--Adjustable Rate Preferred Stock
DECS--Dividend Enhanced Convertible Stock
LYON--Liquid Yield Option Note
PEPS--Participating Equity Preferred Stock
PLC--Public Limited Company
PRIDES--Preferred Redeemable Increased Dividend Equity Securities
REIT--Real Estate Investment Trust
(See Notes which are an integral part of the Financial Statements)
UTILITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
--------------------------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost $9,884,041) $ 10,175,035
--------------------------------------------------------------------------------------------------
Cash 4,027
--------------------------------------------------------------------------------------------------
Income receivable 32,691
--------------------------------------------------------------------------------------------------
Receivable for investments sold 127,477
--------------------------------------------------------------------------------------------------
Receivable for shares sold 18,232
--------------------------------------------------------------------------------------------------
Prepaid expenses 1,516
-------------------------------------------------------------------------------------------------- -------------
Total assets 10,358,978
--------------------------------------------------------------------------------------------------
LIABILITIES:
--------------------------------------------------------------------------------------------------
Payable for investments purchased 102,901
-------------------------------------------------------------------------------------------------- -------------
Net Assets for 1,031,686 shares outstanding $ 10,256,077
-------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
--------------------------------------------------------------------------------------------------
Paid-in capital $ 9,963,294
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 290,994
--------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments 1,789
-------------------------------------------------------------------------------------------------- -------------
Total Net Assets $ 10,256,077
-------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($10,256,077 / 1,031,686 shares outstanding) $9.94
-------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
UTILITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
-----------------------------------------------------------------------------------------------------
Interest $ 34,494
-----------------------------------------------------------------------------------------------------
Dividends (net of foreign tax withheld $212) 103,786
----------------------------------------------------------------------------------------------------- ----------
Total income 138,280
-----------------------------------------------------------------------------------------------------
EXPENSES:
-----------------------------------------------------------------------------------------------------
Investment advisory fee $ 18,496
-----------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
-----------------------------------------------------------------------------------------
Custodian fees 11,222
-----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 7,602
-----------------------------------------------------------------------------------------
Directors'/Trustees' fees 1,991
-----------------------------------------------------------------------------------------
Auditing fees 3,559
-----------------------------------------------------------------------------------------
Legal fees 2,801
-----------------------------------------------------------------------------------------
Portfolio accounting fees 19,367
-----------------------------------------------------------------------------------------
Share registration costs 1,267
-----------------------------------------------------------------------------------------
Printing and postage 7,930
-----------------------------------------------------------------------------------------
Insurance premiums 2,353
-----------------------------------------------------------------------------------------
Miscellaneous 5,982
----------------------------------------------------------------------------------------- ----------
Total expenses 144,557
-----------------------------------------------------------------------------------------
Deduct--
-----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 18,496
-----------------------------------------------------------------------------
Reimbursement of other operating expenses 105,065 123,561
----------------------------------------------------------------------------- ---------- ----------
Net expenses 20,996
----------------------------------------------------------------------------------------------------- ----------
Net investment income 117,284
----------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 12,670
-----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 299,012
----------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 311,682
----------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 428,966
----------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
UTILITY FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
----------------------------------------------------------------
OPERATIONS--
----------------------------------------------------------------
Net investment income $ 117,284 $ 13,207
----------------------------------------------------------------
Net realized gain (loss) on investments ($12,670 net gain and
$9,887 net loss, respectively, as computed for federal tax
purposes) 12,670 (10,881)
----------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments 299,012 (8,018)
---------------------------------------------------------------- ---------------------- -----------------------
Change in net assets resulting from operations 428,966 (5,692)
---------------------------------------------------------------- ---------------------- -----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
----------------------------------------------------------------
Distributions from net investment income (117,596) (13,191)
---------------------------------------------------------------- ---------------------- -----------------------
SHARE TRANSACTIONS--
----------------------------------------------------------------
Proceeds from sale of Shares 9,341,475 1,195,580
----------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 115,374 9,439
----------------------------------------------------------------
Cost of Shares redeemed (486,312) (211,966)
---------------------------------------------------------------- ---------------------- -----------------------
Change in net assets resulting from share
transactions 8,970,537 993,053
---------------------------------------------------------------- ---------------------- -----------------------
Change in net assets 9,281,907 974,170
----------------------------------------------------------------
NET ASSETS:
----------------------------------------------------------------
Beginning of period 974,170 --
---------------------------------------------------------------- ---------------------- -----------------------
End of period (including undistributed net investment income of
$0 and $16, respectively) $ 10,256,077 $ 974,170
---------------------------------------------------------------- ---------------------- -----------------------
</TABLE>
*For the period from December 9, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
UTILITY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.29 $ 9.48
---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------
Net investment income 0.22 0.34
---------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.65 (0.19)
--------------------------------------------------------------------- ------- -------
Total from investment operations 0.87 0.15
---------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------
Distribuitons from net investment income (0.22) (0.34)
--------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.94 $ 9.29
--------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 9.50% 1.12%
---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------
Expenses 0.85%(c) 0.60%(c)
---------------------------------------------------------------------
Net investment income 4.76%(c) 4.77%(c)
---------------------------------------------------------------------
Expense waiver/reimbursement (d) 5.01%(c) 54.83%(c)
---------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------
Net assets, end of period (000 omitted) $10,256 $974
---------------------------------------------------------------------
Portfolio turnover 20% 73%
---------------------------------------------------------------------
</TABLE>
(a) 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 (the start of business) to April 13, 1994, the net investment income
was distributed to the Fund's Adviser.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
UTILITY FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein are only those of Utility Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities and
short-term obligations (and private placement securities) are generally
valued at the prices provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be stated at amortized cost, which approximates fair market
value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement investments. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and or
standards reviewed or established by the Board of Trustees (the
"Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued
UTILITY FUND
--------------------------------------------------------------------------------
daily. Bond premium and discount, if applicable, are amortized as required
by the Internal Revenue Code, as amended (the "Code").
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. At December 31, 1994, the Fund,
for federal tax purposes, had a capital loss carryforward of $9,887, which
will reduce the Fund's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal
tax. Pursuant to the Code, such capital loss carryforward will expire in
2002.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
<S> <C> <C>
Shares sold 964,845 126,510
-----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 11,925 1,007
-----------------------------------------------------------------------
Shares redeemed (49,990) (22,611)
----------------------------------------------------------------------- ---------------- ----------
Net change resulting from share transactions 926,780 104,906
----------------------------------------------------------------------- ---------------- ----------
</TABLE>
*For the period from December 9, 1993, (start of business) to December 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisors, the Fund's investment adviser (the
"Adviser"), receives for its services 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 its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary waiver and reimbursement at
any time at its sole discretion.
UTILITY FUND
--------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The
FServ fee is based on the size, type, and number of accounts and transactions
made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of each Fund's
average daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($17,759) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following December
15, 1993 (the date the Fund became effective). For the six months ended June 30,
1995, the Fund paid $2,368 and $4,201, respectively, pursuant to this agreement.
Certain of the Officers and Trustees of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 8,835,492
---------------------------------------------------------------------------------------------------- ------------
SALES $ 740,841
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and
other information.
PRIME
MONEY
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 458043106
G00433-05 (8/95)
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Prime Money
Fund, a portfolio of Insurance Management Series, which covers the six-month
period ended June 30, 1995. The Report begins with an investment review by the
fund's portfolio manager, which is followed by a complete listing of the fund's
holdings and its financial statements.
As a shareholder in this high-quality money market mutual fund, you're putting
your cash to work pursuing daily income while seeking to keep your principal
stable.* In addition, you have convenient, daily access to your money.
In order to give you opportunities for a competitive daily yield, the fund
invests in a portfolio of high-quality money market securities. During the
reporting period, the fund paid a total of $0.03 per share in dividends to
shareholders. On June 30, 1995, net assets stood at $6.6 million.
Thank you for choosing Prime Money Fund to put your cash to work earning income
every day. We'll continue to keep you up to date on your investment, and welcome
your comments and suggestions.
Sincerely,
J. Christopher Donahue
President
August 15, 1995
* No money market mutual fund can guarantee that a stable net asset value will
be maintained. An investment in this fund is neither insured nor guaranteed by
the U.S. government.
INVESTMENT REVIEW
--------------------------------------------------------------------------------
The fund invests exclusively in money market instruments maturing in thirteen
months or less. The average maturity of these securities, computed on a dollar
weighted basis, is restricted to 90 days or less. Portfolio securities must be
rated in one of the two highest short-term rating categories by one or more of
the nationally recognized statistical rating organizations or be of comparable
quality to securities having such ratings. Typical security types include, but
are not limited to, commercial paper, certificates of deposit, time deposits,
variable rate instruments and repurchase agreements.
