1933 Act File No. 33-69268
1940 Act File No. 811-8042
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 5 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 6 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)
X on April 4, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i)
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on February 15, 1995 ; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and, pursuant to Rule 24f-2(b)(2), need not file the Notice.
Copies To:
Matthew G. Maloney, Esquire
Dickstein, Shapiro & Morin, L.L.P.
2101 L Street, N.W.
Washington, D.C. 20037
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of Insurance
Management Series, which consists of six portfolios: (1) Equity Growth
and Income Fund, (2) Utility Fund, (3) U.S. Government Bond Fund, (4)
Corporate Bond Fund, (5) Prime Money Fund, and (6) International Stock
Fund, relates only to Equity Growth and Income Fund, and is comprised of
the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-6) Cover Page.
Item 2. Synopsis Not applicable.
Item 3. Condensed Financial
Information (1-4) Financial Highlights; (1-6)
Performance Information.
Item 4. General Description of
Registrant (1-6) General Information; (1-6)
Investment Information; (1-6)
Investment Objectives; (1-6)
Investment Policies; (4,5)
Investment Risks; (1-6) Investment
Limitations; (5) Regulatory
Compliance.
Item 5. Management of the Fund (1-6) Fund Information; (1-6)
Management of the Fund; (1-6)
Distribution of Fund Shares; (1-6)
Administration of the Fund; (1-6)
Brokerage Transactions; (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 Taxes; (1-6) State
and Local Taxes; (1-6) Voting
Rights.
Item 7. Purchase of Securities Being
Offered (1-6) Net Asset Value; (1-6)
Investing in the Fund; (1-6)
Purchases and Redemptions; (1-6)
What Shares Cost.
Item 8. Redemption or Repurchase (1-6) Purchases and Redemptions.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-6) Cover Page.
Item 11. Table of Contents (1-6) Table of Contents.
Item 12. General Information and
History Not Applicable.
Item 13. Investment Objectives and
Policies (1-6) Investment Objectives and
Policies; (1-6) Investment
Limitations.
Item 14. Management of the Fund (2-5) Fund Management; (1,6)
Insurance Management Series
Management; (1) Trustees
Compensation.
Item 15. Control Persons and Principal
Holders of Securities (1-6) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-6) Investment Advisory Services;
(1-6) Administrative Services; (6)
Transfer Agent and Dividend
Disbursing Agent.
Item 17. Brokerage Allocation (1-6) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-6) Purchasing Shares; (1-6)
Determining Net Asset Value.
Item 20. Tax Status (1-6) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1-6) Total Return; (1-6) Yield;
(5) Effective Yield; (1-6)
Performance Comparisons.
Item 23. Financial Statements (1-4) To be filed by amendment;
(5,6) To be filed with 4-6 month
update.
International Stock Fund
(A Portfolio of Insurance Management Series)
Prospectus
This Prospectus offers shares of International Stock Fund (the "Fund"),
which is a diversified investment portfolio in Insurance Management
Series (the "Trust"), an open-end management investment company. The
Fund's investment objective is to obtain a total return on its assets.
Shares of the Fund may be sold only to separate accounts of insurance
companies to serve as the investment medium for variable life insurance
policies and variable annuity contracts issued by the insurance
companies.
The shares offered by this Prospectus are not deposits or obligations of
any bank, are not endorsed or guaranteed by any bank, and are not
insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other government agency. Investment in these
shares involves investment risks, including the possible loss of
principal.
This Prospectus contains the information you should read and know before
you invest in the Fund through the variable life insurance policies and
variable annuity contracts offered by insurance companies which provide
for investment in the Fund. Keep this Prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated
April 4, 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 4, 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,
as described below. The prices of fixed income securities
fluctuate inversely to the direction of interest rates.
The debt securities in which the Fund will invest will possess
a minimum credit rating of BBB as assigned by Standard & Poor's
Ratings Group ("S&P") or Baa by Moody's Investors Service, Inc.
("Moody's"), or, if unrated, will be judged by the Fund's
adviser to be of comparable quality. Because the average
quality of the Fund's portfolio investments should remain
constantly between AAA and BBB, the Fund may avoid the adverse
consequences that may arise for some debt securities in
difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the adviser. The adviser
will determine whether or not the security continues to be an
acceptable investment. If not, the security will be sold. A
description of the ratings categories is contained in the
Appendix to the Statement of Additional Information.
