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1
1933 Act File No. 33-69268
1940 Act File No. 811-8042
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 3 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 4 X
INSURANCE MANAGEMENT SERIES
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
x 75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
filed the Notice required by that Rule on _________________; or
intends to file the Notice required by that Rule on or about
____________; or
x during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant
to Rule 24f-2(b)(2), need not file the Notice.
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of Insurance Management
Series, which consists of six portfolios: (1) Equity Growth and Income
Fund, (2) Utility Fund, (3) U.S. Government Bond Fund, (4) Corporate Bond
Fund, (5) Prime Money Fund, and (6) International Equity Fund, relates only
to International Equity Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-6) Cover Page.
Item 2. Synopsis (1-6) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-4) Financial Highlights; (1-6)
Performance Information.
Item 4. General Description of
Registrant (1-6) General Information on Insurance
Management Series; (1) Equity Growth
and Income Fund Investment
Information; (2) Utility Fund
Investment Information; (3) U.S.
Government Bond Fund Investment
Information; (4) Corporate Bond Fund
Investment Information; (5) Prime
Money Fund Investment Information; (6)
International Equity Fund Investment
Information; (1-6) Investment
Objective; (1-6) Investment Policies;
(1-5) Investment Practices; (4,5)
Investment Risks; (1-6) Investment
Limitations; (5) Regulatory
Compliance.
Item 5. Management of the Fund (1-6) Insurance Management Series
Information; (1-6) Management of
Insurance Management Series; (1-6)
Distribution of Fund Shares; (1-5)
Administration of the Trust; (6)
Administration of the Fund; (1-6)
Brokerage Transactions; (1-6) Expenses
of the Fund.
Item 6. Capital Stock and Other
Securities (1-6) Dividends; (1-6) Shareholder
Information; (1-6) Tax Information; (1-
6) Federal Income Tax; (1-6) State and
Local Taxes; (1-6) Voting Rights.
Item 7. Purchase of Securities Being
Offered (1-6) Net Asset Value; (1-6) Investing
in the Fund; (1-6) Purchases and
Redemptions; (1-6) What Shares Cost.
Item 8. Redemption or Repurchase (1-6) Purchases and Redemptions.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-6) Cover Page.
Item 11. Table of Contents (1-6) Table of Contents.
Item 12. General Information and
History (1-5) General Information About the
Trust.
Item 13. Investment Objectives and
Policies (1-5) Investment Information; (1-6)
Investment Objectives; Types of
Investments; Portfolio Turnover;
Investment Limitations.
Item 14. Management of the Fund (1-6) Trust Management.
Item 15. Control Persons and Principal
Holders of Securities (1-6) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-6) Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation (1-6) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-6) Purchasing Shares; Determining
Net Asset Value.
Item 20. Tax Status (1-6) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1-6) Total Return; Yield; (1-5)
Effective Yield; (1-6) Performance
Comparisons.
Item 23. Financial Statements (1-4) Included in Part B; (5,6) To be
filed with 4-6 month update.
International Equity Fund
(A Portfolio of Insurance Management Series)
Prospectus
This Prospectus offers shares of International Equity Fund (the "Fund"),
which is a diversified investment portfolio in Insurance Management Series
(the "Trust"), an open-end management investment company. The Fund's
investment objective is to obtain a total return on its assets. Shares of
the Fund may be sold only to separate accounts of insurance companies to
serve as the investment medium for variable life insurance policies and
variable annuity contracts issued by the insurance companies.
The shares offered by this prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank, and are not insured
by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or
any other government agency. Investment in these shares involves investment
risks, including the possible loss of principal.
This Prospectus contains the information you should read and know before
you invest in the Fund through the variable life insurance policies and
variable annuity contracts offered by insurance companies which provide for
investment in the Fund. Keep this Prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
April __, 1995, with the Securities and Exchange Commission. The
information contained in the Statement of Additional Information is
incorporated by reference into this Prospectus. You may request a copy of
the Statement of Additional Information free of charge by calling 1-800-235-
4669. To obtain other information or to make inquiries about the Fund,
contact the Fund at the address listed in the back of this prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
FUND SHARES ARE AVAILABLE EXCLUSIVELY AS A FUNDING VEHICLE FOR LIFE
INSURANCE COMPANIES WRITING VARIABLE LIFE INSURANCE POLICIES AND VARIABLE
ANNUITY CONTRACTS. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE
PROSPECTUSES FOR SUCH CONTRACTS.
Prospectus dated April __, 1995
General Information 2
Investment Information 2
Investment Objective 2
Investment Policies 2
Investment Limitations 8
Net Asset Value 9
Investing in the Fund 9
Purchases and Redemptions 9
What Shares Cost 9
Dividends 10
Fund Information 10
Management of the Fund 10
Distribution of Fund Shares 11
Administration of the Fund 11
Brokerage Transactions 11
Expenses of the Fund 12
Shareholder Information 12
Voting Rights 12
Tax Information 12
Federal Tax 12
State and Local Taxes 13
Performance Information 13
Addresses 14
General Information
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated September 15, 1993. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial interest
in separate portfolios of securities, including the Fund.
Shares of the Fund are sold only to insurance companies as funding vehicles
for variable insurance policies and variable annuity contracts issued by
the insurance companies. Shares of the Fund are sold at net asset value as
described in the section entitled "What Shares Cost." Shares of the Fund
are redeemed at net asset value.
Investment Information
Investment Objective
The Fund's investment objective is to obtain a total return on its assets.
The investment objective cannot be changed without the approval of the
Fund's shareholders. While there is no assurance that the Fund will
achieve its investment objective, it attempts to do so by following the
investment policies described in this prospectus.
Investment Policies
Acceptable Investments. The Fund will attempt to achieve its objective by
investing at least 65% of its assets (and under normal market conditions
substantially all of its assets) in equity securities of issuers located in
at least three different countries outside of the United States. The
Fund's investment approach is based on the premise that investing in such
non-U.S. securities provides three potential benefits over investing solely
in U.S. securities: (1) the opportunity to invest in foreign issuers
believed to have superior growth potential; (2) the opportunity to invest
in foreign countries with economic policies or business cycles different
from those of the U.S.; and (3) the opportunity to reduce portfolio
volatility to the extent that securities markets inside and outside the
U.S. do not move in harmony. The Fund may purchase sponsored or
unsponsored American Depositary Receipts ("ADRs"), Global Depositary
Receipts ("GDRs"), and European Depositary Receipts ("EDRs"); corporate and
government fixed income securities of issuers outside of the U.S.;
convertible securities; and options and financial futures contracts. In
addition, the Fund may enter into forward commitments, repurchase
agreements, and foreign currency transactions; and maintain reserves in
foreign or U.S. money market instruments.
Unless otherwise indicated, the investment policies may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change to these policies becomes effective.
Depositary Receipts. The Fund may purchase sponsored or
unsponsored ADRs, GDRs, and EDRs (collectively, "Depositary
Receipts"). ADRs are Depositary Receipts typically issued by a
U.S. bank or trust company which evidence ownership of underlying
securities issued by a foreign corporation. EDRs and GDRs are
typically issued by foreign banks or trust companies, although
they also may be issued by U.S. banks or trust companies, and
evidence ownership of underlying securities issued by either a
foreign or a U.S. corporation. Generally, Depositary Receipts in
registered form are designed for use in the U.S. securities market
and Depositary Receipts in bearer form are designed for use in
securities markets outside the U.S. Depositary Receipts may not
necessarily be denominated in the same currency as the underlying
securities into which they may be converted. Ownership of
unsponsored Depositary Receipts may not entitle the Fund to
financial or other reports from the issuer of the underlying
security, to which it would be entitled as the owner of sponsored
Depositary Receipts.
Fixed Income Securities. At the date of this prospectus, the Fund
has committed its assets primarily to dividend-paying equity
securities of established companies that appear to have growth
potential. However, as a temporary defensive position, the Fund
may shift its emphasis to fixed income securities, warrants, or
other obligations of foreign companies or governments, if they
appear to offer potential higher return. Fixed income securities
include preferred stock, bonds, notes, or other debt securities
which are investment grade or higher. The prices of fixed income
securities fluctuate inversely to the direction of interest rates.