During the six-month reporting period, the Federal Reserve Board (the "Fed")
initially continued its restrictive interest rate stance but gradually moved to
a more neutral stance. The Fed tightened monetary policy by increasing the Fed
Funds target rate from 5.50% to 6.00% in early February, 1995, but has held
steady since that time. Given the current scenario of a contained inflationary
environment as well as an economic growth slowdown, it is likely that the Fed
has achieved its "soft landing." Recent steep declines in employment statistics,
however, may make the landing seem a bit bumpy. In this regard, the market is
assuming an easing of Fed policy in the summer months.
Reflecting this change in sentiment, the money market yield curve changed its
shape drastically during the reporting period. One month commercial paper rates
declined 29 basis points while six month rates dropped 48 basis points resulting
in a very flat money market curve.
The target average maturity range for Prime Money Fund began the reporting
period at 30-40 days but was subsequently lengthened to a 35-45 day range,
reflecting the changing economic and monetary sentiment. In structuring the
fund, there is continued emphasis placed on positioning 30-35% of the fund's
assets in variable rate demand notes and accomplishing a modest barbell
structure.
During the six months ended June 30, 1995, the net assets of Prime Money Fund
increased from $0.6 to $6.6 million while the 7-day net yield increased from
4.16% to 5.32%*. The effective average maturity of the fund on June 30, 1995,
was 39 days.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Performance information does not reflect the charges
and expenses of a variable annuity or variable life insurance contract.
PRIME MONEY FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
------------ -------------------------------------------------------------------------------------- ------------
CERTIFICATE OF DEPOSIT--3.0%
----------------------------------------------------------------------------------------------------
BANKING--3.0%
--------------------------------------------------------------------------------------
$ 200,000 MBNA America Bank, N.A., 6.20% - 6.25%, 9/11/1995 - 11/8/1995 $ 200,000
-------------------------------------------------------------------------------------- ------------
(a) COMMERCIAL PAPER--34.3%
----------------------------------------------------------------------------------------------------
BANKING--4.5%
--------------------------------------------------------------------------------------
100,000 Abbey National N.A. Corp., 6.02%, (Guaranteed by Abbey National Banc PLC), 8/9/1995 99,356
--------------------------------------------------------------------------------------
200,000 Queensland Alumina Ltd., (Credit Suisse LOC), 5.94%, 9/7/1995 197,790
-------------------------------------------------------------------------------------- ------------
Total 297,146
-------------------------------------------------------------------------------------- ------------
FINANCE-COMMERCIAL--14.9%
--------------------------------------------------------------------------------------
200,000 Beta Finance, Inc., 5.98%, 8/31/1995 198,004
--------------------------------------------------------------------------------------
300,000 CIT Group Holdings, Inc., 5.76% - 5.85%, 9/20/1995 - 12/22/1995 293,290
--------------------------------------------------------------------------------------
300,000 General Electric Capital Corp., 5.80% - 6.21%, 10/25/1995 - 12/5/1995 293,656
--------------------------------------------------------------------------------------
200,000 Sheffield Receivables Corp., 6.10%, 8/9/1995 198,700
-------------------------------------------------------------------------------------- ------------
Total 983,650
-------------------------------------------------------------------------------------- ------------
FINANCE-RETAIL--8.9%
--------------------------------------------------------------------------------------
200,000 Associates Corp. of North America, 6.04% - 6.05%, 8/4/1995 - 10/13/1995 197,734
--------------------------------------------------------------------------------------
200,000 Ford Credit Receivables Funding, Inc., 6.09%, 7/27/1995 199,133
--------------------------------------------------------------------------------------
200,000 New Center Asset Trust (Series A1+P1), 6.21%, 10/30/1995 195,953
-------------------------------------------------------------------------------------- ------------
Total 592,820
-------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS--3.0%
--------------------------------------------------------------------------------------
200,000 AT&T Corp., 5.89%, 9/5/1995 197,866
-------------------------------------------------------------------------------------- ------------
</TABLE>
PRIME MONEY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
------------ -------------------------------------------------------------------------------------- ------------
(a) COMMERCIAL PAPER--CONTINUED
----------------------------------------------------------------------------------------------------
TOBACCO--3.0%
--------------------------------------------------------------------------------------
$ 200,000 Philip Morris Capital Corp., 6.12%, 8/25/1995 $ 198,167
-------------------------------------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 2,269,649
-------------------------------------------------------------------------------------- ------------
CORPORATE NOTES--1.6%
----------------------------------------------------------------------------------------------------
BANKING--1.6%
--------------------------------------------------------------------------------------
103,794 Banc One Auto Trust, 6.36%, 4/15/1996 103,794
-------------------------------------------------------------------------------------- ------------
(B) NOTES-VARIABLE--15.0%
----------------------------------------------------------------------------------------------------
BANKING--15.0%
--------------------------------------------------------------------------------------
200,000 Alabama Industrial Development Authority, 6.20%, (Wellborn Cabinet, Inc.)/(Amsouth
Bank N.A. LOC), 7/5/1995 200,000
--------------------------------------------------------------------------------------
200,000 Capital One Funding Corp., 6.12% (Series 1995-A)/(Banc One LOC),
7/6/1995 200,000
--------------------------------------------------------------------------------------
200,000 Denver Urban Renewal Authority, 6.40%, (Series 1992-B)/(Banque Paribas LOC), 7/6/1995 200,000
--------------------------------------------------------------------------------------
200,000 Franklin County, OH, 6.25% (Series 1995)/(Edison Welding)/(Huntington National Bank
LOC), 7/6/1995 200,000
--------------------------------------------------------------------------------------
190,000 Southeast Regional Holding, 6.32%, (Series 1995-A)/(Columbus Bank and Trust Co. LOC),
7/6/1995 190,000
-------------------------------------------------------------------------------------- ------------
TOTAL NOTES-VARIABLE 990,000
-------------------------------------------------------------------------------------- ------------
(c) REPURCHASE AGREEMENTS--23.7%
----------------------------------------------------------------------------------------------------
310,000 Daiwa Securities America, Inc., 6.16%, dated 6/30/1995, due 7/3/1995 310,000
--------------------------------------------------------------------------------------
200,000 First Chicago Capital Markets, Inc., 6.15%, dated 6/30/1995, due 7/3/1995 200,000
--------------------------------------------------------------------------------------
128,000 HSBC Securities, Inc., 6.35%, dated 6/30/1995, due 7/3/1995 128,000
--------------------------------------------------------------------------------------
310,000 PaineWebber, Inc., 6.18%, dated 6/30/1995, due 7/3/1995 310,000
--------------------------------------------------------------------------------------
310,000 S.G. Warburg & Co., Inc., 6.20%, dated 6/30/1995, due 7/3/1995 310,000
--------------------------------------------------------------------------------------
310,000 UBS Securities, Inc., 6.15%, dated 6/30/1995, due 7/3/1995 310,000
-------------------------------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 1,568,000
-------------------------------------------------------------------------------------- ------------
</TABLE>
PRIME MONEY FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
------------ -------------------------------------------------------------------------------------- ------------
(a) U.S. TREASURY OBLIGATIONS--22.6%
----------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS--22.6%
--------------------------------------------------------------------------------------
$ 1,500,000 5.10%, 7/6/1995 $ 1,498,938
-------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (D) $ 6,630,381
-------------------------------------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for discount
issues.
(b) Current rate and next reset date shown.
(c) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($6,621,268) at June 30, 1995.