Convertible Securities. The Fund may invest in convertible
securities that are rated, at the time of purchase, investment
grade by a nationally 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.
Restricted and Illiquid Securities. As a matter of investment practice,
the Fund may invest up to 15% of its total assets in restricted
securities. This restriction is not applicable to commercial paper
issued under Section 4(2) of the Securities Act of 1933. Restricted
securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies but which are subject
to restriction on resale under federal securities law. To the extent
restricted securities are deemed to be illiquid, the Fund will limit
their purchase, including non-negotiable time deposits, repurchase
agreements providing for settlement in more than seven days after
notice, over-the-counter options, and certain restricted securities
determined by the Trustees not to be liquid, to 15% of the net assets of
the Fund.
Lending of Portfolio Securities. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional
borrowers of securities. The Fund will only enter into loan arrangements
with broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on
a timely basis and the Fund, may, therefore, lose the opportunity to
sell the securities at a desirable price. In addition, in the event that
a borrower of securities would file for bankruptcy or become insolvent,
disposition of the securities may be delayed pending court action.
Foreign Currency Transactions. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or
cash basis at prevailing rates or through forward foreign currency
exchange contracts.
The Fund may also enter into foreign currency transactions to protect
Fund assets against adverse changes in foreign currency exchange rates
or exchange control regulations. Such changes could unfavorably affect
the value of Fund assets which are denominated in foreign currencies,
such as foreign securities or funds deposited in foreign banks, as
measured in U.S. dollars. Although foreign currency exchanges may be
used by the Fund to protect against a decline in the value of one or
more currencies, such efforts may also limit any potential gain that
might result from a relative increase in the value of such currencies
and might, in certain cases, result in losses to the Fund. Further, the
Fund may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different
nations. Cross-hedging transactions by the Fund involve the risk of
imperfect correlation between changes in the values of the currencies to
which such transactions relate and changes in the value of the currency
or other asset or liability that is the subject of the hedge.
Forward Foreign Currency Exchange Contracts and Options on Foreign
Currencies. A forward foreign currency exchange contract ("forward
contract") is an obligation to purchase or sell an amount of a
particular currency at a specific price and on a future date agreed upon
by the parties.
Generally, no commission charges or deposits are involved. At the time
the Fund enters into a forward contract, Fund assets with a value equal
to the Fund's obligation under the forward contract are segregated on
the Fund's records and are maintained until the contract has been
settled. The Fund will not enter into a forward contract with a term of
more than one year. The Fund will generally enter into a forward
contract to provide the proper currency to settle a securities
transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24
hours and 30 days, depending upon local custom.
The Fund may also protect against the decline of a particular foreign
currency by entering into a forward contract to sell an amount of that
currency approximating the value of all or a portion of the Fund's
assets denominated in that currency ("hedging"). The success of this
type of short-term hedging strategy is highly uncertain due to the
difficulties of predicting short-term currency market movements and of
precisely matching forward contract amounts and the constantly changing
value of the securities involved. Although the adviser will consider the
likelihood of changes in currency values when making investment
decisions, the adviser believes that it is important to be able to enter
into forward contracts when it believes the interests of the Fund will
be served. The Fund will not enter into forward contracts for hedging
purposes in a particular currency in an amount in excess of the Fund's
assets denominated in that currency. No more than 30% of the Fund's
assets will be committed to forward contracts for hedging purposes at
any time. (This restriction does not include forward contracts entered
into to settle securities transactions.)
The Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the U.S.
dollar value of foreign currency-denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be
acquired. As in the case of other kinds of options, however, the writing
of an option on a foreign currency constitutes only a partial hedge, up
to the amount of the premium received, and the Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in
exchange rates although, in the event of rate movements adverse to the
Fund's position, it may forfeit the entire amount of the premium plus
related transaction costs. Options on foreign currencies to be written
or purchased by the Fund are traded on U.S. and foreign exchanges or
over-the-counter.
Risks Associated with Financial Futures Contracts and Options on
Financial Futures Contracts. When the Fund uses futures and options on
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate with the
prices of the securities in the Fund's portfolio. This may cause the
futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Fund's adviser
could be incorrect in its expectations about the direction or extent of
market factors such as interest or currency exchange rate movements. In
these events, the Fund may lose money on the futures contract or option.