The high-quality debt securities in which the Fund will invest
will possess a minimum credit rating of BBB as assigned by
Standard & Poor's Ratings Group ("S&P") or Baa by Moody's
Investors Service, Inc. ("Moody's"), or, if unrated, will be
judged by the Fund's adviser to be of comparable quality. Because
the average quality of the Fund's portfolio investments should
remain constantly between AAA and BBB, the Fund may avoid the
adverse consequences that may arise for some debt securities in
difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the adviser. The adviser will
determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold. A
description of the ratings categories is contained in the Appendix
to the Statement of Additional Information.
Convertible Securities. The Fund may invest in convertible
securities that are rated, at the time of purchase, investment
grade by a nationally recoginzed statistical rating organization
("NRSRO") or, if unrated, of comparable quality as determined by
the adviser. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of
the issuer's underlying common stock at the option of the holder
during a specified time period. Convertible securities may take
the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a
combination of the features of several of these securities. The
investment characteristics of each convertible security vary
widely, which allows convertible securities to be employed for
different investment objectives.
Convertible bonds and convertible preferred stocks are fixed
income securities that generally retain the investment
characteristics of fixed income securities until they have been
converted but also react to movements in the underlying equity
securities. The holder is entitled to receive the fixed income of
a bond or the dividend preference of a preferred stock until the
holder elects to exercise the conversion privilege. Usable bonds
are corporate bonds that can be used in whole or in part,
customarily at full fact value, in lieu of cash to purchase the
issuer's common stock. When owned as part of a unit along with
warrants, which entitle the holder to buy the common stock, they
function as convertible bonds, except that the warrants generally
will expire before the bonds' maturity. Convertible securities are
senior to equity securities and, therefore, have a claim to assets
of the corporation prior to the holders of common stock in the
case of liquidation. However, convertible securities are generally
subordinated to similar nonconvertible securities of the same
company. The interest income and dividends from convertible bonds
and preferred stocks provide a stable stream of income with
generally higher yields than common stocks, but lower than
nonconvertible securities of similar quality. A Fund will exchange
or convert the convertible securities held in its portfolio into
shares of the underlying common stocks when, in the adviser's
opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective.
Otherwise, the Fund will hold or trade the convertible securities.
In selecting convertible securities for the Fund, the adviser
evaluates the investment characteristics of the convertible
security as a fixed income instrument, and the investment
potential of the underlying equity security for capital
appreciation. In evaluating these matters with respect to a
particular convertible security, the adviser considers numerous
factors, including the economic and political outlook, the value
of the security relative to other investment alternatives, trends
in the determinants of the issuer's profits, and the issuer's
management capability and practices.
Options and Financial Futures Contracts. The Fund may purchase put
and call options, financial futures contracts, and options on
financial futures contracts. In addition, the Fund may write
(sell) put and call options with respect to securities in the
Fund's portfolio.
Forward Commitments. Forward commitments are contracts to purchase
securities for a fixed price at a date beyond customary settlement
time. The Fund may enter into these contracts if liquid securities
in amounts sufficient to meet the purchase price are segregated on
the Fund's records at the trade date and maintained until the
transaction has been settled. Risk is involved if the value of the
security declines before settlement. Although the Fund enters into
forward commitments with the intention of acquiring the security,
it may dispose of the commitment prior to settlement and realize a
short-term profit or loss.
Repurchase Agreements. Repurchase agreements are arrangements in
which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price.
To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
Money Market Instruments. The Fund may invest in foreign and U.S.
money market instruments, including interest-bearing call deposits
with banks, government obligations, certificates of deposit,
banker's acceptances, commercial paper, short-term corporate debt
securities, and repurchase agreements. The commercial paper in
which the Fund invests will be rated A-1 by S&P or P-1 by Moody's.
These investments may be used to temporarily invest cash received
from the sale of Fund shares, to establish and maintain reserves
for temporary defensive purposes, or to take advantage of market
opportunities. Investments in the World Bank, Asian Development
Bank, or Inter-American Development Bank are not anticipated.
When-Issued and Delayed Delivery Transactions. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices. Accordingly, the Fund may pay more or
less than the market value of the securities on the settlement date. The
Fund may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Fund may enter into transactions
to sell its purchase commitments to third parties at current market values
and simultaneously acquire other commitments to purchase similar securities
at later dates. The Fund may realize short-term profits or losses upon the
sale of such commitments.
Lending of Portfolio Securities. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund, may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
Foreign Currency Transactions. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or
cash basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or
exchange control regulations. Such changes could unfavorably affect the
value of Fund assets which are denominated in foreign currencies, such as
foreign securities or funds deposited in foreign banks, as measured in U.S.
dollars. Although foreign currency exchanges may be used by the Fund to
protect against a decline in the value of one or more currencies, such
efforts may also limit any potential gain that might result from a relative
increase in the value of such currencies and might, in certain cases,
result in losses to the Fund. Further, the Fund may be affected either
unfavorably or favorably by fluctuations in the relative rates of exchange
between the currencies of different nations. Cross-hedging transactions by
the Fund involve the risk of imperfect correlation between changes in the
values of the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability that is the subject
of the hedge.
Forward Foreign Currency Exchange Contracts and Options on Foreign
Currencies. A forward foreign currency exchange contract ("forward
contract") is an obligation to purchase or sell an amount of a particular
currency at a specific price and on a future date agreed upon by the
parties.
Generally, no commission charges or deposits are involved. At the time the
Fund enters into a forward contract, Fund assets with a value equal to the
Fund's obligation under the forward contract are segregated on the Fund's
records and are maintained until the contract has been settled. The Fund
will not enter into a forward contract with a term of more than one year.
The Fund will generally enter into a forward contract to provide the proper
currency to settle a securities transaction at the time the transaction
occurs ("trade date"). The period between the trade date and settlement
date will vary between 24 hours and 30 days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign
currency by entering into a forward contract to sell an amount of that
currency approximating the value of all or a portion of the Fund's assets
denominated in that currency ("hedging"). The success of this type of short-
term hedging strategy is highly uncertain due to the difficulties of
predicting short-term currency market movements and of precisely matching
forward contract amounts and the constantly changing value of the
securities involved. Although the adviser will consider the likelihood of
changes in currency values when making investment decisions, the adviser
believes that it is important to be able to enter into forward contracts
when it believes the interests of the Fund will be served. The Fund will
not enter into forward contracts for hedging purposes in a particular
currency in an amount in excess of the Fund's assets denominated in that
currency. No more than 30% of the Fund's assets will be committed to
forward contracts for hedging purposes at any time. (This restriction does
not include forward contracts entered into to settle securities
transactions.)
The Fund may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the U.S. dollar value of
foreign currency-denominated portfolio securities and against increases in
the U.S. dollar cost of such securities to be acquired. As in the case of
other kinds of options, however, the writing of an option on a foreign
currency constitutes only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in the event of rate
movements adverse to the Fund's position, it may forfeit the entire amount
of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
Risks Associated with Financial Futures Contracts and Options on Financial
Futures Contracts. When the Fund uses futures and options on futures as
hedging devices, there is a risk that the prices of the securities subject
to the futures contracts may not correlate with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and
any related options to react differently than the portfolio securities to
market changes. In addition, the Fund's adviser could be incorrect in its
expectations about the direction or extent of market factors such as
interest or currency exchange rate movements. In these events, the Fund may
lose money on the futures contract or option. Also, it is not certain that
a secondary market for positions in futures contracts or for options will
exist at all times. Although the Fund's adviser will consider liquidity
before entering into such transactions, there is no assurance that a liquid
secondary market on an exchange or otherwise will exist for any particular
futures contract or option at any particular time. The Fund's ability to
establish and close out futures and options positions depends on this
secondary market.
Risks Associated with Non-U.S. Securities. Investing in non-U.S. securities
carries substantial risks in addition to those associated with domestic
investments. In an attempt to reduce some of these risks, the Fund
diversifies its investments broadly among foreign countries, including both
developed and developing countries. At least three different countries will
always be represented.
The Fund occasionally takes advantage of the unusual opportunities for
higher returns available from investing in developing countries. These
investments, however, carry considerably more volatility and risk because
they are associated with less mature economies and less stable political
systems.