The following acronym(s) are used throughout this portfolio:
CP--Commercial Paper
LOC--Letter of Credit
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
PRIME MONEY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
----------------------------------------------------------------------------------------------------
Investments, at amortized cost and value $ 6,630,381
----------------------------------------------------------------------------------------------------
Cash 739
----------------------------------------------------------------------------------------------------
Interest receivable 7,354
---------------------------------------------------------------------------------------------------- ------------
Total assets 6,638,474
----------------------------------------------------------------------------------------------------
LIABILITIES:
----------------------------------------------------------------------------------------------------
Payable for shares redeemed $ 791
-----------------------------------------------------------------------------------------
Accrued expenses 16,415
----------------------------------------------------------------------------------------- ---------
Total liabilities 17,206
---------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 6,621,268 shares outstanding $ 6,621,268
---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($6,621,268 / 6,621,268 shares outstanding) $1.00
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME MONEY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
-------------------------------------------------------------------------------------------------------
Interest $ 97,368
-------------------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------------------
Investment advisory fee $ 7,987
-------------------------------------------------------------------------------------------
Administrative personnel and services fees 61,987
-------------------------------------------------------------------------------------------
Custodian fees 18,507
-------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 6,421
-------------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
-------------------------------------------------------------------------------------------
Auditing fees 2,059
-------------------------------------------------------------------------------------------
Legal fees 801
-------------------------------------------------------------------------------------------
Portfolio accounting fees 10,000
-------------------------------------------------------------------------------------------
Share registration costs 1,267
-------------------------------------------------------------------------------------------
Printing and postage 3,982
-------------------------------------------------------------------------------------------
Insurance premiums 1,991
-------------------------------------------------------------------------------------------
Miscellaneous 3,801
------------------------------------------------------------------------------------------- ----------
Total expenses 119,794
-------------------------------------------------------------------------------------------
Deduct--
-------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 7,987
--------------------------------------------------------------------------------
Reimbursement of other operating expenses 99,028 107,015
-------------------------------------------------------------------------------- --------- ----------
Net expenses 12,779
------------------------------------------------------------------------------------------------------- ---------
Net investment income $ 84,589
------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME MONEY FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------------
Net investment income $ 84,589 $ 2,449
----------------------------------------------------------------------- ---------------- -----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
-----------------------------------------------------------------------
Distributions from net investment income (84,589) (2,449)
----------------------------------------------------------------------- ---------------- -----------------------
SHARE TRANSACTIONS--
-----------------------------------------------------------------------
Proceeds from sale of Shares 10,483,613 1,276,510
-----------------------------------------------------------------------
Net asset value of Shares issued to shareholders in
payment of distributions declared 83,174 2,491
-----------------------------------------------------------------------
Cost of Shares redeemed (4,497,787) (726,733)
----------------------------------------------------------------------- ---------------- -----------------------
Change in net assets resulting from share
transactions 6,069,000 552,268
----------------------------------------------------------------------- ---------------- -----------------------
Change in net assets 6,069,000 552,268
-----------------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------------
Beginning of period 552,268 --
----------------------------------------------------------------------- ---------------- -----------------------
End of period $ 6,621,268 $ 552,268
----------------------------------------------------------------------- ---------------- -----------------------
</TABLE>
*For the period from December 10, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
PRIME MONEY FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 PERIOD ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------
Net investment income 0.03 0.01
---------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------
Distributions from net investment income (0.03) (0.01)
--------------------------------------------------------------------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
--------------------------------------------------------------------- ------- ------
TOTAL RETURN (B) 2.55% 0.50%
---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------
Expenses 0.81%(c) 0.80%(c)
---------------------------------------------------------------------
Net investment income 5.35%(c) 4.26%(c)
---------------------------------------------------------------------
Expense waiver/reimbursement (d) 6.77%(c) 71.84%(c)
---------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------
Net assets, end of period (000 omitted) $6,621 $552
---------------------------------------------------------------------
</TABLE>
(a) 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.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PRIME MONEY FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, diversified
management investment company. The Trust consists of six diversified portfolios.
The financial statements presented herein are only those of Prime Money Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by The Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At June
30, 1995, capital paid-in aggregated $6,621,268. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
<S> <C> <C>
Shares sold 10,483,613 1,276,510
-----------------------------------------------------------------------
Shares issued to shareholders in payment
of distributions declared 83,174 2,491
-----------------------------------------------------------------------
Shares redeemed (4,497,787) (726,733)
----------------------------------------------------------------------- ---------------- ------------
Net change resulting from share transactions 6,069,000 552,268
----------------------------------------------------------------------- ---------------- ------------
</TABLE>
*For the period from December 10, 1993, (start of business) to December 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser, (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.50 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive any portion of its fee and reimburse certain operating expenses
of the Fund. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. The FAS fee is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Trust. This
fee is based on the size, type, and number of accounts, and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($22,431) were borne initially
by the Adviser. The Fund has agreed to reimburse the Adviser for the
organizational expenses during the five year period following December 15, 1993
(the date the Fund became effective). For the six months ended June 30, 1995,
the Fund paid $2,991 pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Trustees of
the above companies.
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and
other information.
U.S.
GOVERNMENT
BOND
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779 [RECYCLE LOGO]
Cusip 458043106
G00433-05 (8/95)
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for U.S.
Government Bond Fund, a portfolio of Insurance Management Series, which covers
the six-month period ended June 30, 1995. The Report begins with an investment
review by the fund's portfolio manager, which is followed by a complete listing
of the fund's holdings and its financial statements.
The fund invests in a portfolio of U.S. government securities to help your money
earn income. These securities are among the safest available, because the
government, agency, or instrumentality that issues these securities provides a
guarantee that the fund will receive the prompt payment of principal and
interest. Of course, the actual shares of the fund is not guaranteed.
As of June 30, 1995, fund assets were invested primarily in U.S. Treasury Bills.
Remaining fund assets were invested in a repurchase agreement backed by U.S.
government securities.
During the period covered by this report, the fund paid dividends of $0.24 per
share. On both the first and last days of the reporting period, the fund's net
asset value stood at $9.99. On June 30, 1995, its net assets stood at $4
million.
Thank you for selecting this fund to participate in the income-earning potential
of U.S. government securities. We'll continue to keep you up to date on your
progress. As always, we welcome your comments and suggestions.
Sincerely,
J. Christopher Donahue
President
August 15, 1995
INVESTMENT REVIEW
--------------------------------------------------------------------------------
U.S. Government Bond Fund, a portfolio of Insurance Management Series, provides
shareholders with a professionally managed portfolio of U.S. government
securities. The fund is managed for specific maturity levels according to
management's assumptions on market risk and volatility.
The U.S. fixed income markets have experienced some major changes in the first
six months of 1995. The yield on the 10-year U.S. Treasury Bill has declined
over 160 basis points, which in turn has pushed rates on 30-year fixed mortgages
down to 7.75% from year-end levels of 9.25%. The yield curve continued its
flattening bias with the yield spread between the one and ten year U.S. Treasury
notes at 58 basis points versus a ten year average of 104 basis points.
The rally in the U.S. Treasury market sparked investors concerns over increased
prepayment activity in combination with a sharp rise in interest rate
volatility. These two events helped to widen spread levels on all mortgage
securities as investors moved into the U.S. Treasury market in search of
positively convex securities.
At this point in time, management believes that the underperformance of
mortgages has been exaggerated, and that the mortgage market will offer
competitive total rates of return versus U.S. Treasury securities during the
third quarter of 1995.
Current portfolio structure emphasizes short U.S. Treasury securities. At this
point in time, U.S. Treasuries are favored for their liquidity characteristics.
Management anticipates that as the second half of 1995 progresses, and the fund
continues to experience asset growth, portfolio selection will stress the
mortgage-backed securities market.
U.S. GOVERNMENT BOND FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN U.S. GOVERNMENT BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
U.S. Government Bond Fund (the "Fund") from March 28, 1994, (start of
performance) to June 30, 1995, compared to the Lehman Brothers 5 Year Treasury
Bellwether Index (LB5TB)+, and the Lipper U.S. Mortgage Funds Average
(LUSMFA).++
[GRAPHIC REPRESENTATION "C" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LB5TB and the LUSMFA have been adjusted to
reflect reinvestment of dividends on securities in the index and
average.
+The LB5TB is not adjusted to reflect sales loads, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance.
The index is unmanaged.
++The LUSMFA represents the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the category, and is not adjusted to reflect any
sales loads. However, total return is reported net of expenses or
other fees that the SEC requires to be reflected in a fund's
performance.
U.S. GOVERNMENT BOND FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
------------ -------------------------------------------------------------------------------------- ------------
U.S. TREASURY BILLS--96.6%
--------------------------------------------------------------------------------------
$ 3,900,000 4.11%, 7/6/1995 $ 3,897,238
-------------------------------------------------------------------------------------- ------------
(A)REPURCHASE AGREEMENT--2.1%
--------------------------------------------------------------------------------------
85,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 85,000
-------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (B) $ 3,982,238
-------------------------------------------------------------------------------------- ------------
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations, based on market prices as of the date of the portfolio.