Also, it is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Fund's
adviser will consider liquidity before entering into such transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at
any particular time. The Fund's ability to establish and close out
futures and options positions depends on this secondary market.
Risks Associated with Non-U.S. Securities. Investing in non-U.S.
securities carries substantial risks in addition to those associated
with domestic investments. In an attempt to reduce some of these risks,
the Fund diversifies its investments broadly among foreign countries,
including both developed and developing countries. At least three
different countries will always be represented.
The Fund occasionally takes advantage of the unusual opportunities for
higher returns available from investing in developing countries. These
investments, however, carry considerably more volatility and risk
because they are associated with less mature economies and less stable
political systems.
Currency Risks. Because the Fund may purchase securities
denominated in currencies other than the U.S. dollar, changes
in foreign currency exchange rates could affect the Fund's net
asset value; the value of interest earned; gains and losses
realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by
the Fund. If the value of a foreign currency rises against the
U.S. dollar, the value of the Fund assets denominated in that
currency will increase; correspondingly, if the value of a
foreign currency declines against the U.S. dollar, the value of
Fund assets denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign
currencies are a function of such factors as supply and demand
in the currency exchange markets, international balances of
payments, governmental interpretation, speculation and other
economic and political conditions. Although the Fund values its
assets daily in U.S. dollars, the Fund will not convert its
holdings of foreign currencies to U.S. dollars daily. When the
Fund converts its holdings to another currency, it may incur
conversion costs. Foreign exchange dealers may realize a profit
on the difference between the price at which they buy and sell
currencies.
Foreign Companies. Other differences between investing in non-
U.S. and U.S. securities include:
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.
Portfolio Turnover. Although the Fund does not intend to invest for the
purpose of seeking short-term profits, securities in its portfolio will
be sold whenever t he Fund's investment adviser believes it is
appropriate to do so in light of the Fund's investment objective,
without regard to the length of time a particular security may have been
held. It is not anticipated that the portfolio trading engaged in by
the Fund will result in its annual rate of portfolio turnover exceeding
200%. A portfolio turnover rate of 100% would occur, for example, if
all the securities in the Fund's portfolio were replaced once in a
period of one year. The Fund's rate of portfolio turnover may exceed
that of certain other mutual funds with the same investment objective.
A higher rate of portfolio turnover involves correspondingly greater
brokerage commissions and other expenses which must be borne directly by
the Fund and, thus, indirectly by its shareholders. In addition, a high
rate of portfolio turnover may result in the realization of larger
amounts of capital gains which, when distributed to the Fund's
shareholders, are taxable to them. Nevertheless, transactions for the
Fund's portfolio will be based only upon investment considerations and
will not be limited by any other considerations when the Fund's
investment adviser deems it appropriate to make changes in the Fund's
portfolio.
Net Asset Value
The net asset value per share of the Fund fluctuates. It is determined
by dividing the sum of the market value of all securities and other
assets of the Fund, less liabilities, by the number of shares
outstanding.
Investing in the Fund
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.
Massachusetts Partnership Law
Under certain circumstances, shareholders may be held personally liable
as partners under Massachusetts law for obligations of the Trust. To
protect its shareholders, the Trust has filed legal documents with
Massachusetts that expressly disclsim the liability of its shareholders
for acts or obligations of the Trust. These documents require notice of
this disclsimer to be given in each agreement, obligation, or instrument
the Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust
to use its property to protect or compensate the shareholder. On
request, the Trust will defend any claim made and pay any judgment
against a shareholder for any act or obligatoin of the Trust.
Therefore, financial loss resulting from liability as a shareholder will
occur only if the Trust itself cannot meet its obligations to indemnify
shareholders and ay judgments against them.
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 Stock Fund Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
Custodian
State Street Bank 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 Stock Fund
Prospectus
A Diversified Portfolio of Insurance Management
Series, An Open-End, Management Investment
Company
April 4, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
458043 60 1
G01078-01 (4/95)
International Stock Fund
A Portfolio of Insurance Management Series
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus for International Stock Fund (the "Fund"), a portfolio
of Insurance Management Series (the "Trust"), dated April 4, 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 4, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED
INVESTORS
Investment Objective and Policies 1
Types of Investments 1
When-Issued and Delayed
Delivery Transactions 1
Repurchase Agreements 1
Lending of Portfolio Securities 1
Restricted and Illiquid
Securities 1
Futures and Options
Transactions 2
Foreign Currency Hedging
Transactions 4
Risks 5
Warrants 5
Investment Limitations 6
Fund Ownership 12
Trustees Compensation 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.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will repurchase
the portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked
to market daily and maintained until the transaction is settled.