Currency Risks. Because the Fund may purchase securities
denominated in currencies other than the U.S. dollar, changes in
foreign currency exchange rates could affect the Fund's net asset
value; the value of interest earned; gains and losses realized on
the sale of securities; and net investment income and capital
gain, if any, to be distributed to shareholders by the Fund. If
the value of a foreign currency rises against the U.S. dollar, the
value of the Fund assets denominated in that currency will
increase; correspondingly, if the value of a foreign currency
declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign currencies
are a function of such factors as supply and demand in the
currency exchange markets, international balances of payments,
governmental interpretation, speculation and other economic and
political conditions. Although the Fund values its assets daily in
U.S. dollars, the Fund will not convert its holdings of foreign
currencies to U.S. dollars daily. When the Fund converts its
holdings to another currency, it may incur conversion costs.
Foreign exchange dealers may realize a profit on the difference
between the price at which they buy and sell currencies.
Foreign Companies. Other differences between investing in non-U.S.
and U.S. securities include:
o less publicly available information about foreign companies;
o the lack of uniform financial accounting standards applicable to
foreign companies;
o less readily available market quotations on foreign companies;
o differences in government regulation and supervision of foreign
stock exchanges, brokers, listed companies, and banks;
o differences in legal systems which may affect the ability to
enforce contractual obligations or obtain court judgements;
o generally lower foreign stock market volume;
o the likelihood that foreign securities may be less liquid or
more volatile;
o foreign brokerage commissions may be higher;
o unreliable mail service between countries; and
o political or financial changes which adversely affect
investments in some countries.
U.S. Government Policies. In the past, U.S. government policies
have discouraged or restricted certain investments abroad by
investors such as the Fund. Investors are advised that when such
policies are instituted, the Fund will abide by them.
Short Sales. The Fund intends to sell securities short from time
to time, subject to certain restrictions. A short sale occurs when
a borrowed security is sold in anticipation of a decline in its
price. If the decline occurs, shares equal in number to those sold
short can be purchased at the lower price. If the price increases,
the higher price must be paid. The purchased shares are then
returned to the original lender. Risk arises because no loss limit
can be placed on the transaction. When the Fund enters into a
short sale, assets equal to the market price of the securities
sold short or any lesser price at which the Fund can obtain such
securities, are segregated on the Fund's records and maintained
until the Fund meets its obligations under the short sale.
Developing/Emerging Markets. The economics of individual emerging
countries may differ favorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation,
currency depreciation, capital reinvestment, resource self-
sufficiency and balance of payments position. Further, the
economics of developing countries generally are heavily dependent
on international trade and, accordingly, have been, and may
continue to be, adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and
other protectionist measures imposed or negotiated by the
countries with which they trade. These economies also have been,
and may continue to be, adversely affected by economic conditions
in the countries with which they trade.
Prior governmental approval for foreign investments may be
required under certain circumstances in some emerging countries,
and the extent of foreign investment in certain debt securities
and domestic companies may be subject to limitation in other
emerging countries. Foreign ownership limitations also may be
imposed by the charters of individual companies in emerging
countries to prevent, among other concerns, violation of foreign
investment limitations.
Repatriation of investment income, capital and the proceeds of
sales by foreign investors may require governmental registration
and/or approval in some emerging countries. The Fund could be
adversely affected by delays in, or a refusal to grant, any
required governmental registration or approval for such
repatriation. Any investment subject to such repatriation controls
will be considered illiquid if it appears reasonably likely that
this process will take more than seven days.
With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political
changes, governmental regulation, social instability or diplomatic
developments (including war) which could affect adversely the
economies of such countries or the value of the Fund's investments
in those countries. In addition, it may be difficult to obtain and
enforce a judgment in a court outside of the U.S.
Investment Limitations
The Fund will not:
o with respect to 75% of the value of its total assets, invest
more than 5% of the value of its total assets in the securities
(other than securities issued or guaranteed by the government of
the U.S. or its agencies or instrumentalities) of any one
issuer, or acquire more than 10% of the outstanding voting
securities of any one issuer;
o sell securities short except under strict limitations;
o borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value
of its total assets and pledge its assets to secure such
borrowings; or
o permit margin deposits for financial futures contracts held by
the Fund, plus premiums paid by it for open options on financial
futures contracts, to exceed 5% of the fair market value of the
Fund's total assets, after taking into account the unrealized
profits and losses on the contracts.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these limitations becomes effective.
The Fund will not:
o invest more than 5% of its assets in warrants;
o own securities of other investment companies, except under
certain circumstances and subject to certain limitations not
exceeding 10% of its total assets (the Fund will indirectly bear
its proportionate share of any fees and expenses paid by other
investment companies, in addition to the fees and expenses
payable directly by the Fund);
o invest more than 5% of its total assets in securities of issuers
that have records of less than three years of continuous
operations;
o invest more than 15% of the value of its net assets in illiquid
securities, including securities not determined by the Trustees
to be liquid, repurchase agreements with maturities longer than
seven days after notice, and certain over-the-counter options;
or
o purchase put options on securities unless the securities or an
offsetting call option is held in the Fund's portfolio.
Variable Asset Regulations. The Fund is also subject to variable contract
asset regulations prescribed by the U.S. Treasury Department under Section
817(h) of the Internal Revenue Code. After a one year start-up period, the
regulations generally require that, as of the end of each calendar quarter
or within 30 days thereafter, no more than 55% of the total assets of the
Fund may be represented by any one investment, no more than 70% of the
total assets of the Fund may be represented by any two investments, no more
than 80% of the total assets of the Fund may be represented by any three
investments, and no more than 90% of the total assets of the Fund may be
represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each treated
as a single investment. In the case of government securities, each
government agency or instrumentality shall be treated as a separate issuer.
If the Fund fails to achieve the diversification required by the
regulations, unless relief is obtained from the Internal Revenue Service,
the contracts invested in the Fund will not be treated as annuity,
endowment, or life insurance contracts.
The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.
State Insurance Regulations. The Fund is intended to be a funding vehicle
for variable annuity contracts and variable life insurance policies offered
by certain insurance companies. The contracts will seek to be offered in as
many jurisdictions as possible. Certain states have regulations concerning,
among other things, the concentration of investments, sales and purchases
of futures contracts, and short sales of securities. If applicable, the
Fund may be limited in its ability to engage in such investments and to
manage its portfolio with desired flexibility. The Fund will operate in
material compliance with the applicable insurance laws and regulations of
each jurisdiction in which contracts will be offered by the insurance
companies which invest in the Fund.
Net Asset Value
The net asset value per share of the Fund fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets of
the Fund, less liabilities, by the number of shares outstanding.
Investing in the Fund
Purchases and Redemptions
Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable life insurance policies and variable
annuity contracts. The use of Fund shares as investments for both variable
life insurance policies and variable annuity contracts is referred to as
"mixed funding." The use of Fund shares as investments by separate accounts
of unaffiliated life insurance companies is referred to as "shared
funding."
The Fund intends to engage in mixed funding and shared funding in the
future. Although the Fund does not currently foresee any disadvantage to
contract owners due to differences in redemption rates, tax treatment, or
other considerations, resulting from mixed funding or shared funding, the
Trustees of the Fund will closely monitor the operation of mixed funding
and shared funding and will consider appropriate action to avoid material
conflicts and take appropriate action in response to any material conflicts
which occur. Such action could result in one or more participating
insurance companies withdrawing their investment in the Fund.
Shares of the Fund are purchased or redeemed on behalf of participating
insurance companies at the next computed net asset value after an order is
received on days on which the New York Stock Exchange is open.
What Shares Cost
Shares of the Fund are sold and redeemed at the net asset value calculated
at 4:00 p.m. (Eastern time), Monday through Friday. The Fund reserves the
right to reject any purchase request.
Net asset value of shares of the Fund will not be calculated on: (i) days
on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected;
(ii) days on which no shares are tendered for redemption and no orders to
purchase shares are received; and (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.
Purchase orders from separate accounts investing in the Fund which are
received by the insurance companies by 4:00 p.m. (Eastern time) will be
computed at the net asset value of the Fund determined on that day, as long
as such purchase orders are received by the Fund in proper form and in
accordance with applicable procedures by 8:00 a.m. (Eastern time) on the
next business day and as long as federal funds in the amount of such orders
are received by the Fund on the next business day. It is the responsibility
of each insurance company which invests in the Fund to properly transmit
purchase orders and federal funds in accordance with the procedures
described above.
Dividends
Dividends on shares of the Fund are declared and paid annually. Shares of
the Fund will begin earning dividends if owned on the applicable record
date. Dividends of the Fund are automatically reinvested in additional
shares of the Fund on payment dates at the ex-dividend date net asset
value.