The investment in the repurchase agreement is through participation in a
joint account with other Federated funds.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($4,034,150) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
U.S. GOVERNMENT BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
-------------------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $ 3,982,238
-------------------------------------------------------------------------------------------------------
Cash 4,056
-------------------------------------------------------------------------------------------------------
Income receivable 14
-------------------------------------------------------------------------------------------------------
Receivable for shares sold 48,147
------------------------------------------------------------------------------------------------------- ------------
Total assets 4,034,455
-------------------------------------------------------------------------------------------------------
LIABILITIES:
-------------------------------------------------------------------------------------------------------
Payable for shares redeemed $ 305
-------------------------------------------------------------------------------------------- ---------
Total liabilities 305
------------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 403,629 shares outstanding $ 4,034,150
------------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
-------------------------------------------------------------------------------------------------------
Paid-in capital $ 4,033,423
-------------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (6)
-------------------------------------------------------------------------------------------------------
Undistributed net investment income 733
------------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 4,034,150
------------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Net Asset Value Per Share ($4,034,150 / 403,629 shares outstanding) $9.99
------------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. GOVERNMENT BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
-------------------------------------------------------------------------------------------------------
Interest $ 68,682
-------------------------------------------------------------------------------------------------------
EXPENSES:
-------------------------------------------------------------------------------------------------------
Investment advisory fee $ 6,979
-------------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
-------------------------------------------------------------------------------------------
Custodian fees 28,655
-------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 7,059
-------------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
-------------------------------------------------------------------------------------------
Auditing fees 6,878
-------------------------------------------------------------------------------------------
Legal fees 1,801
-------------------------------------------------------------------------------------------
Portfolio accounting fees 10,164
-------------------------------------------------------------------------------------------
Share registration costs 1,086
-------------------------------------------------------------------------------------------
Printing and postage 5,792
-------------------------------------------------------------------------------------------
Insurance premiums 1,991
-------------------------------------------------------------------------------------------
Miscellaneous 3,982
------------------------------------------------------------------------------------------- ----------
Total expenses 137,365
-------------------------------------------------------------------------------------------
Deduct--
-------------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 6,979
-------------------------------------------------------------------------------
Reimbursement of other operating expenses 121,067 128,046
------------------------------------------------------------------------------- ---------- ----------
Net expenses 9,319
------------------------------------------------------------------------------------------------------- ---------
Net investment income 59,363
------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 59,363
------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. GOVERNMENT BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
---------------------------------------------------------------------
OPERATIONS--
---------------------------------------------------------------------
Net investment income $ 59,363 $ 18,762
---------------------------------------------------------------------
Net realized gain (loss) on investments ($0 net loss and $6 net loss,
respectively, as computed for federal income tax purposes) -- (6)
--------------------------------------------------------------------- ---------------- -------------
Change in net assets resulting from operations 59,363 18,756
--------------------------------------------------------------------- ---------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
---------------------------------------------------------------------
Dividends from net investment income (58,630) (18,762)
--------------------------------------------------------------------- ---------------- -------------
SHARE TRANSACTIONS--
---------------------------------------------------------------------
Proceeds from sale of Shares 3,537,448 1,519,262
---------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 53,911 11,969
---------------------------------------------------------------------
Cost of Shares redeemed (801,706) (387,461)
--------------------------------------------------------------------- ---------------- -------------
Change in net assets resulting from share
transactions 2,789,653 1,143,770
--------------------------------------------------------------------- ---------------- -------------
Change in net assets 2,790,386 1,143,764
---------------------------------------------------------------------
NET ASSETS:
---------------------------------------------------------------------
Beginning of period 1,243,764 100,000
--------------------------------------------------------------------- ---------------- -------------
End of period (including undistributed net investment income of $733
and $0, respectively) $ 4,034,150 $ 1,243,764
--------------------------------------------------------------------- ---------------- -------------
</TABLE>
(a) For the period from December 8, 1993 (start of business) to December 31,
1994.
(See Notes which are an integral part of the Financial Statements)
U.S. GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 9.99
---------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------
Net investment income 0.24 0.27
---------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------
Distributions from net investment income (0.24) (0.27)
--------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.99 $ 9.99
--------------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 2.49% 2.62%
---------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------
Expenses 0.80%(c) 0.48%(c)
---------------------------------------------------------------------
Net investment income 5.10%(c) 3.99%(c)
---------------------------------------------------------------------
Expense waiver/reimbursement (d) 11.01%(c) 32.83%(c)
---------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,034 $1,244
---------------------------------------------------------------------
Portfolio turnover -- --
---------------------------------------------------------------------
</TABLE>
(a) 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.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
U.S. GOVERNMENT BOND FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein present only those of U.S. Government Bond
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of
its income. Accordingly, no provisions for federal tax are necessary. At
December 31, 1994, the Fund, for federal tax purposes, had a capital loss
carryforward of $6, which will reduce the Fund's income arising from future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2002.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994(A)
<S> <C> <C>
Shares sold 353,954 152,142
---------------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 5,403 1,200
---------------------------------------------------------------------
Shares redeemed (80,280) (38,790)
--------------------------------------------------------------------- ---------------- ----------
Net change resulting from Fund share transactions 279,077 114,552
--------------------------------------------------------------------- ---------------- ----------
</TABLE>
(a) For the period from December 8, 1993, (start of business) to December 31,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.60 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary waiver and reimbursement at
any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($20,065) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following December
15, 1993 (date the Fund became effective). For the six months ended June 30,
1995, the Fund paid $2,675 and $4,201, respectively, to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other government agency. Investment in mutual
funds involves investment risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and
other information.
CORPORATE
BOND
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
Insurance Management Series
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 458043403
G00433-02 (8/95)
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present your Semi-Annual Report to Shareholders for Corporate
Bond Fund, a portfolio of Insurance Management Series, which covers the
six-month period ended June 30, 1995. The Report begins with an investment
review by the fund's portfolio manager, which is followed by a complete listing
of the fund's holdings as well as its financial statements.
As a shareholder in this mutual fund, you're putting your money to work pursuing
a high level of income through a diversified portfolio of corporate bonds. These
bonds are issued by American companies across the entire business spectrum--from
broadcast radio and television to chemicals and plastics, through food products,
steel, retail, and telecommunications.
During the reporting period, dividends paid to shareholders totaled $0.40 per
share. In addition, the fund's net asset value increased from $8.87 on the first
day of the reporting period to $9.47 on the last day of the reporting period. As
a result, the fund's total return for the reporting period was 11.54%.* On June
30, 1995, its net assets stood at $6.0 million.
Thank you for participating in the income-earning potential of high-quality
American companies. We'll continue to keep you up to date on your progress. Your
comments and suggestions are always welcome.
Sincerely,
J. Christopher Donahue
President
August 15, 1995
*Performance quoted represents past performance. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Performance information does not reflect
the charges and expenses of a variable annuity or variable life insurance
contract.
INVESTMENT REVIEW
--------------------------------------------------------------------------------
The major factor in the performance of fixed-income securities for the six month
period ended June 30, 1995, was the substantial decline in interest rates. For
example, the yield on a 10 year U.S. Treasury security declined by over 160
basis points during the period. The interest rate decline was in response to
evidence that the domestic economy was slowing from the rapid pace experienced
in the fourth quarter of 1994. High-yield bonds participated in this rally
especially early in the period when the consensus favored a soft landing
consisting of slow growth with modest inflation. However, towards the end of the
second quarter, the economic commentary switched from the likelihood of a soft
landing to the possibility of a hard landing or a recession. As this shift in
thinking occurred, the high-yield market continued to move modestly higher but
substantially underperformed higher quality bonds as yield spreads (or the risk
premium for high-yield bonds) widened. Also negatively impacting the high-yield
market was a relatively large new issue calendar towards the end of the period
that increased supply at a time of uncertainty, from a fundamental viewpoint.
For the six months as a whole, high-yield bonds showed attractive absolute
returns but lagged the total returns achieved by high-quality fixed income
assets of similar duration.
The Corporate Bond Fund has experienced a large percentage growth in assets
during the period increasing from $1.5 million on December 31, 1994, to
approximately $6.0 million on June 30, 1995. Despite this large asset increase
the fund has outperformed the Lipper High Current Yield average. For the period,
the fund had a total return of 11.54%* versus 9.86% for the Lipper average.
Several factors benefited the fund. First, the fund maintained a modestly higher
quality bias during the period. As spreads widened, higher quality high-yield
bonds outperformed lower quality high-yield bonds. Second, the fund was
overweighted in the cable television and broadcast television industries which
performed strongly in the period due to a strong advertising environment and
potentially positive regulatory changes. The fund was also underweighted in the
general retail area, which substantially underperformed the overall market.
Finally, several specific positions performed above average. These included
Nextel, California Energy, American Standard, Doskocil, and PanAmSat. Offsetting
some of the positives were the fund's underweighting in the gaming industry and
it's continuing exposure to cyclical issuers which underperformed as the
possibility of economic weakness increased. While the cyclical exposure has been
substantially reduced it still represented an overweight for much of the period.
The fund's management continues to be cautious about the outlook for the balance
of 1995. Economic growth is expected to trail the strong second half of 1994.
However, management does not expect the slower economic growth to result in a
recession given high employment levels, lower interest rates and strong export
demand. From a portfolio perspective, we continue to be comfortable with a
modestly higher quality bias. However, the spread widening that occurred in the
latter half of the period has presented the fund's management with some
attractive opportunities in the new issue market. For example, new positions
established in Six Flags, Monarch Marking, Cabot Safety, and Australis Media
were all purchased at yields in excess of 12%. While it is still too early to
employ a wholesale downgrading, selective opportunities do exist to enhance
long-term total return. The fund's cyclical exposure, which has been reduced
from peak levels, will be maintained given the spread widening which has
occurred and several specific situations that we believe represent outstanding
long-term value.
*Performance quoted represents past performance. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost. Performance information does not reflect
the charges and expenses of a variable annuity or variable life insurance
contract.
