INSIGHT
ADJUSTABLE
RATE
MORTGAGE
FUND
SEMI-ANNUAL REPORT AND
SUPPLEMENT TO PROSPECTUS
DATED JANUARY 19, 1994
MAY 30, 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
4041803 (5/94)
A. Please insert the following "Financial Highlights" table as page 2 of the
prospectus following the "Summary of Fund Expenses" and before the section
entitled "General Information." In addition, please add the heading
"Financial Highlights" to the Table of Contents page after the heading
"Summary of Fund Expenses."
INSIGHT ADJUSTABLE RATE MORTGAGE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31, 1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.02
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------
Net investment income 0.07
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.05)
- --------------------------------------------------------------------------------------------- -------------------
Total from investment operations 0.02
- ---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.07)
- --------------------------------------------------------------------------------------------- -------------------
NET ASSET VALUE, END OF PERIOD $ 9.97
- --------------------------------------------------------------------------------------------- -------------------
TOTAL RETURN** 0.16%
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------
Expenses 0.35%(b)
- ---------------------------------------------------------------------------------------------
Net investment income 4.29%(b)
- ---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.70%(b)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $1,760
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 5%
- ---------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from February 2, 1994 (date of initial
public investment) to March 31, 1994 (unaudited).
**Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
B. Please delete the section entitled "Redemption Before Purchase Instruments
Clear" on page 10 of the prospectus.
C. Please insert the following after the section entitled "Portfolio
Manager's Background" on page 11 of the prospectus. In addition, please
add the heading "Other Payments to Financial Institutions" to the Table of
Contents page after the heading "Portfolio Manager's Background."
"OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Plan, Federated Securities Corp. will pay
financial institutions an amount equal to 1% of the net asset value of shares
purchased by their clients or customers at the time of purchase (except for
participants in the Liberty Family Retirement Program). Furthermore, the Adviser
or its affiliates may offer to pay a fee from their own assets to financial
institutions as financial assistance for providing substantial marketing, sales
and operational support to the distributor. The support may include
participating in sales, educational and training seminars at recreational type
facilities, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or operational support furnished
by the financial institutions."
D. Please replace the section entitled "Administrative Services" on page 12
of the prospectus with the following:
"ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors ("Federated Funds") as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee."
E. Please replace the section entitled "Shareholder Services Plan" on page 12
of the prospectus with the following:
"SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Fund to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services."
F. Please insert the following financial statements beginning as page 15 of
the prospectus. In addition, please add the heading "Financial Statements"
to the Table of Contents page immediately before "Addresses."
INSIGHT ADJUSTABLE RATE MORTGAGE FUND
PORTFOLIO OF INVESTMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ----------- -------------------------------------------------------------------------------------- -------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION--96.2%
- ---------------------------------------------------------------------------------------------------
$ 800,000 5.43%, 3/1/2023 $ 821,698
--------------------------------------------------------------------------------------
853,437 4.00%, 9/1/2023 870,992
-------------------------------------------------------------------------------------- -------------
TOTAL (IDENTIFIED COST, $1,696,773) 1,692,690
-------------------------------------------------------------------------------------- -------------
*REPURCHASE AGREEMENT--2.6%
- ---------------------------------------------------------------------------------------------------
45,000 J.P. Morgan Securities, Inc., 3.59%, dated 3/31/94, due 4/4/94 (Note 2B) 45,000
-------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST, $1,741,773) $ 1,737,690\
-------------------------------------------------------------------------------------- -------------
</TABLE>
*The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\The cost of investments for federal tax purposes amounts to $1,741,773. The net
unrealized depreciation of investments on a federal tax basis amounts to
$4,083.
Note: The categories of investments are shown as a percentage of net assets of
($1,759,845) at March 31, 1994.