Fund Information
Management of the Fund
Board of Trustees. The Trust is managed by a Board of Trustees. The
Trustees are responsible for managing the business affairs of the Trust and
for exercising all of the Trust's powers except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
Investment Adviser. Pursuant to an investment advisory contract with
the Trust, investment decisions for the Fund are made by Federated
Advisers, the Fund's investment adviser, subject to direction by the
Trustees. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale
of portfolio instruments, for which it receives an annual fee from
the Fund.
Advisory Fees. The Fund's adviser receives an annual investment
advisory fee equal to 1.00% of the Fund's average daily net
assets. The adviser may voluntarily choose to waive a portion of
its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of
expenses at any time at its sole discretion.
Adviser's Background. Federated Advisers, a Delaware business
trust organized on April 11, 1989, is a registered investment
adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees
of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Advisers and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies
and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. Total
assets under management or administration by these and other
subsidiaries of Federated Investors is approximately $70 billion.
Federated Investors, which was founded in 1956 as Federated
Investors, Inc., develops and manages mutual funds primarily for
the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse
investment philosophy serve approximately 3,500 client
institutions nationwide. Through these same client institutions,
individual shareholders also have access to this same level of
investment expertise.
Randall S. Bauer has been the Fund's portfolio manager since the
Fund commenced operations. Mr. Bauer joined Federated Investors in
1989 as an Assistant Vice President of the Fund's investment
adviser. Mr. Bauer was an Assistant Vice President of the
International Banking Division at Pittsburgh National Bank from
1982 until 1989. Mr. Bauer is a Chartered Financial Analyst and
received his M.B.A. in Finance from Pennsylvania State University.
Distribution of Fund Shares
Federated Securities Corp. is the principal distributor for shares of the
Fund. Federated Securities Corp. is located at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. It is a Pennsylvania corporation
organized on November 14, 1969, and is the principal distributor for a
number of investment companies. Federated Securities Corp. is a subsidiary
of Federated Investors.
Administration of the Fund
Administrative Services. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Administrative Services provides these at an
annual rate which relates to the average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors ("Federated Funds") as
specified below:
Average Aggregate Daily
Administrative Fee Net Assets of the Federated
Funds
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on net assets in excess of $750 million
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion
of its fee.
Custodian. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the
Fund.
Transfer Agent and Dividend Disbursing Agent. Federated Services Company,
Pittsburgh, Pennsylvania, a subsidiary of Federated Investors, is the
transfer agent for shares of the Fund and dividend disbursing agent for the
Fund.
Independent Auditors. The independent auditors for the Fund are Deloitte &
Touche LLP, Boston, Massachusetts.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
utilize those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. In selecting among firms believed to meet these criteria, the
adviser may give consideration to those firms which have sold or are
selling shares of the other funds distributed by Federated Securities Corp.
The adviser makes decisions on portfolio transactions and select brokers
and dealers subject to review by the Trustees.
Expenses of the Fund
The Fund pays all of its own expenses and its allocable share of Trust
expenses. These expenses may include, but are not limited to, the cost of:
organizing the Trust and continuing its existence; Trustees' fees;
investment advisory and administrative services; printing prospectuses and
other documents for contract holders; registering the Trust, the Fund, and
shares of the Fund; taxes and commissions; issuing, purchasing,
repurchasing, and redeeming shares; custodians, transfer agents, dividend
disbursing agents, contract holders servicing agents, and registrars;
printing, mailing, auditing, accounting, and legal expenses; reports to
contract holders and governmental agencies; meetings of Trustees and
contract holders and proxy solicitations therefor; insurance; association
membership dues; and such nonrecurring and extraordinary items as may
arise. However, the investment adviser may voluntarily reimburse some
expenses.
Shareholder Information
Voting Rights
The insurance company separate accounts, as shareholders of the Fund, will
vote the Fund shares held in their separate accounts at meetings of the
shareholders. Voting will be in accordance with instructions received from
contract owners of the separate accounts, as more fully outlined in the
prospectus of the separate account.
Each share of the Fund gives the shareholder one vote in Trustee elections
and other matters submitted to shareholders for vote. All shares of each
portfolio in the Trust have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Fund's operation and for the election of
Trustees in certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the
outstanding shares of all series of the Trust.
Tax Information
Federal Tax
The Fund will pay no federal income tax because the Fund expects to meet
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies.
The Fund will be treated as a single, separate entity for federal income
tax purposes so that income (including capital gains) and losses realized
by the Trust's other portfolios will not be combined for tax purposes with
those realized by the Fund.
The Fund intends to comply with the variable asset diversification
regulations which are described earlier in this prospectus. If the Fund
fails to comply with these regulations, contracts invested in the Fund
shall not be treated as annuity, endowment, or life insurance contracts
under the Internal Revenue Code.
Contract owners should review the applicable contract prospectus for
information concerning the federal income tax treatment of their contracts
and distributions from the Fund to the separate accounts.
State and Local Taxes
Contract owners are urged to consult their own tax advisers regarding the
status of their contracts under state and local tax laws.
Performance Information
From time to time the Fund advertises total return and yield. Total return
represents the change, over a specified period of time, in the value of an
investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Fund is
calculated by dividing the net investment income per share (as defined by
the Securities and Exchange Commission) earned by the Fund over a thirty-
day period by the offering price per share of the Fund on the last day of
the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by the Fund
and, therefore, may not correlate to the dividends or other distributions
paid to shareholders. Performance information will not reflect the charges
and expenses of a variable annuity or variable life insurance contract.
Because shares of the Fund can only be purchased by a separate account of
an insurance company offering such a contract, you should review the
performance figures of the contract in which you are invested, which
performance figures will accompany any advertisement of the Fund's
performance.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
Addresses
Insurance Management Series
International Equity Fund Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-
8604
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Independent Auditors
Deloitte & Touche LLP 125 Summer Street
Boston, Massachusetts 02110-
1617
International Equity Fund
Prospectus
A Diversified Portfolio of Insurance Management
Series, An Open-End, Management Investment
Company
April__, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
CUSIP #s
#######X (date)
International Equity Fund
A Portfolio of Insurance Management Series
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus for International Equity Fund (the "Fund"), a portfolio of
Insurance Management Series (the "Trust"), dated April __, 1995. This
Statement is not a prospectus itself. To receive a copy of the
prospectus, write or call the Fund.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated April __, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
Table of Contents
Investment Objective and Policies 1
Types of Investements 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Lending of Portfolio Securities 1
Restricted and Illiquid Securities 1
Futures and Options Transactions 2
Futures Contracts 2
"Margin" in Futures Transactions 2
Put Options on Financial and Stock
Index Futures Contracts 3
Call Options of Financial and Stock
Index Futures Contracts 3
Purchasing Put Options on Portfolio
Securities and Stock Indices 4
Writing Covered Call Options on
Portfolio Securities and Stock
Indices 4
Foreign Currency Hedging Transactions 4
Risks 5
Warrants 5
Portfolio Turnover 5
Investment Limitations 6
Diversification of Investments 6
Acquiring Securities 6
Concentration of Investments 6
Borrowing 6
Pledging Assets 6
Buying on Margin 6
Issuing Senior Securities 6
Underwriting 6
Investing in Real Estate 6
Investing in Commodities 6
Lending Cash or Securities 7
Selling Short 7
Purchasing Securities to Exercise
Control 7
Investing in Warrants 7
Investing in Securities of Other
Investment Companies 7
Investing in New Issuers 7
Investing in Minerals 7
Investing in Illiquid Securities 7
Dealing in Puts and Calls 8
Investing in Issuers Whoe Securities
are Owned by Officers and Trustees
of the Trust 8
Arbitrage Transactions 8
Insurance Management Series Management 8
The Funds 11
Fund Ownership 12
Investment Advisory Services 12
Adviser to the Fund 12
Advisory Fees 12
State Expense Limitations 12
Other Related Services 12
Administrative Services 12
Transfer Agent and Dividend Disbursing
Agent 13
Brokerage Transactions 13
Purchasing Shares 13
Determining Net Asset Value 13
Determining Market Value of Securities 13
Trading in Foreign Securities 14
Tax Status 14
The Fund's Tax Status 14
Foreign Taxes 14
Shareholders' Tax Status 14
Total Return 14
Yield 14
Performance Comparisons 15
Appendix 16
Investment Objective and Policies
The Fund's investment objective is to obtain a total return on its assets.