CORPORATE BOND FUND
--------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN CORPORATE BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Corporate Bond Fund (the "Fund") from March 1, 1994, (start of performance) to
June 30, 1995, compared to the Lehman Brothers Single B Rated Index (LBSBRI)+
and the Lipper High Current Yield Fund Average (LHCYFA)+.
[GRAPHIC REPRESENTATION "D" OMITTED. SEE APPENDIX.]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK, AND ARE NOT FEDERALLY INSURED.
*The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBSBRI and the LHCYFA have been adjusted to reflect
reinvestment of dividends on securities in the index and average.
+The LBSBRI is not adjusted to reflect sales loads, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The index is
unmanaged.
++The LHCYFA represents the average of the total returns reported by all of the
mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category, and is not adjusted to reflect any sales loads. However, these
total returns are reported net of expenses or other fees that the SEC
requires to be reflected in a fund's performance.
CORPORATE BOND FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- -------------------------------------------------------------------------------------- ------------
CORPORATE BONDS--88.8%
---------------------------------------------------------------------------------------------------
AUTOMOTIVE--3.4%
--------------------------------------------------------------------------------------
$ 100,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 $ 106,500
--------------------------------------------------------------------------------------
50,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 51,625
--------------------------------------------------------------------------------------
50,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 47,500
-------------------------------------------------------------------------------------- ------------
Total 205,625
-------------------------------------------------------------------------------------- ------------
BANKING--1.8%
--------------------------------------------------------------------------------------
50,000 Dime Bancorp Inc., Sr. Note, 10.50%, 11/15/2005 53,750
--------------------------------------------------------------------------------------
50,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001 53,750
-------------------------------------------------------------------------------------- ------------
Total 107,500
-------------------------------------------------------------------------------------- ------------
BEVERAGE & TOBACCO--1.7%
--------------------------------------------------------------------------------------
100,000 Cott Corp., Sr. Note, 9.375%, 7/1/2005 100,750
-------------------------------------------------------------------------------------- ------------
BROADCAST RADIO & TV--7.3%
--------------------------------------------------------------------------------------
50,000 Allbritton Communication Co., Sr. Sub. Note, 11.50%, 8/15/2004 53,000
--------------------------------------------------------------------------------------
70,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 70,350
--------------------------------------------------------------------------------------
100,000 NWCG Holding Corp., Sr. Disc. Note, 13.50% accrual, 6/15/1999 62,750
--------------------------------------------------------------------------------------
100,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 104,750
--------------------------------------------------------------------------------------
50,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 50,500
--------------------------------------------------------------------------------------
100,000 Young Broadcasting Inc., Sr. Sub. Note, 10.125%, 2/15/2005 101,000
-------------------------------------------------------------------------------------- ------------
Total 442,350
-------------------------------------------------------------------------------------- ------------
BUSINESS EQUIPMENT & SERVICES--2.5%
--------------------------------------------------------------------------------------
100,000 *Monarch Acquisition Corp., Sr. Note, 12.50%, 7/1/2003 100,750
--------------------------------------------------------------------------------------
50,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 51,000
-------------------------------------------------------------------------------------- ------------
Total 151,750
-------------------------------------------------------------------------------------- ------------
</TABLE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- -------------------------------------------------------------------------------------- ------------
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------------------------------------------
CABLE TELEVISION--6.1%
--------------------------------------------------------------------------------------
$ 50,000 Australis Media Limited, Unit, 0/14.00%, 5/15/2003 $ 26,375
--------------------------------------------------------------------------------------
50,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 53,125
--------------------------------------------------------------------------------------
50,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 51,875
--------------------------------------------------------------------------------------
100,000 *International Cabletel, Inc., Sr. Defd. Cpn. Note, 0/12.75%, 4/15/2005 59,250
--------------------------------------------------------------------------------------
50,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 53,000
--------------------------------------------------------------------------------------
50,000 Peoples Choice TV Corp., Unit, 0/13.125%, 6/1/2004 23,875
--------------------------------------------------------------------------------------
100,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority Note, 10.00%, 3/15/2005 103,500
-------------------------------------------------------------------------------------- ------------
Total 371,000
-------------------------------------------------------------------------------------- ------------
CHEMICALS & PLASTICS--8.4%
--------------------------------------------------------------------------------------
100,000 Arcadian Partners L.P., Sr. Note, Series B, 10.75%, 5/1/2005 101,750
--------------------------------------------------------------------------------------
100,000 Foamex L.P., Sr. Sub. Deb., 11.875%, 10/1/2004 96,500
--------------------------------------------------------------------------------------
100,000 G-I Holdings, Inc., Sr. Disc. Note, 11.375% accrual, 10/1/1998 67,750
--------------------------------------------------------------------------------------
100,000 Harris Chemical North America, Inc., Sr. Secd. Disc. Note,
0/10.25%, 7/15/2001 92,000
--------------------------------------------------------------------------------------
100,000 *Polymer Group, Inc., Sr. Note, 12.75%, 7/15/2002 101,500
--------------------------------------------------------------------------------------
50,000 UCC Investors Holdings, Inc., Sr. Sub. Note, 11.00%, 5/1/2003 50,250
-------------------------------------------------------------------------------------- ------------
Total 509,750
-------------------------------------------------------------------------------------- ------------
CLOTHING & TEXTILES--2.4%
--------------------------------------------------------------------------------------
50,000 Dan River Inc., Sr. Sub. Note, 10.125%, 12/15/2003 49,750
--------------------------------------------------------------------------------------
100,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 97,250
-------------------------------------------------------------------------------------- ------------
Total 147,000
-------------------------------------------------------------------------------------- ------------
CONGLOMERATES--3.3%
--------------------------------------------------------------------------------------
100,000 Fairchild Industries, Sr. Secd. Note, 12.25%, 2/1/1999 101,750
--------------------------------------------------------------------------------------
100,000 Sherritt Gordon Ltd., Sr. Note, 9.75%, 4/1/2003 96,750
-------------------------------------------------------------------------------------- ------------
Total 198,500
-------------------------------------------------------------------------------------- ------------
</TABLE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- -------------------------------------------------------------------------------------- ------------
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS--1.6%
--------------------------------------------------------------------------------------
$ 100,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 $ 94,500
-------------------------------------------------------------------------------------- ------------
CONTAINER & GLASS PRODUCTS--2.7%
--------------------------------------------------------------------------------------
50,000 Owens-Illinois, Inc., Sr. Amort. Deb., 11.00%, 12/1/2003 55,313
--------------------------------------------------------------------------------------
50,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 51,500
--------------------------------------------------------------------------------------
50,000 Silgan Corp., Sr. Sub. Note, 11.75%, 6/15/2002 53,250
-------------------------------------------------------------------------------------- ------------
Total 160,063
-------------------------------------------------------------------------------------- ------------
COSMETICS & TOILETRIES--0.8%
--------------------------------------------------------------------------------------
50,000 Revlon Consumer Products Corp., Note, 9.375%, 4/1/2001 48,375
-------------------------------------------------------------------------------------- ------------
ECOLOGICAL SERVICES & EQUIPMENT--2.6%
--------------------------------------------------------------------------------------
50,000 Allied Waste Industries, Inc., Sr. Sub. Note, 12.00%, 2/1/2004 52,750
--------------------------------------------------------------------------------------
100,000 Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 102,500
-------------------------------------------------------------------------------------- ------------
Total 155,250
-------------------------------------------------------------------------------------- ------------
FOOD & DRUG RETAILERS--3.3%
--------------------------------------------------------------------------------------
150,000 Pathmark Stores, Inc., Sr. Sub. Note, 9.625%, 5/1/2003 147,188
--------------------------------------------------------------------------------------
50,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 50,000
-------------------------------------------------------------------------------------- ------------
Total 197,188
-------------------------------------------------------------------------------------- ------------
FOOD PRODUCTS--2.5%
--------------------------------------------------------------------------------------