Lending of Portfolio Securities
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The
Fund may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker.
Restricted and Illiquid Securities
The 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.
Investment Limitations
Diversification of Investments
With respect to 75% of the value of its total assets, the Fund
will not purchase securities of any one issuer (other than
securities issued or guaranteed by the government of the United
States or its agencies or instrumentalities) if as a result more
than 5% of the value of its total assets would be invested in the
securities of that issuer, or if it would own more than 10% of the
outstanding voting securities of any one issuer.
Acquiring Securities
The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer.
Concentration of Investments
The Fund will not invest 25% or more of its total assets in
securities of issuers having their principal business activities
in the same industry.
Borrowing
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts up to
one-third of the value of its total assets, including the amount
borrowed. This borrowing provision is not for investment leverage
but solely to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of
portfolio securities would be inconvenient or disadvantageous. The
Fund will not purchase securities while outstanding borrowings
exceed 5% of the value of its total assets.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate assets, except
when necessary for permissible borrowings. Neither the deposit of
underlying securities or other assets in escrow in connection with
the writing of put or call options or the purchase of securities
on a when-issued basis, nor margin deposits for the purchase and
sale of financial futures contracts and related options are deemed
to be a pledge.
Buying on Margin
The Fund will not purchase any securities on margin, but may
obtain such short-term credits as are necessary for clearance of
transactions, except that the Fund may make margin payments in
connection with its use of financial futures contracts or related
options and transactions.
Issuing Senior Securities
The Fund will not issue senior securities except in connection
with borrowing money directly or through reverse repurchase
agreements or as required by forward commitments to purchase
securities or currencies.
Underwriting
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
Investing in Real Estate
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or
issued by companies, including real estate investment trusts,
which invest in real estate or interests therein.
Investing in Commodities
The Fund will not purchase or sell commodities or commodity
contracts, except that the Fund may purchase and sell financial
futures contracts and options on financial futures contracts,
provided that the sum of its initial margin deposits for financial
futures contracts held by the Fund, plus premiums paid by it for
open options on financial futures contracts, may not exceed 5% of
the fair market value of the Fund's total assets, after taking
into account the unrealized profits and losses on those contracts.
Further, the Fund may engage in foreign currency transactions and
purchase or sell forward contracts with respect to foreign
currencies and related options.
Lending Cash or Securities
The Fund will not lend any assets except portfolio securities.
This shall not prevent the purchase or holding of bonds,
debentures, notes, certificates of indebtedness, or other debt
securities of an issuer, repurchase agreements or other
transactions which are permitted by the Fund's investment
objective and policies or its Declaration of Trust.
Selling Short
The Fund will not sell securities short unless (1) it owns, or has
a right to acquire, an equal amount of such securities, or (2) it
has segregated an amount of its other assets equal to the lesser
of the market value of the securities sold short or the amount
required to acquire such securities. The segregated amount will
not exceed 10% of the Fund's net assets. While in a short
position, the Fund will retain the securities, rights, or
segregated assets.
To comply with registration requirements in certain states, the
Fund (1) will limit short sales of securities of any class of any
one issuer to the lesser of 2% of the Fund's net assets or 2% of
the securities of that class, (2) will make short sales only on
securities listed on recognized stock exchanges. The latter
restrictions, however, do not apply to short sales of securities
the Fund holds or has a right to acquire without the payment of
any further consideration, and (3) will not invest more than 5% of
its total assets in restricted securities. (If state requirements
change, these restrictions may be revised without shareholder
notification.)
Except as noted, the above investment limitations cannot be changed
without shareholder approval. The following limitations, however, may be
changed by the Trustees without shareholder approval. Except as noted,
shareholders will be notified before any material change in these
limitations becomes effective.
Purchasing Securities to Exercise Control
The Fund will not purchase securities of a company for the purpose
of exercising control or management.
Investing in Warrants
The Fund will not invest more than 5% of its assets in warrants,
including those acquired in units or attached to other securities.
To comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on recognized stock
exchanges to 2% of its total assets. (If state restrictions
change, this latter restriction may be revised without notice to
shareholders.) For purposes of this investment restriction,
warrants acquired by the Fund in units or attached to securities
may be deemed to be without value.
Investing in Securities of Other Investment Companies
The Fund will not purchase securities of other investment
companies, except by purchase in the open market involving only
customary brokerage commissions and as a result of which not more
than 10% of the value of its total assets would be invested in
such securities, or except as part of a merger, consolidation or
other acquistion.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers which have records of less than
three years of continuous operations, including the operation of
any predecessor.
Investing in Minerals
The Fund will not invest in interests in oil, gas, or other
mineral exploration or development programs, other than debentures
or equity stock interests.
Investing in Restricted Securities
The Fund will not invest more than 15% of its total assets in
securities subject to restrictions on resale under the Securities
Act of 1933, except for commercial paper issued under Section 4(2)
of the Securities Act of 1933 and certain other restricted
securities which meet the criteria for liquidity as established by
the Trustees.
Investing in Illiquid Securities
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including securities not determined
by the Trustees to be liquid, repurchase agreements with
maturities longer than seven days after notice, and certain over-
the-counter options.
Dealing in Puts and Calls
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or the Fund is
entitled to them in deliverable form without further payment or
the Fund has segregated cash in the amount of any further
payments. The Fund will not purchase put options on securities
unless the securities or an offsetting call option is held in the
Fund's portfolio. The Fund may also purchase, hold or sell (i)
contracts for future delivery of securities or currencies and (ii)
warrants granted by the issuer of the underlying securities.
Investing in Issuers Whose Securities are Owned by Officers and
Trustees of the Trust
The Fund will not purchase or retain the securities of any issuer
if the officers and Trustees of the Trust or the Fund's investment
adviser or sub-adviser owning individually more than 1/2 of 1% of
the issuer's securities together own more than 5% of the issuer's
securities.
Arbitrage Transactions
To comply with certain state restrictions, the Fund will not enter
into transactions for the purpose of engaging in arbitrage. If
state requirements change, this restriction may be revised without
shareholder notification.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
The Fund has no present intent to borrow money or pledge securities in
excess of 5% of the value of its total assets in the coming fiscal year.
Insurance Management Series Management
Officers and Trustees are listed with their addresses, present
positions with Insurance Management Series, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life
and Casualty Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds. Mr. Donahue is the father of J.
Christopher Donahue, President and Trustee of the Trust.
Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
Funds;
Funds; Director, Trustee, or Managing General Partner of some of the
Funds. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.
Lawrence D. Ellis, M.D.
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and Montefiore Hospitals; Director, Trustee, or Managing General Partner
of the Funds.
Edward L. Flaherty, Jr.@
Henny, Koehuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.
Peter E. Madden
225 Franklin Street
Boston, MA
Birthdate: April 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General Partner of the Funds; formerly,
President, State Street Bank and Trust Company and State Street Boston
Corporation and Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Henny, Koehuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Koehuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director, Trustee or Managing General Partner
of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; formerly, Chairman,
National Advisory Council for Environmental Policy and Technology.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: July 21, 1935
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director,
Federated Research Corp.; Chairman and Director, Federated Securities
Corp.; President or Vice President of some of the Funds; Director or
Trustee of some of the Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., and Passport Research,
Ltd.; Executive Vice President, Treasurer, and Director, Federated
Securities Corp.; Trustee, Federated Services Company and Federated
Shareholder Services; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director of some of the Funds; Vice
President and Treasurer of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.
* This Trustee is deemed to be an "interested person" as defined
in the Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of
the Board of Trustees handles the responsibilities of the Board
of Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Cash Management Trust; Automated
Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones
& Co. Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange
Fund, Ltd.; Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate
Government Trust; Federated Short-Term U.S. Government Trust; Federated
Stock Trust; Federated Tax-Free Trust; Federated U.S. Government Bond
Fund; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High Yield Cash
Trust; Insight Institutional Series, Inc.; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund,
Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty Term Trust, Inc.--1999; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust;
Managed Series Trust; The Medalist Funds; Money Market Management, Inc.;
Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument
Funds; The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government
Cash Reserves; Trust for Short-Term U.S. Government Securities; Trust
for U.S. Treasury Obligations; and World Investment Series, Inc.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of April __, 1995 there were no shareholders of record who owned 5%
or more of the outstanding shares of the Fund.