Types of Investments
The Fund invests in a diversified portfolio of equity securities issued by
non-U.S. issuers. The Fund will invest at least 65%, and under normal
market conditions, substantially all of its total assets, in equity
securities of issuers located in at least three different countries outside
of the United States. The Fund may also purchase sponsored or unsponsored
American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs")
and European Depositary Receipts ("EDRs"); purchase investment grade
corporate and government fixed income securities of issuers outside the
U.S.; enter into forward commitments, repurchase agreements, and foreign
currency transactions; and maintain reserves in foreign or U.S. money
market instruments.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are marked
to market daily and maintained until the transaction has been settled. The
Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
Repurchase Agreements
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.
In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject
to repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser or sub-adviser to be creditworthy, pursuant to
guidelines established by the Trustees.
Lending of Portfolio Securities
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
Restricted and Illiquid Securities
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission Staff position is set forth in the adopting release for Rule
144A under the Securities Act of 1933 (the "Rule"). The Rule is a non-
exclusive, safe-harbor for certain secondary market transactions involving
securities subject to restrictions on resale under federal securities laws.
The Rule provides an exemption from registration for resales of otherwise
restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for
securities eligible for resale under the Rule . The Fund believes that the
staff of the Securities and Exchange Commission has left the question of
determining the liquidity of all restricted securities (eligible for resale
under the Rule) to the Trustees. The Trustees consider the following
criteria in determining the liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
When the Fund invests in certain restricted securities determined by the
Trustees to be liquid, such investments could have the effect of increasing
the level of Fund illiquidity to the extent that the buyers in the
secondary market for such securities (whether in resales under the Rule or
other exempt transactions) become, for a time, uninterested in purchasing
these securities.
Futures and Options Transactions
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio by
buying and selling futures contracts and options on futures contracts, and
buying put and call options on portfolio securities and securities indices.
The Fund may also write covered put and call options on portfolio
securities to attempt to increase its current income or to hedge a portion
of its portfolio investments. The Fund will maintain its positions in
securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An option
position on a futures contract may be closed out over-the-counter or on a
nationally recognized exchange which provides a secondary market for
options of the same series. The Fund will not engage in futures
transactions for speculative purposes.
Futures Contracts
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities
due to anticipated changes in interest rates and market conditions
without necessarily buying or selling the securities. Although some
financial futures contracts call for making or taking delivery of the
underlying securities, in most cases these obligations are closed out
before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting
futures contract. Other financial futures contracts by their terms
call for cash settlements.
The Fund also may purchase and sell stock index futures contracts
with respect to any stock index traded on a recognized stock exchange
or board of trade to hedge against changes in prices. Stock index
futures contracts are based on indices that reflect the market value
of common stock of the firms included in the indices. An index
futures contract is an agreement pursuant to which two parties agree
to take or make delivery of an amount of cash equal to the difference
between the value of the index at the close of the last trading day
of the contract and the price at which the index contract was
originally written. No physical delivery of the underlying securities
in the index is made. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at
the expiration of the contract.
A futures contract is a firm commitment by two parties: the seller
who agrees to make delivery of the specific type of security called
for in the contract ("going short") and the buyer who agrees to take
delivery of the security ("going long") at a certain time in the
future. For example, in the fixed income securities market, prices
move inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to
hedge its holdings of fixed income securities against a rise in
market interest rates, the Fund could enter into contracts to deliver
securities at a predetermined price (i.e., "go short") to protect
itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period.
The Fund would "go long" (agree to purchase securities in the future
at a predetermined price) to hedge against a decline in market
interest rates.
"Margin" in Futures Transactions
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract.
Rather, the Fund is required to deposit an amount of "initial margin"
in cash, U.S. government securities or highly-liquid debt securities
with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of
margin in securities transactions in that initial margin in futures
transactions does not involve the borrowing of funds by the Fund to
finance the transactions. Initial margin is in the nature of a
performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called "variation margin," equal to the
daily change in value of the futures contract. This process is known
as "marking to market." Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will mark to market its open futures positions. The Fund is also
required to deposit and maintain margin when it writes call options
on futures contracts.
To the extent required to comply with Commodity Futures Trading
Commission ("CFTC") Regulation 4.5 and thereby avoid status as a
"commodity pool operator," the Fund will not enter into a futures
contract, or purchase an option thereon, if immediately thereafter
the initial margin deposits for futures contracts held by it, plus
premiums paid by it for open options on futures contracts, would
exceed 5% of the market value of the Fund's total assets, after
taking into account the unrealized profits and losses on those
contracts it has entered into; and, provided further, that in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%. Second, the
Fund will not enter into these contracts for speculative purposes;
rather, these transactions are entered into only for bona fide
hedging purposes, or other permissible purposes pursuant to
regulations promulgated by the CFTC. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor
serve as a vehicle for trading in the commodities futures or
commodity options markets. Finally, because the Fund will submit to
the CFTC special calls for information, the Fund will not register as
a commodities pool operator.
Put Options on Financial and Stock Index Futures Contracts
The Fund may purchase listed put options on financial and stock index
futures contracts to protect portfolio securities against decreases
in value resulting from market factors, such as an anticipated
increase in interest rates or stock prices. Unlike entering directly
into a futures contract, which requires the purchaser to buy a
financial instrument on a set date at a specified price, the purchase
of a put option on a futures contracts entitles (but does not
obligate) its purchaser to decide on or before a future date whether
to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value
during the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Fund will normally close out its option by selling an
identical option. If the hedge is successful, the proceeds received
by the Fund upon the sale of the second option will be large enough
to offset both the premium paid by the Fund for the original option
plus the decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the strike
price. If the Fund neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
When the Fund sells a put on a futures contract, it receives a cash
premium in exchange for granting to the purchaser of the put the
right to receive from the Fund, at the strike price, a short position
in such futures contract, even though the strike price upon exercise
of the option is greater than the value of the futures position
received by such holder. If the value of the underlying futures
position is not such that exercise of the option would be profitable
to the option holder, the option will generally expire without being
exercised. It will generally be the policy of the Fund, in order to
avoid the exercise of an option sold by it, to cancel its obligation
under the option by entering into a closing purchase transaction, if
available, unless it is determined to be in the Fund's interest to
deliver the underlying futures position. A closing purchase
transaction consists of the purchase by the Fund of an option having
the same term as the option sold by the Fund, and has the effect of
canceling the Fund's position as a seller. The premium which the Fund
will pay in executing a closing purchase transaction may be higher
than the premium received when the option was sold, depending in
large part upon the relative price of the underlying futures position
at the time of each transaction.
Call Options on Financial and Stock Index Futures Contracts
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates
rise, causing the prices of futures to go down, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase.
In other words, as the underlying futures price falls below the
strike price, the buyer of the option has no reason to exercise the
call, so that the Fund keeps the premium received for the option.
This premium can substantially offset the drop in value of the Fund's
portfolio securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but
not the obligation, to enter into the underlying futures contract at
a strike price determined at the time the call was purchased,
regardless of the comparative market value of such futures position
at the time the option is exercised. The holder of a call option has
the right to receive a long (or buyer's) position in the underlying
futures contract.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its securities portfolio plus or minus
the unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the
futures contracts. If this limitation is exceeded at any time, the
Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
Purchasing Put Options on Portfolio Securities and Stock Indices
The Fund may purchase put options on portfolio securities and stock
indices to protect against price movements in the Fund's portfolio
securities. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option.
Writing Covered Call Options on Portfolio Securities and Stock
Indices
The Fund may also write covered call options to generate income and
thereby protect against price movements in the Fund's portfolio
securities. As writer of a call option, the Fund has the obligation
upon exercise of the option during the option period to deliver the
underlying security upon payment of the exercise price or, in the
case of a securities index, a cash payment equal to the difference
between the closing price of the index and the exercise price of the
option. The Fund may only sell call options either on securities held
in its portfolio or on securities which it has the right to obtain
without payment of further consideration (or has segregated cash in
the amount of any additional consideration).