50,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 53,250
--------------------------------------------------------------------------------------
50,000 Doskocil Cos., Inc., Sr. Sub. Note, 9.75%, 7/15/2000 48,750
--------------------------------------------------------------------------------------
50,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 51,250
-------------------------------------------------------------------------------------- ------------
Total 153,250
-------------------------------------------------------------------------------------- ------------
FOOD SERVICES--1.5%
--------------------------------------------------------------------------------------
100,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 93,250
-------------------------------------------------------------------------------------- ------------
FOREST PRODUCTS--2.6%
--------------------------------------------------------------------------------------
50,000 Repap New Brunswick, 1st Priority Sr. Secd. Note, 9.875%, 7/15/2000 50,750
--------------------------------------------------------------------------------------
50,000 Riverwood International Corp., Sr. Sub. Note, 11.25%, 6/15/2002 54,625
--------------------------------------------------------------------------------------
$ 50,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 $ 49,875
-------------------------------------------------------------------------------------- ------------
</TABLE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- -------------------------------------------------------------------------------------- ------------
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------------------------------------------
FOREST PRODUCTS--CONTINUED
--------------------------------------------------------------------------------------
Total 155,250
-------------------------------------------------------------------------------------- ------------
HEALTHCARE--1.8%
--------------------------------------------------------------------------------------
100,000 National Medical Enterprises, Inc., Sr. Sub. Note, 10.125%, 3/1/2005 106,250
-------------------------------------------------------------------------------------- ------------
HOME PRODUCTS & FURNISHINGS--1.5%
--------------------------------------------------------------------------------------
50,000 American Standard, Inc., Sr. Sub. Disc. Deb., 0/10.50%, 6/1/2005 38,250
--------------------------------------------------------------------------------------
50,000 Triangle Pacific Corp., Sr. Note, 10.50%, 8/1/2003 51,250
-------------------------------------------------------------------------------------- ------------
Total 89,500
-------------------------------------------------------------------------------------- ------------
INDUSTRIAL PRODUCTS & EQUIPMENT--4.3%
--------------------------------------------------------------------------------------
100,000 *Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 101,250
--------------------------------------------------------------------------------------
50,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 47,500
--------------------------------------------------------------------------------------
100,000 Truck Components, Inc., Sr. Note, 12.25%, 6/30/2001 110,500
-------------------------------------------------------------------------------------- ------------
Total 259,250
-------------------------------------------------------------------------------------- ------------
LEISURE & ENTERTAINMENT--2.6%
--------------------------------------------------------------------------------------
150,000 *Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 108,750
--------------------------------------------------------------------------------------
50,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 49,000
-------------------------------------------------------------------------------------- ------------
Total 157,750
-------------------------------------------------------------------------------------- ------------
MACHINERY & EQUIPMENT--2.6%
--------------------------------------------------------------------------------------
100,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 102,250
--------------------------------------------------------------------------------------
50,000 Waters Corp., Sr. Sub. Note, 12.75%, 9/30/2004 52,625
-------------------------------------------------------------------------------------- ------------
Total 154,875
-------------------------------------------------------------------------------------- ------------
OIL & GAS--5.6%
--------------------------------------------------------------------------------------
150,000 Clark USA, Inc., Sr. Note, 11.00% accrual, 2/15/2000 94,125
--------------------------------------------------------------------------------------
100,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 99,000
--------------------------------------------------------------------------------------
50,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 48,875
--------------------------------------------------------------------------------------
50,000 H.S. Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 48,750
--------------------------------------------------------------------------------------
$ 50,000 WRT Energy Corp., Unit, 13.875%, 3/1/2002 $ 49,750
-------------------------------------------------------------------------------------- ------------
Total 340,500
-------------------------------------------------------------------------------------- ------------
</TABLE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- -------------------------------------------------------------------------------------- ------------
CORPORATE BONDS--CONTINUED
---------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING--1.5%
--------------------------------------------------------------------------------------
50,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 49,750
--------------------------------------------------------------------------------------
50,000 Webcraft Technologies, Inc., Sr. Sub. Note, 9.375%, 2/15/2002 44,000
-------------------------------------------------------------------------------------- ------------
Total 93,750
-------------------------------------------------------------------------------------- ------------
RETAILERS--0.8%
--------------------------------------------------------------------------------------
50,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 47,500
-------------------------------------------------------------------------------------- ------------
STEEL--4.8%
--------------------------------------------------------------------------------------
50,000 Carbide/Graphite Group, Sr. Note, 11.50%, 9/1/2003 52,750
--------------------------------------------------------------------------------------
100,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 89,750
--------------------------------------------------------------------------------------
100,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 99,250
--------------------------------------------------------------------------------------
50,000 Northwestern Steel & Wire Co., Sr. Note, 9.50%, 6/15/2001 47,000
-------------------------------------------------------------------------------------- ------------
Total 288,750
-------------------------------------------------------------------------------------- ------------
SURFACE TRANSPORTATION--4.2%
--------------------------------------------------------------------------------------
100,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 106,500
--------------------------------------------------------------------------------------
50,000 Sea Containers Ltd., Sr. Note, 9.50%, 7/1/2003 49,000
--------------------------------------------------------------------------------------
50,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 50,750
--------------------------------------------------------------------------------------
50,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 49,000
-------------------------------------------------------------------------------------- ------------
Total 255,250
-------------------------------------------------------------------------------------- ------------
TELECOMMUNICATIONS & CELLULAR--3.2%
--------------------------------------------------------------------------------------
50,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 24,750
--------------------------------------------------------------------------------------
100,000 PanAmSat Corp., Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 71,500
--------------------------------------------------------------------------------------
50,000 ProNet, Inc., Sr. Sub. Note, 11.875%, 6/15/2005 50,500
--------------------------------------------------------------------------------------
50,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 43,750
-------------------------------------------------------------------------------------- ------------
Total 190,500
-------------------------------------------------------------------------------------- ------------
UTILITIES--1.4%
--------------------------------------------------------------------------------------
$ 100,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 $ 85,750
-------------------------------------------------------------------------------------- ------------
TOTAL CORPORATE BONDS (IDENTIFIED COST, $5,358,426) 5,360,976
-------------------------------------------------------------------------------------- ------------
</TABLE>
CORPORATE BOND FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- -------------------------------------------------------------------------------------- ------------
COMMON STOCKS--0.2%
---------------------------------------------------------------------------------------------------
FOOD & DRUG RETAILERS--0.2%
--------------------------------------------------------------------------------------
883 Grand Union Co. (identified cost, $53,125) 11,920
-------------------------------------------------------------------------------------- ------------
(A)REPURCHASE AGREEMENT--13.1%
---------------------------------------------------------------------------------------------------
$ 790,000 J.P. Morgan & Co., Inc., 6.125%, dated 6/30/1995, due 7/3/1995 $ 790,000
-------------------------------------------------------------------------------------- ------------
TOTAL INVESTMENTS (IDENTIFIED COST, $6,201,551)(B) $ 6,162,896
-------------------------------------------------------------------------------------- ------------
</TABLE>
Note: The categories of investments are shown as a percentage of net assets
($6,038,104) at June 30, 1995.
*Restricted Securities--Investment in securities not registered under the
Securities Act of 1933. At the end of the period, these securities amounted to
7.8% of net assets.
(a) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $6,201,551. The
unrealized depreciation on a federal tax cost basis amounts to $38,655,
which is comprised of $76,428 appreciation and $115,083 depreciation at June
30, 1995.