Trustees Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
John F. Donahue
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Thoms G. Bigley
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
John T. Conroy, Jr.
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
William J. Copeland
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
J. Christopher Donahue
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
James E. Dowd
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D.
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Edward L. Flaherty, Jr.
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Peter E. Madden
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Gregor F. Meyer
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Wesley W. Posvar
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
Marjorie P. Smuts
Trustee $ _____ $_____ for the Trust and
_____ other investment companies in the Fund
Complex
*Information is furnished for the fiscal year ended December 31, 1994.
#The aggregate compensation is provided for the Trust which is comprised
of 6 portfolios.
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. You should review the performance
figures for your insurance contract, which figures reflect the
applicable charges and expenses of the contract. Such performance
figures will accompany any advertisement of the Fund's performance.
Yield
The Fund's yield is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day
period by the offering price per share of the Fund on the last day of
the period. This value is then annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day
period is assumed to be generated each month over a twelve-month period
and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. You should review
the performance figures for your insurance contract, which figures
reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's
performance.
Performance Comparisons
The Fund's performance depends upon such variables as:
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 Brothers World Equity Index Ex U.S. is a capitalization-
weighted index comprised of equities from 22 countries excluding the
United States.
o FT Actuaries World - Ex U.S. index is comprised of 1,740 stocks,
excluding U.S. stocks, jointly compiled by the Financial Times Ltd.,
Goldman, Sachs & Co., and NatWest Securities Ltd. in conjunction with
the Institute of Actuaries and the Faculty of Actuaries.
Advertisements and sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment
in the Fund based on annual reinvestment of dividends over a specified
period of time.
From time to time as it deems appropriate the Fund may advertise its
performance using charts, graphs, and descriptions, compared to
federally insured bank products, including certificates of deposit and
time deposits and to money market fund using the Lipper Analytical
Services money market instruments average.
Appendix
Standard and Poor's Ratings Group Bond Rating Definitions
AAA-Debt rated "AAA" has the highest rating assigned by Standard &
Poor's Corporation. Capacity to pay interest and repay principal is
extremely strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effect
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.
B-Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal payments. Adverse
business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating
category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
CCC-Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of
principal.
CC-The rating CC typically is applied to debt subordinated to senior
debt that is assigned an actual or implied CCC debt rating.
C-The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating
may be used to cover a situation where a bankruptcy petition has been
filed but debt service payments are continued.
CI-The rating CI is reserved for income bonds on which no interest is
being paid.
D-Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace
period. The D rating also will be used upon the filing of a bankruptcy
petition if debt service payments are jeopardized.
Moody's Investors Service, Inc. Corporate Bond Ratings
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa-Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative
characteristics as well.
Ba-Bonds which are Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca-Bonds which are rated C represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Fitch Investors Service, Inc. Long-Term Debt Ratings
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated "AAA." Because
bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issuers is generally rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligator's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and, therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
BB-Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B-Bonds are considered highly speculative. While bonds in this call are
currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the limited
margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC-Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probably over time.
C-Bonds are in imminent default in payment of interest or principal.
DDD,DD, and D-Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds, and D represents the lowest potential for
recovery.
Standard & Poor's Ratings Group Commercial Paper Rating
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
Moody's Investors Service, Inc. Commercial Paper Rating
Prime-1 - Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well
established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt and
ample asset protection; broad margins in earning coverage of fixed
financial charges and high internal cash generation; well-established
access to a range of financial markets and assured sources of alternate
liquidity.
Prime-2 - Issuers rated Prime-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends and
coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
Fitch Investors Service, Inc. Short-Term Debt Rating
F-1+ - Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1 - Very Strong Credit Quality. Issues assigned this rating reflect
an assurance for timely payment only slightly less in degree than issues
rated F-1+.
F-2 - Good Credit Quality. Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as for issues assigned F-1+ and F-1 ratings.