Foreign Currency Hedging Transactions
In order to hedge against foreign currency exchange rate risks, the Fund
may enter into forward foreign currency exchange contracts and foreign
currency futures contracts, as well as purchase put or call options on
foreign currencies, as described below. The Fund may also conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from
adverse changes in the relationship between the U.S. dollar and foreign
currencies. A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers. The Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated
in a foreign currency in order to "lock in" the U.S. dollar price of the
security. In addition, for example, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes that the
U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward contract to buy that foreign currency for a fixed
dollar amount. This second investment practice is generally refered to as
"cross-hedging." Because in connection with the Fund's forward foreign
currency transactions an amount of the Fund's assets equal to the amount of
the purchase will be held aside or segregated to be used to pay for the
commitment, the Fund will always have cash, cash equivalents or high
quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk. The segregated account will
be marked to market on a daily basis. While these contracts are not
presently regulated by the CFTC, the CFTC may in the future assert
authority to regulate forward contracts. In such event, the Fund's ability
to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive
change in the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in poorer overall
performance for the Fund than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the dollar cost of
foreign securities to be acquired. As is the case with other kinds of
options, however, the writing of an option on foreign currency will
constitute only a partial hedge, up to the amount of the premium received,
and the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of
an option on foreign currency may constitute an effective hedge against
fluctuation in exchange rates, although, in the event of rate movements
adverse to the Fund's position, the Fund may forfeit the entire amount of
the premium plus related transaction costs. Options on foreign currencies
to be written or purchased by the Fund will be traded on U.S. and foreign
exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or sale
for future delivery of foreign currencies ("foreign currency futures").
This investment technique will be used only to hedge against anticipated
future changes in exchange rates which otherwise might adversely affect the
value of the Fund's portfolio securities or adversely affect the prices of
securities that the Fund intends to purchase at a later date. The
successful use of foreign currency futures will usually depend on the
ability of the adviser to forecast currency exchange rate movements
correctly. Should exchange rates move in an unexpected manner, the Fund may
not achieve the anticipated benefits of foreign currency futures or may
realize losses.
Risks
When the Fund uses futures and options on futures as hedging devices, there
is a risk that the prices of the securities or foreign currency subject to
the futures contracts may not correlate perfectly with the prices of the
securities or currency in the Fund's portfolio. This may cause the futures
contract and any related options to react differently to market changes
than the portfolio securities or foreign currency. In addition, the adviser
could be incorrect in its expectations about the direction or extent of
market factors such as stock price movements or foreign currency exchange
rate fluctuations. In these events, the Fund may lose money on the futures
contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract or option at any particular time.
The Fund's ability to establish and close out futures and options positions
depends on this secondary market. The inability to close out these
positions could have an adverse effect on the Fund's ability to effectively
hedge its portfolio.
To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the value of the Fund's total assets
after taking into account the unrealized profits and losses on those
contracts it has entered into; and, provided further, that in the case of
an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in computing such 5%. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related
margin deposits), will be deposited in a segregated account with the Fund's
custodian (or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures contract is
unleveraged. When the Fund sells futures contracts, it will either own or
have the right to receive the underlying future or security, or will make
deposits to collateralize the position as discussed above.
Warrants
The Fund may invest in warrants. Warrants are basically options to purchase
common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific period
of time. Warrants may have a life ranging from less than a year to twenty
years or may be perpetual. However, most warrants have expiration dates
after which they are worthless. In addition, if the market price of the
common stock does not exceed the warrant's exercise price during the life
of the warrant, the warrant will expire as worthless. Warrants have no
voting rights, pay no dividends, and have no rights with respect to the
assets of the corporation issuing them. The percentage increase or decrease
in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned common
stock.
Portfolio Turnover
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt
to achieve the Fund's investment objective. Portfolio securities will be
sold when the adviser or sub-adviser believes it is appropriate, regardless
of how long those securities have been held. The adviser and anticipates
that the Fund's portfolio turnover rate will not exceed 200%.
Investment Limitations
Diversification of Investments
With respect to 75% of the value of its total assets, the Fund will
not purchase securities of any one issuer (other than securities
issued or guaranteed by the government of the United States or its
agencies or instrumentalities) if as a result more than 5% of the
value of its total assets would be invested in the securities of that
issuer, or if it would own more than 10% of the outstanding voting
securities of any one issuer. To comply with certain state
restrictions, the Fund will not purchase securities of any issuer if
as a result more than 5% of its total assets would be invested in
securities of that issuer. (If state restrictions change, this latter
restriction may be revised without shareholder approval or
notification.)
Acquiring Securities
The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer.
Concentration of Investments
The Fund will not invest 25% or more of its total assets in
securities of issuers having their principal business activities in
the same industry.
Borrowing
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts up to
one-third of the value of its total assets, including the amount
borrowed. This borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Fund
to meet redemption requests when the liquidation of portfolio
securities would be inconvenient or disadvantageous. The Fund will
not purchase securities while outstanding borrowings exceed 5% of the
value of its total assets.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate assets, except
when necessary for permissible borrowings. Neither the deposit of
underlying securities or other assets in escrow in connection with
the writing of put or call options or the purchase of securities on a
when-issued basis, nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a
pledge.
Buying on Margin
The Fund will not purchase any securities on margin, but may obtain
such short-term credits as are necessary for clearance of
transactions, except that the Fund may make margin payments in
connection with its use of financial futures contracts or related
options and transactions.
Issuing Senior Securities
The Fund will not issue senior securities except in connection with
borrowing money directly or through reverse repurchase agreements or
as required by forward commitments to purchase securities or
currencies.
Underwriting
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
Investing in Real Estate
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or
issued by companies, including real estate investment trusts, which
invest in real estate or interests therein.
Investing in Commodities
The Fund will not purchase or sell commodities or commodity
contracts, except that the Fund may purchase and sell financial
futures contracts and options on financial futures contracts,
provided that the sum of its initial margin deposits for financial
futures contracts held by the Fund, plus premiums paid by it for open
options on financial futures contracts, may not exceed 5% of the fair
market value of the Fund's total assets, after taking into account
the unrealized profits and losses on those contracts. Further, the
Fund may engage in foreign currency transactions and purchase or sell
forward contracts with respect to foreign currencies and related
options.
Lending Cash or Securities
The Fund will not lend any assets except portfolio securities. This
shall not prevent the purchase or holding of bonds, debentures,
notes, certificates of indebtedness, or other debt securities of an
issuer, repurchase agreements or other transactions which are
permitted by the Fund's investment objective and policies or its
Declaration of Trust.
Selling Short
The Fund will not sell securities short unless (1) it owns, or has a
right to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of the
market value of the securities sold short or the amount required to
acquire such securities. The segregated amount will not exceed 10% of
the Fund's net assets. While in a short position, the Fund will
retain the securities, rights, or segregated assets.
To comply with registration requirements in certain states, the Fund
(1) will limit short sales of securities of any class of any one
issuer to the lesser of 2% of the Fund's net assets or 2% of the
securities of that class, (2) will make short sales only on
securities listed on recognized stock exchanges. The latter
restrictions, however, do not apply to short sales of securities the
Fund holds or has a right to acquire without the payment of any
further consideration, and (3) will not invest more than 5% of its
total assets in restricted securities. (If state requirements change,
these restrictions may be revised without shareholder notification.)
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by
the Trustees without shareholder approval. Except as noted, shareholders
will be notified before any material change in these limitations becomes
effective.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
Investing in Warrants
The Fund will not invest more than 5% of its assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on recognized stock exchanges
to 2% of its total assets. (If state restrictions change, this latter
restriction may be revised without notice to shareholders.) For
purposes of this investment restriction, warrants acquired by the
Fund in units or attached to securities may be deemed to be without
value.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment companies,
except by purchase in the open market involving only customary
brokerage commissions and as a result of which not more than 5% of
the value of its total assets would be invested in such securities,
or except as part of a merger, consolidation or other acquistion.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers which have records of less than three
years of continuous operations, including the operation of any
predecessor.
Investing in Minerals
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs, other than debentures or equity
stock interests.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including securities not determined by the
Trustees to be liquid, repurchase agreements with maturities longer
than seven days after notice, and certain over-the-counter options.
Dealing in Puts and Calls
The Fund will not write call options or put options on securities,
except that the Fund may write covered call options and secured put
options on all or any portion of its portfolio, provided the
securities are held in the Fund's portfolio or the Fund is entitled
to them in deliverable form without further payment or the Fund has
segregated cash in the amount of any further payments. The Fund will
not purchase put options on securities unless the securities or an
offsetting call option is held in the Fund's portfolio. The Fund may
also purchase, hold or sell (i) contracts for future delivery of
securities or currencies and (ii) warrants granted by the issuer of
the underlying securities.