(See Notes which are an integral part of the Financial Statements)
CORPORATE BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------------
Investments in repurchase agreements $ 790,000
--------------------------------------------------------------------------------------
Investments in securities 5,372,896
-------------------------------------------------------------------------------------- ------------
Total investments in securities, at value (identified and tax cost $6,201,551) $ 6,162,896
----------------------------------------------------------------------------------------------------
Cash 1,727
----------------------------------------------------------------------------------------------------
Income receivable 122,682
----------------------------------------------------------------------------------------------------
Receivable for shares sold 33,974
----------------------------------------------------------------------------------------------------
Prepaid expenses 17,856
---------------------------------------------------------------------------------------------------- ------------
Total assets 6,339,135
----------------------------------------------------------------------------------------------------
LIABILITIES:
----------------------------------------------------------------------------------------------------
Payable for investments purchased 301,031
---------------------------------------------------------------------------------------------------- ------------
Net Assets for 637,856 shares outstanding $ 6,038,104
---------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
----------------------------------------------------------------------------------------------------
Paid in capital $ 6,077,503
----------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (38,655)
----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (1,128)
----------------------------------------------------------------------------------------------------
Undistributed net investment income 384
---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 6,038,104
---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
($6,038,104 / 637,856 shares outstanding) $9.47
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CORPORATE BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
-----------------------------------------------------------------------------------------------------
Interest $ 141,456
-----------------------------------------------------------------------------------------------------
EXPENSES:
-----------------------------------------------------------------------------------------------------
Investment advisory fee $ 8,236
-----------------------------------------------------------------------------------------
Administrative personnel and services fee 61,987
-----------------------------------------------------------------------------------------
Custodian fees 21,946
-----------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 6,421
-----------------------------------------------------------------------------------------
Directors'/Trustees' fees 991
-----------------------------------------------------------------------------------------
Auditing fees 3,878
-----------------------------------------------------------------------------------------
Legal fees 1,801
-----------------------------------------------------------------------------------------
Portfolio accounting fees 10,000
-----------------------------------------------------------------------------------------
Share registration costs 1,267
-----------------------------------------------------------------------------------------
Printing and postage 4,525
-----------------------------------------------------------------------------------------
Insurance premiums 1,991
-----------------------------------------------------------------------------------------
Miscellaneous 3,982
----------------------------------------------------------------------------------------- ----------
Total expenses 127,025
-----------------------------------------------------------------------------------------
Deduct--
-----------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 8,236
-----------------------------------------------------------------------------
Reimbursement of other operating expenses 107,791 116,027
----------------------------------------------------------------------------- ---------- ----------
Net expenses 10,998
----------------------------------------------------------------------------------------------------- ----------
Net investment income 130,458
----------------------------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
-----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 11,220
-----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 126,493
----------------------------------------------------------------------------------------------------- ----------
Net realized and unrealized gain (loss) on investments 137,713
----------------------------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $ 268,171
----------------------------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CORPORATE BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------------
Net investment income $ 130,458 $ 121,011
-----------------------------------------------------------------------
Net realized gain (loss) on investments
($11,220 net gain and $12,348 net loss, respectively, as
computed for federal income tax purposes) 11,220 (12,348)
-----------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 126,493 (165,148)
----------------------------------------------------------------------- ---------------- -----------------------
Change in assets resulting from operations 268,171 (56,485)
----------------------------------------------------------------------- ---------------- -----------------------
DISTRIBUTIONS TO SHAREHOLDERS--
-----------------------------------------------------------------------
Distributions from net investment income (128,010) (121,011)
-----------------------------------------------------------------------
Distributions in excess of net investment income 0 (2,064)
----------------------------------------------------------------------- ---------------- -----------------------
Change in net assets resulting from distributions to shareholders (128,010) (123,075)
----------------------------------------------------------------------- ---------------- -----------------------
SHARE TRANSACTIONS
-----------------------------------------------------------------------
Proceeds from sale of Shares 5,419,735 2,484,492
-----------------------------------------------------------------------
Net asset value of Shares issued to shareholders in
payment of distributions declared 125,873 20,705
-----------------------------------------------------------------------
Cost of Shares redeemed (1,104,608) (868,694)
----------------------------------------------------------------------- ---------------- -----------------------
Change in net assets resulting from share
transactions 4,441,000 1,636,503
----------------------------------------------------------------------- ---------------- -----------------------
Change in net assets 4,581,161 1,456,943
-----------------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------------
Beginning of period 1,456,943 0
----------------------------------------------------------------------- ---------------- -----------------------
End of period (including undistributed net investment income of $384
and $0, respectively) $ 6,038,104 $ 1,456,943
----------------------------------------------------------------------- ---------------- -----------------------
</TABLE>
*For the period from December 9, 1993 (start of business) to December 31, 1994.
(See Notes which are an integral part of the Financial Statements)
CORPORATE BOND FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.87 $ 10.00
--------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------------------------
Net investment income 0.40 0.75
--------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments 0.60 (1.12)
-------------------------------------------------------------- ------- -------
Total from investment operations 1.00 (0.37)
--------------------------------------------------------------
LESS DISTRIBUTIONS
--------------------------------------------------------------
Distributions from net investment income (0.40) (0.75)
--------------------------------------------------------------
Distributions in excess of net investment income 0.00 (0.01)
-------------------------------------------------------------- ------- -------
Total distributions (0.40) (0.76)
-------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.47 $ 8.87
-------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 11.54% (3.73%)
--------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------------------
Expenses 0.80%(c) 0.41%(c)
--------------------------------------------------------------
Net investment income 9.50%(c) 9.11%(c)
--------------------------------------------------------------
Expense waiver/reimbursement (d) 8.45%(c) 10.01%(c)
--------------------------------------------------------------
SUPPLEMENTAL DATA
--------------------------------------------------------------
Net assets, end of period (000 omitted) $6,038 $1,457
--------------------------------------------------------------
Portfolio turnover 24 % 18 %
--------------------------------------------------------------
</TABLE>
(a) 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.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
CORPORATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein present only those of Corporate Bond Fund
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed corporate bonds and other fixed-income and
asset backed securities are valued at the last sale price reported on
national securities exchanges. Unlisted bonds and securities and short-term
obligations are valued at the prices provided by an independent pricing
service. Short-term securities with remaining maturities of sixty days or
less may be stated at amortized cost, which approximates value.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS--Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded
on the ex-dividend date. 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.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary. At December 31,
1994, the Fund, for federal tax purposes, had a capital loss carryforward
of $12,348, which will reduce the Fund's taxable income arising from future
net realized gain on investments, if any, to the extent permitted by the
Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will
expire in 2002.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees. The Fund will not
incur any registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by an independent pricing
service, or, if no market prices are available, at the fair value as
determined by the Fund's pricing committee.
Additional information on each restricted security held at June 30, 1995,
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Monarch Acquisition Corp., Sr. Note 6/23/1995 $ 100,000
International Cabletel, Inc., Sr. Defd. Cpn. Note 4/13/1995 53,995
Polymer Group, Inc., Sr. Note 5/12/1995 106,211
Cabot Safety Acquisition Corp., Sr. Sub. Note 6/29/1995 100,000
Six Flags Theme Parks, Sr. Sub. Disc. Note 6/16/1995 105,276
</TABLE>
OTHER--Investment transactions are accounted for on the trade date.
CORPORATE BOND FUND
--------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994*
<S> <C> <C>
Shares sold 581,704 257,641
----------------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 13,573 2,295
----------------------------------------------------------------
Shares redeemed (121,691) (95,666)
---------------------------------------------------------------- ---------- ----------
Net change resulting from Fund share transactions 473,586 164,270
---------------------------------------------------------------- ---------- ----------
</TABLE>
*For the period from December 9, 1993, (start of business) to December 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.60 of 1% of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive its fee and reimburse certain operating expenses of the Fund.
The Adviser can modify or terminate this voluntary reimbursement at any time at
its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($16,313) and start-up
administrative service expenses ($31,507) were borne initially by the Adviser.
The Fund has agreed to reimburse the Adviser for the organizational expenses and
start-up administrative expenses during the five year period following December
15, 1993 (date the Fund became effective). For the six months ended June 30,
1995, the Fund paid $2,175 and $4,201, respectively, pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1995, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 4,497,969
---------------------------------------------------------------------------------------------------- ------------
SALES $ 657,156
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and
other information.
INTERNATIONAL
STOCK
FUND
SEMI-ANNUAL REPORT
AND SUPPLEMENT TO
PROSPECTUS DATED
APRIL 30, 1995
Insurance Management Series
June 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Cusip 458043601
G01083-03 (8/95)
A. Please insert the following "Financial Highlights" table as page 1 of the
prospectus. In addition, please add the heading "Financial Highlights" to
the Table of Contents page as the first entry.
INTERNATIONAL STOCK FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1995(A)
(UNAUDITED)
<S> <C>
--------------------------------------------------------------------------------------------- -------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------
Net investment income 0.02
---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.01
---------------------------------------------------------------------------------------------
Total from investment operations 0.03
---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------------------------------
Distributions from net investment income --
--------------------------------------------------------------------------------------------- ------
NET ASSET VALUE, END OF PERIOD $ 10.03
---------------------------------------------------------------------------------------------
TOTAL RETURN (B) 0.30%
---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------
Expenses 0.00%(c)
---------------------------------------------------------------------------------------------
Net investment income 5.22%(c)
---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 297.10%(c)
---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $302
---------------------------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from May 5, 1995 (date of initial public
investment) to June 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
B. Please insert the following as the fourth paragraph of the section
entitled "Voting Rights" on page 13 of the prospectus.
"As of August 2, 1995, Aetna Life Insurance and Annuity Company, Hartford,
Connecticut, owned 43.59%, and Aetna Insurance Company of America, Hartford,
Connecticut, owned 56.37% of the voting securities of the Fund, and, therefore,
may for certain purposes be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders."
C. Please insert the following Financial Statements after the section
entitled "Performance Information" and before the address page. In
addition, please add the heading "Financial Statements" to the Table of
Contents page after the heading "Performance Information."
INTERNATIONAL STOCK FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
----------- ----------------------------------------------------------------------------------------- ----------
(a)REPURCHASE AGREEMENTS--89.3%
------------------------------------------------------------------------------------------------------
$55,000 Bank of Tokyo, 6.25%, dated 6/30/1995, due 7/3/1995 $ 55,000
-----------------------------------------------------------------------------------------
55,000 Bear, Stearns & Co., Inc., 6.125%, dated 6/30/1995, due 7/3/1995 55,000
-----------------------------------------------------------------------------------------
55,000 Chemical Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 55,000
-----------------------------------------------------------------------------------------
50,000 J.P. Morgan Securities, Inc., 6.125%, dated 6/30/1995, due 7/3/1995 50,000
-----------------------------------------------------------------------------------------
55,000 NCNB of North Carolina--Charlotte, 6.30%, dated 6/30/1995, due 7/3/1995 55,000
----------------------------------------------------------------------------------------- ----------
TOTAL INVESTMENTS, AT AMORTIZED COST (B) $ 270,000
----------------------------------------------------------------------------------------- ----------
</TABLE>
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations, based on market prices as of the date of the portfolio.