G01078-02
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements: (1-4) To be filed by
amendment; (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) (i) Copy of Specimen Certificate for Shares
of
Beneficial Interest of Equity Growth
and Income Fund; (2)
(ii) Copy of Specimen Certificate for Shares
of Beneficial Interest of Utility Fund;
(2)
(iii) Copy of Specimen Certificate for Shares
of Beneficial Interest of U.S. Government
Bond Fund; (2)
(iv) Copy of Specimen Certificate for Shares
of Beneficial Interest of Corporate Bond
Fund; (2)
(v) Copy of Specimen Certificate for Shares
of Beneficial Interest of Prime Money
Fund; (2)
(vi) Copy of Specimen Certificate for Shares
of Beneficial Interest of International
Equity Fund; (4)
+ 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)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed January 19, 1995. (File Nos. 33-
69268 and 811-8042)
(5) Conformed copy of Investment Advisory
Contract; (3)
(i) Conformed copy 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 Fund
Schedule for Computation of Fund
Performance Data;(3)
(iv) Copy of Corporate Bond Fund Schedule
for Computation of Fund Performance Data;
(2)
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)
(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed January 19, 1995. (File Nos. 33-
69268 and 811-8042O)
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of March 24, 1995
Shares of beneficial interest
(no par value)
Equity Growth and Income Fund 6
Utility Fund 7
U.S. Government Bond Fund 8
Corporate Bond Fund 6
Prime Money Fund 4
International Stock Fund 0
Item 27. Indemnification: (1)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of the investment
adviser, see the section entitled "Fund Information - Management
of the Fund" in Part A. The affiliations with the Registrant of
four of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement
under "Insurance Management Series Management." The remaining
Trustee of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal occupation
is: Mark D. Olson (Partner, Wilson, Holbrook and Bayard), 107 W.
Market Street, Georgetown, Delaware 19447.
The remaining Officers of the investment adviser are: William D.
Dawson, III, J. Thomas Madden, and Mark L. Mallon, Executive Vice
Presidents; Henry J. Gailliot, Senior Vice President-Economist;
Peter R. Anderson, 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.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Alexander Hamilton
Funds; American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Cash Management Trust;
Automated Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; California Municipal
Cash Trust; Cash Trust Series, Inc.; Cash Trust Series II;
DG Investor Series; Edward D. Jones & Co. Daily Passport
Cash Trust; Federated ARMs Fund; Federated Exchange Fund,
Ltd.; Federated GNMA Trust; Federated Government Trust;
Federated Growth Trust; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Institutional Trust;
Federated Intermediate Government Trust; Federated Master
Trust; Federated Municipal Trust; Federated Short-
Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated U.S. Government Bond Fund; First Priority
Funds; First Union Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund,
Inc.; Fountain Square Funds; Fund for U.S. Government
Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust;
Managed Series Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; The Medalist Funds; Money Market
Obligations Trust; Money Market Trust; The Monitor Funds;
Municipal Securities Income Trust; Newpoint Funds; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree Funds;
The Planters Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; SouthTrust Vulcan Funds; Star
Funds; The Starburst Funds; The Starburst Funds II; Stock
and Bond Fund, Inc.; Sunburst Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; Tower Mutual Funds;
Trademark Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations;
Vision Fiduciary Funds, Inc.; Vision Group of Funds, Inc.;
and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty
Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, 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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
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
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
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
Newton Heston, III Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Stephen A. La Versa Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp. --
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
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
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
Charles H. Field Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant 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
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 Prime Money Fund, using financial statements for
Prime Money Fund, which need not be certified, within four to six
months from the effective date of Post-Effective Amendment No. 2.
Registrant hereby undertakes to file a post-effective amendment
on behalf of International Stock Fund, using financial statements
for International Stock Fund, which need not be certified, within
four to six months from the effective date of Post-Effective
Amendment No. 3.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INSURANCE MANAGEMENT
SERIES, certifies that it meets all the requirements for effectiveness
of this Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 3rd day of April, 1995.
INSURANCE MANAGEMENT SERIES
BY: /s/G. Andrew Bonnewell
G. Andrew Bonnewell, Assistant Secretary
Attorney in Fact for John F. Donahue
April 3, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/G. Andrew Bonnewell
G. Andrew Bonnewell Attorney In Fact April 3, 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
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit (5)(i) on Form N1A
Exhibit (10) under item 601/Reg. S-K
EXHIBIT F
to the
Investment Advisory Contract
International Stock 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 1/365th 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 1st day of March, 1995.
Attest: Federated Advisers
/s/ J. C. Donahue By: /s/ J. Thomas Madden
Assistant Secretary Executive Vice President
Attest: Insurance Management Series
/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
Assistant Secretary Vice President