Investing in Issuers Whose Securities are Owned by Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer if
the officers and Trustees of the Trust or the Fund's investment
adviser or sub-adviser owning individually more than 1/2 of 1% of the
issuer's securities together own more than 5% of the issuer's
securities.
Arbitrage Transactions
To comply with certain state restrictions, the Fund will not enter
into transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without
shareholder notification.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund has no present intent to borrow money or pledge securities in
excess of 5% of the value of its total assets in the coming fiscal year.
Insurance Management Series Management
Officers and Trustees are listed with their addresses, present positions
with Insurance Management Series, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and
Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, President and Trustee of the Trust.
Thomas G. Bigley
28th Floor
One Oxford Center
Pittsburgh, PA 15219
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board,
Children's Hospital of Pittsburgh; Director, Trustee or Managing
General Partner of the Funds; formerly, Senior Partner, Ernst &
Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Trustee of the Trust.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Trustee
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Two Gateway Center
Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba Meyer & Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center
Suite 674
Pittsburgh, PA
Trustee
Attorney-at-law; Partner, Henny, Koehuba Meyer & Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.; Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
The Funds
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Arrow Funds; Automated Cash
Management Trust; Automated Government Money Trust; California Municipal
Cash Trust; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal Trust; Federated Short-
Intermediate Government Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust; Federated U.S. Government
Bond Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income Fund,
Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.; Liberty
Term Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liberty
Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; The Medalist
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash
Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage
Funds; RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal Trust;
Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Trademark Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; and World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April __, 1995 there were no shareholders of record who owned 5% or
more of the outstanding shares of the Fund.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Federated Advisers (the "Adviser"). It is
a subsidiary of Federated Investors. All the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
his wife, and his son, J. Christopher Donahue.
The Adviser shall not be liable to the Fund, the Trust, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding,
or sale of any security or for anything done or omitted by it, except acts
or omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
Advisory Fees
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares
are registered for sale in those states. If the Fund's normal
operating expenses (including the investment advisory fees, but not
including brokerage commissions, interest, taxes, and extraordinary
expenses) exceed 2-1/2% per year of the first $30 million of average
net assets, 2% per year of the next $70 million of average net
assets, and 1-1/2% per year of the remaining average net assets, the
Adviser and sub-adviser will reimburse the Fund for its expenses over
the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fees paid will be reduced by the
amounts of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amounts to be reimbursed by the
Adviser will be limited, in any single fiscal year, by the amounts of
the investment advisory fees.
This arrangement is not part of the advisory contract agreement and
may be amended or rescinded in the future.
Other Related Services
Affiliates of the Adviser may, from time to time, provide certain
electronic equipment and software to institutional customers in order to
facilitate the purchase of shares of funds offered by Federated Securities
Corp.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund and receives an
administrative fee as described in the prospectus. Dr. Henry J. Gailliot,
an officer of Federated Advisers, the Adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as a director
of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Administrative Services.
Transfer Agent and Dividend Disbursing Agent
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee paid to the transfer agent is based on the
size, type and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Fund's accounting records.
The fee paid for this service is based on the level of the Fund's average
net assets for the period plus out-of-pocket expenses.
Brokerage Transactions
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. The Adviser determines in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising certain other accounts. To
the extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
The Adviser may engage in other non-U.S. transactions that may have adverse
effects on the market for securities in the Fund's portfolio. The Adviser
is not obligated to obtain any material non-public ("inside") information
about any securities issuer, or to base purchase or sale recommendations on
such information.
Purchasing Shares
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value without a sales charge on days the New York
Stock Exchange is open for business. The procedure for purchasing shares is
explained in the prospectus under "Purchases and Redemptions" and "What
Shares Cost."
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
Determining Market Value of Securities
Market or fair values of the Fund's portfolio securities are determined as
follows:
o according to the last reported sale price on a recognized securities
exchange, if available. (If a security is traded on more than one
exchange, the price on the primary market for that security, as
determined by the Adviser is used.);
o according to the last reported bid price, if no sale on the recognized
exchange is reported or if the security is traded over-the-counter;
o at fair value as determined in good faith by the Trustees; or
o for short-term obligations with remaining maturities of less than 60
days at the time of purchase, at amortized cost, which approximates
value.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional
trading in similar groups of securities; yield; quality; coupon rate;
maturity; type of issue; trading characteristics; and other market data.
Trading in Foreign Securities
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value,
the Fund values foreign securities at the latest closing price on the
exchange on which they are traded immediately prior to the closing of the
New York Stock Exchange. Certain foreign currency exchange rates may also
be determined at the latest rate prior to the closing of the New York Stock
Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at current rates. Occasionally, events that affect these
values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If such events
materially affect the value of portfolio securities, these securities may
be valued at their fair value as determined in good faith by the Trustees,
although the actual calculation may be done by others.
Tax Status
The Fund's Tax Status
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the
Fund must, among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
However, the Fund may invest in the stock of certain foreign corporations
which would constitute a Passive Foreign Investment Company (PFIC). Federal
income taxes may be imposed on the Fund upon disposition of PFIC
investments.
Foreign Taxes
Investment income on certain foreign securities in which the Fund may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount
of foreign taxes to which the Fund would be subject.
Shareholders' Tax Status
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and in this Statement of
Additional Information. If the Fund fails to comply with these regulations,
contracts invested in the Fund shall not be treated as annuity, endowment
or life insurance contracts under the Internal Revenue Code, as amended.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
Total Return
The average annual total return for shares of the Fund is the average
compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of shares
owned at the end of the period by the offering price per share at the end
of the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, less any applicable sales load, adjusted over the period by any
additional shares, assuming the annual reinvestment of all dividends and
distributions.
Yield
The Fund's yield is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period
by the maximum offering price per share of the Fund on the last day of the
period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by the Fund because of certain adjustments required by the
SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, the performance will be reduced for those shareholders paying those
fees.
Performance Comparisons
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in Fund expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any indices used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
o Lipper Analytical Services, Inc., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and
income dividends.
o Morgan Stanley Europe, Australia, and Far East (EAFE) Index is a market
capitalization weighted foreign securities index, which is widely used
to measure the performance of European, Australian, New Zealand and Far
Eastern stock markets.
The index covers approximately 1,020 companies drawn from 18 countries
in the above regions. The index values its securities daily in both U.S.
dollars and local currency and calculates total returns monthly. EAFE
U.S. dollar total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital International, S.A.,
Geneva, Switzerland.
o Salomon Brother World Equity Index - Ex U.S.
o FT Actuaries World Index - Ex U.S.
Advertisements and sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
also represent the historic change in the value of an investment in the
Fund based on annual reinvestment of dividends over a specified period of
time.
From time to time as it deems appropriate the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits
and to money market fund using the Lipper Analytical Services money market
instruments average.
Appendix
Standard and Poor's Ratings Group Bond Rating Definitions
AAA-Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely
strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B-Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal payments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC-Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
CC-The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.
C-The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI-The rating CI is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa-Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics
as well.
Ba-Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca-Bonds which are rated C represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Fitch Investors Service, Inc. Long-Term Debt Ratings
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in
the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligator's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and, therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
BB-Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B-Bonds are considered highly speculative. While bonds in this call are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the limited margin of
safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC-Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probably over time.
C-Bonds are in imminent default in payment of interest or principal.
DDD,DD, and D-Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the
obligor. DDD represents the highest potential for recovery on these bonds,
and D represents the lowest potential for recovery.