The investments in repurchase agreements are through participation in joint
accounts with other Federated funds.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($302,303) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
----------------------------------------------------------------------------------------------------
Investment in repurchase agreements, at amortized cost and value $ 270,000
----------------------------------------------------------------------------------------------------
Cash 4,991
----------------------------------------------------------------------------------------------------
Income receivable 47
----------------------------------------------------------------------------------------------------
Receivable for shares sold 27,265
---------------------------------------------------------------------------------------------------- ------------
Total assets 302,303
---------------------------------------------------------------------------------------------------- ------------
NET ASSETS for 30,126 shares outstanding $ 302,303
---------------------------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
----------------------------------------------------------------------------------------------------
Paid-in capital $ 301,753
----------------------------------------------------------------------------------------------------
Undistributed net investment income 550
---------------------------------------------------------------------------------------------------- ------------
Total Net Assets $ 302,303
---------------------------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share:
Net Asset Value Per Share ($302,303 / 30,126 shares outstanding) $ 10.03
---------------------------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
STATEMENT OF OPERATIONS
PERIOD ENDED JUNE 30, 1995(A) (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------------------------------
Interest $ 550
----------------------------------------------------------------------------------------------------------
EXPENSES:
-----------------------------------------------------------------------------------------------
Investment advisory fee $ 107
-----------------------------------------------------------------------------------------------
Administrative personnel and services fees 18,151
-----------------------------------------------------------------------------------------------
Custodian fees 3,900
-----------------------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 450
-----------------------------------------------------------------------------------------------
Legal fees 450
-----------------------------------------------------------------------------------------------
Portfolio accounting fees 3,430
-----------------------------------------------------------------------------------------------
Share registration costs 250
-----------------------------------------------------------------------------------------------
Printing and postage 1,200
-----------------------------------------------------------------------------------------------
Insurance premiums 2,000
-----------------------------------------------------------------------------------------------
Miscellaneous 1,350
----------------------------------------------------------------------------------------------- ---------
Total expenses 31,288
-----------------------------------------------------------------------------------------------
Deduct--
------------------------------------------------------------------------------------
Waiver of investment advisory fee $ 107
------------------------------------------------------------------------------------
Reimbursement of other operating expenses 31,181 31,288
------------------------------------------------------------------------------------ --------- ---------
Net expenses 0
---------------------------------------------------------------------------------------------------------- ---------
Net investment income 550
---------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 550
---------------------------------------------------------------------------------------------------------- ---------
</TABLE>
(a) For the period from May 5, 1995 (date of initial public investment) to June
30, 1995.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1995(A)
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
---------------------------------------------------------------------------------------------
OPERATIONS--
---------------------------------------------------------------------------------------------
Net investment income $ 550
---------------------------------------------------------------------------------------------
Net realized gain (loss) on investments
($0 net loss as computed for federal income tax purposes) --
--------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from operations 550
--------------------------------------------------------------------------------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS--
---------------------------------------------------------------------------------------------
Distributions from net investment income --
---------------------------------------------------------------------------------------------
SHARE TRANSACTIONS--
---------------------------------------------------------------------------------------------
Proceeds from sale of Shares 302,283
---------------------------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of distributions declared --
---------------------------------------------------------------------------------------------
Cost of Shares redeemed (530)
--------------------------------------------------------------------------------------------- -------------------
Change in net assets resulting from share transactions 301,753
--------------------------------------------------------------------------------------------- -------------------
Change in net assets 302,303
---------------------------------------------------------------------------------------------
NET ASSETS:
---------------------------------------------------------------------------------------------
Beginning of period --
--------------------------------------------------------------------------------------------- -------------------
End of period (including undistributed net investment income of $550) $ 302,303
--------------------------------------------------------------------------------------------- -------------------
</TABLE>
(a) For the period from May 5, 1995 (date of initial public investment) to June
30, 1995.
(See Notes which are an integral part of the Financial Statements)
INTERNATIONAL STOCK FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of six diversified portfolios. The
financial statements included herein present only those of International Stock
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the
"Trustees"). Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreement. Accordingly, the Fund could
receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount,
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. However, federal taxes may be
imposed on the Fund upon the disposition of certain investments in passive
foreign investment companies. Withholding taxes on foreign dividends have
been provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred
and are being amortized using the straight-line method not to exceed a
period of five years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1995(A)
<S> <C>
Shares sold 30,179
---------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared --
---------------------------------------------------------------------------------------------
Shares redeemed (53)
--------------------------------------------------------------------------------------------- -------
Net change resulting from Fund share transactions 30,126
--------------------------------------------------------------------------------------------- -------
</TABLE>
(a) For the period ended May 5, 1995 (date of initial public investment) to
June 30, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
1.00% of the Fund's average daily net assets. The Adviser may voluntarily choose
to waive its fee and reimburse certain operating expenses of the Fund. The
Adviser can modify or terminate this voluntary waiver and reimbursement at any
time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Admnistrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by the Adviser and are estimated at $30,000. The Fund has agreed
to reimburse the Adviser for the organizational expenses during the five year
period following April 4, 1995 (date the Fund became effective). For the six
months ended June 30, 1995, the Fund paid $0 pursuant to this agreement.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
TRUSTEES OFFICERS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts G. Andrew Bonnewell
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and
other information.
INSURANCE MANAGEMENT SERIES APPENDIX
A. The graphic presentation here displayed consists of a line
graph titled "Growth of $10,000 Invested in Equity Growth and
Income Fund." The corresponding components of the line graph are
listed underneath. The Equity Growth and Income Fund (the
"Fund") is represented by a solid line. The Standard and Poor's
500 Index (the "S&P 500") is represented by a dotted line. The
Lipper Growth and Income Funds Average (the "LGIFA") is
represented by a dashed line The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 investment in the Fund, the S&P 500 and the
LGIFA. The "x" axis reflects computation periods from the start
of performance (February 10, 1994) to June 30, 1995. The "y"
axis reflects the cost of the investment, ranging from $9,600 to
$14,000. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the S&P 500
and the LGIFA. The ending values are $11,607, 12,079, and
$11,412, respectively.
B. The graphic presentation here displayed consists of a line
graph titled "Growth of $10,000 Invested in Utility Fund." The
corresponding components of the line graph are listed underneath.
The Utility Fund (the "Fund") is represented by a solid line.
The Standard and Poor's 500 Index (the "S&P 500") is represented
by a dotted line. The Standard and Poor's Utility Index (the
"SPUX") is represented by a dashed line The line graph is a
visual representation of a comparison of change in value of a
hypothetical $10,000 investment in the Fund, the S&P 500 and the
SPUX. The "x" axis reflects computation periods from the start
of performance (February 10, 1994) to June 30, 1995. The "y"
axis reflects the cost of the investment, ranging from $9,000 to
$13,000. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the S&P 500
and the SPUX. The ending values are $10,584, 12,079, and
$10,547, respectively.
C. The graphic presentation here displayed consists of a line
graph titled "Growth of $10,000 Invested in U.S. Government Bond
Fund." The corresponding components of the line graph are listed
underneath. The U.S. Government Bond Fund (the "Fund") is
represented by a solid line. The Lehman Brothers 5 Year Treasury
Bellwether Index (the "LB5TB") is represented by a dotted line.
The Lipper U.S. Mortgage Funds Average (the "LUSMFA") is
represented by a dashed line. The line graph is a visual
representation of a comparison of change in value of a
hypothetical $10,000 investment in the Fund, the LB5TB and the
LUSMFA. The "x" axis reflects computation periods from the start
of performance (March 28, 1994) to June 30, 1995. The "y" axis
reflects the cost of the investment, ranging from $9,600 to
$11,200. The right margin reflects the ending value of the
hypothetical investment in the Fund as compared to the LB5TB and
the LUSMFA. The ending values are $10,517, 10,996, and $10,824,
respectively.
D. The graphic presentation here displayed consists of a line
graph titled "Growth of $10,000 Invested in Corporate Bond Fund."
The corresponding components of the line graph are listed
underneath. The Corporate Bond Fund (the "Fund") is represented
by a solid line. The Lehman Brothers Single B Rated Index (the
"LBSBRI") is represented by a dotted line. The Lipper High
Current Yield Fund Average (the "LHCYFA") is represented by a
dashed line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $10,000
investment in the Fund, the LBSBRI and the LHCYFA. The "x" axis
reflects computation periods from the start of performance (March
1, 1994) to June 30, 1995. The "y" axis reflects the cost of the
investment, ranging from $9,200 to $11,200. The right margin
reflects the ending value of the hypothetical investment in the
Fund as compared to the LBSBRI and the LHCYFA. The ending values
are $10,751, 10,858, and $10,321, respectively.