Standard & Poor's Ratings Group Commercial Paper Rating
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
Moody's Investors Service, Inc. Commercial Paper Rating
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries;
high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and high internal
cash generation; well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2 - Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch Investors Service, Inc. Short-Term Debt Rating
F-1+ - Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1 - Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2 - Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned F-1+ and F-1 ratings.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: (1-4) Included in Part B;
(5,6) To be filed with 4-6 month update;
(b) Exhibits:
(1) Conformed copy of Amended and Restated
Declaration of Trust; (3)
(2) Copy of By-Laws; (2)
(3) Not Applicable;
(4) Copy of Specimen Certificate for Shares of
Beneficial Interest; +
(5) Conformed copy of Investment Advisory
Contract; (3)
(i) Form of Exhibit F to Investment
Advisory Contract;+
(6) Conformed copy of Distributor's Contract; (3)
(7) Not Applicable;
(8) Conformed copy of the Custodian Agreement; (2)
(9) Conformed copy of Agreement for Fund
Accounting, Shareholder Recordkeeping and
Custody Services Procurement; (3)
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered; (2)
(11) Not Applicable;
(12) Not Applicable;
(13) Conformed copy of Initial Capital
Understanding; (2)
(14) Not Applicable;
(15) Not Applicable;
(16) (i) Copy of Equity Growth and Income Fund
Schedule for Computation of Fund
Performance Data; (3)
(ii) Copy of Utility Fund Schedule for
Computation of Fund Performance Data; (3)
(iii) Copy of U.S. Government Bond Schedule for
Computation of Fund Performance Data;(3)
(iv) Copy of Corporate Bond Fund Schedule for
Computation of Fund Performance Data; (2)
(17) Conformed copy of Power of Attorney; +
(18) Not applicable
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 10, 1993. (File Nos. 33-69268
and 811-8042)
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 29, 1994. (File Nos. 33-69268 and
811-8042)
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed August 23, 1994. (File Nos. 33-69268
and 811-8042)
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 6, 1995
Shares of beneficial interest
(no par value)
Equity Growth and Income Fund 4
Utility Fund 6
U.S. Government Bond Fund 8
Corporate Bond Fund 6
Prime Money Fund 4
International Equity Fund 0
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment adviser,
see the section entitled "Insurance Management Series - Management
of Insurance Management Series" in Part A. The affiliations with
the Registrant of four of the Trustees and one of the Officers of
the investment adviser are included in Part B of this Registration
Statement under "Trust Management - Officers and Directors." The
remaining Trustee of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal occupation
is: Mark D. Olson (Partner, Wilson, Holbrook and Bayard), 107 W.
Market Street, Georgetown, Delaware 19447.
The remaining Officers of the investment adviser are: William D.
Dawson, III, J. Thomas Madden, and Mark L. Mallon, Executive Vice
Presidents; Henry J. Gailliot, Senior Vice President-Economist;
Peter R. Anderson, Gary J. Madich, and J. Alan Minteer, Senior Vice
Presidents; J. Scott Albrecht, Randall A. Bauer, Jonathan C. Conley,
Deborah A. Cunningham, Michael P. Donnelly, Mark E. Durbiano,
Kathleen M. Foody-Malus, Thomas M. Franks, Edward C. Gonzales, Jeff
A. Kozemchak, Marian R. Marinack, John W. McGonigle, Gregory M.
Melvin, Susan M. Nason, Mary Jo Ochson, Robert J. Ostrowski,
Frederick L. Plautz, Jr., Charles A. Ritter, James D. Roberge, and
Christopher H. Wiles, Vice Presidents; Edward C. Gonzales,
Treasurer; and John W. McGonigle, Secretary. The business address
of each of the Officers of the investment adviser is Federated
Investors Tower, Pittsburgh, PA 15222-3779. These individuals are
also officers of a majority of the investment advisers to the Funds
listed in Part B of this Registration Statement under "The Funds."
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Alexander Hamilton
Funds; American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Cash Management Trust; Automated
Government Money Trust; BayFunds; The Biltmore Funds; The
Biltmore Municipal Funds; California Municipal Cash Trust; Cash
Trust Series, Inc.; Cash Trust Series II; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust; Federated
High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-
Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority
Funds; First Union Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress
Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fountain Square Funds; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Independence One Mutual Funds; Insight Institutional
Series, Inc.; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty Equity Income Fund, Inc.; Liberty High Income
Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Marshall
Funds, Inc.; Money Market Management, Inc.; The Medalist Funds;
Money Market Obligations Trust; Money Market Trust; The Monitor
Funds; Municipal Securities Income Trust; New York Municipal
Cash Trust; 111 Corcoran Funds; Peachtree Funds; The Planters
Funds; Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; SouthTrust Vulcan Funds; Star
Funds; The Starburst Funds; The Starburst Funds II; Stock and
Bond Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-
Free Instruments Trust; Tower Mutual Funds; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Vision Fiduciary Funds,
Inc.; Vision Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a)
of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following
locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and
Portfolio Recordkeeper
Federated Administrative Federated Investors Tower
Services Pittsburgh, PA 15222-3779
Administrator
Federated Advisers Federated Investors Tower
Investment Adviser Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266-8604
Custodian
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
Registrant hereby undertakes to file a post-effective amendment on
behalf of International Equity Fund, using financial statements for
International Equity Fund, which need not be certified, within four
to six months from the effective date of this Post-Effective
Amendment No. 3.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INSURANCE MANAGEMENT
SERIES, has duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 19th day of
January, 1995.
INSURANCE MANAGEMENT SERIES
BY: /s/G. Andrew Bonnewell
G. Andrew Bonnewell, Assistant Secretary
Attorney in Fact for John F. Donahue
January 19, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/G. Andrew Bonnewell
G. Andrew Bonnewell Attorney In Fact January 19, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit (17) on Form N-1A
Exhibit (24) under Item 601/Reg S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretary of INSURANCE MANAGEMENT SERIES and the
Assistant General Counsel of Federated Investors, and each of them, their true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to sign and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and Trustee January 17, 1995
John F. Donahue (Chief Executive Officer)
/s/J. Christopher Donahue President and Trustee January 17, 1995
J. Christopher Donahue
/s/Edward C. Gonzales Vice President and Treasurer January 17, 1995
Edward C. Gonzales (Principal Financial and
Accounting Officer)
/s/Thomas G. Bigley Trustee January 17, 1995
Thomas G. Bigley
/s/John T. Conroy, Jr. Trustee January 17, 1995
John T. Conroy, Jr.
/s/William J. Copeland Trustee January 17, 1995
William J. Copeland
SIGNATURES TITLE DATE
/s/James E. Dowd Trustee January 17, 1995
James E. Dowd
/s/Lawrence D. Ellis, M.D. Trustee January 17, 1995
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr., Trustee January 17, 1995
Edward L. Flaherty, Jr.
/s/Peter E. Madden Trustee January 17, 1995
Peter E. Madden
/s/Gregor F. Meyer Trustee January 17, 1995
Gregor F. Meyer
/s/Wesley W. Posvar Trustee January 17, 1995
Wesley W. Posvar
/s/Marjorie P. Smuts Trustee January 17, 1995
Marjorie P. Smuts
Sworn to and subscribed before me this 17th day of January, 1995
/s/Marie M. Hamm
Notary Public
Exhibit (4) on Form N-1A
Exhibit 3(c) under Item 601/Reg S-K
INSURANCE MANAGEMENT SERIES
INTERNATIONAL EQUITY FUND
Number Shares
_____ _____
Account No. Alpha Code See Reverse Side For
Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP_____________
Fully Paid and Non-Assessable Shares of Beneficial Interest of INTERNATIONAL
EQUITY FUND, a portfolio of INSURANCE MANAGEMENT SERIES hereafter called the
Trust, transferable on the books of the Trust by the owner in person or by
duly authorized attorney upon surrender of this certificate properly
endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: INSURANCE MANAGEMENT SERIES
Corporate Seal
1993
Massachusetts
/s/ Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman
Countersigned: Federated Services
Company (Boston)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entireties (Cust) (Minors)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received__________ hereby sell, assign, and transfer unto
Please insert social security or other
identifying number of assignee
______________________________________
_____________________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
_____________________________________________________________________________
_____________________________________________________________________________
______________________________________________________________________ shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________________________________________
_____________________________________________________________________________
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.
Dated______________________
NOTICE:______________________________
The signature to this assignment must
correspond with the name as written upon
the face of the certificate in every
particular, without alteration or
enlargement or any change whatever.
All persons dealing with INSURANCE MANAGEMENT SERIES, a Massachusetts
business trust, must look solely to the Trust property for the enforcement of
any claim against the Trust, as the Trustees, officers, agents or
shareholders of the Trust assume no personal liability whatsoever for
obligations entered into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit (5)(i) on Form N-1A
Exhibit (10) under Item 601/Reg. S-K
EXHIBIT F
to the
Investment Advisory Contract
International Equity Fund
For all services rendered by Adviser hereunder, the above-named Fund of
the Trust shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual investment
advisory fee equal to 1% of the average daily net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 12/365th of 1% applied to the daily
net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this __ day of ______, 19__.
Attest: FEDERATED ADVISERS
By:
Secretary
Executive Vice President
Attest: INSURANCE MANAGEMENT SERIES
By:
Assistant Secretary
Vice President