(See Notes which are an integral part of the Financial Statements)
INSIGHT ADJUSTABLE RATE MORTGAGE FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------------
Investments, at value (Notes 2A and 2B) (identified and tax cost; $1,741,773) $ 1,737,690
- ----------------------------------------------------------------------------------------------------
Cash 3,444
- ----------------------------------------------------------------------------------------------------
Receivable from Adviser (Note 4) 12,827
- ----------------------------------------------------------------------------------------------------
Interest receivable 6,470
- ----------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 5,902
- ---------------------------------------------------------------------------------------------------- -------------
Total assets 1,766,333
- ----------------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------------
Dividends payable $ 6,121
- -----------------------------------------------------------------------------------------
Accrued expenses and other liabilities 367
- ----------------------------------------------------------------------------------------- ---------
Total liabilities 6,488
- ---------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 176,573 shares of capital stock outstanding $ 1,759,845
- ---------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------------------------------------------
Paid-in capital $ 1,766,012
- ----------------------------------------------------------------------------------------------------
Unrealized depreciation of investments (4,083)
- ----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (2,084)
- ---------------------------------------------------------------------------------------------------- -------------
Total $ 1,759,845
- ---------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share
($1,759,845 / 176,573 shares of capital stock outstanding) $9.97
- ---------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
INSIGHT ADJUSTABLE RATE MORTGAGE FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MARCH 31, 1994*
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 13,438
- -------------------------------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 2,027
- --------------------------------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 290
- --------------------------------------------------------------------------------------------
Shareholder servicing fee (Note 4) 724
- -------------------------------------------------------------------------------------------- ---------
Total expenses 3,041
- --------------------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 2,027
- -------------------------------------------------------------------------------------------- ---------
Net expenses 1,014
- ------------------------------------------------------------------------------------------------------- ---------
Net investment income 12,424
- ------------------------------------------------------------------------------------------------------- ---------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (2,084)
- -------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (4,083)
- ------------------------------------------------------------------------------------------------------- ---------
Net realized and unrealized gain (loss) on investments (6,167)
- ------------------------------------------------------------------------------------------------------- ---------
Change in net assets resulting from operations $ 6,257
- ------------------------------------------------------------------------------------------------------- ---------
</TABLE>
*Reflects operations for the period from February 2, 1994 (date of initial
public investment) to
March 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
INSIGHT ADJUSTABLE RATE MORTGAGE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD
ENDED
MARCH 31,
1994*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------------------------------
Net investment income $ 12,424
- ---------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions
($2,084 net loss as computed for federal tax purposes) (2,084)
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (4,083)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations 6,257
- --------------------------------------------------------------------------------------------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- ---------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (12,424)
- --------------------------------------------------------------------------------------------------- -------------
CAPITAL STOCK TRANSACTIONS (NOTE 3)--
- ---------------------------------------------------------------------------------------------------
Proceeds from sale of shares 1,965,475
- ---------------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of dividends declared 190
- ---------------------------------------------------------------------------------------------------
Cost of shares redeemed (199,653)
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from capital stock transactions 1,766,012
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets 1,759,845
- ---------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------
Beginning of period --
- --------------------------------------------------------------------------------------------------- -------------
End of period $ 1,759,845
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
*Reflects operations for the period from February 2, 1994 (date of initial
public investment) to
March 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
INSIGHT ADJUSTABLE RATE MORTGAGE FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Insight Institutional Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Trust consists of four diversified investment
portfolios. The financial statements included herein present only those of
Insight Adjustable Rate Mortgage Fund (the "Fund"). The financial statements of
the other portfolios are presented seperately. The assets of each portfolio are
segregated and a shareholders interest is limited to the portfolio in which
shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor on a daily basis, the market value of
each repurchase agreements underlying collateral to ensure the value at
least equals the principal amount of the repurchase agreement, including
accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Directors ("Directors"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount are amortized as required by
the Internal Revenue Code, as amended ("Code"). Distributions to
shareholders are recorded on the ex-dividend date.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued and delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At March 31, 1994, there were 2,000,000,000 shares of $0.001 per share par value
capital stock authorized. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD
ENDED
MARCH 31,
1994*
<S> <C>
Shares outstanding, beginning of period --
- ----------------------------------------------------------------------------------------------------
Shares sold 196,559
- ----------------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 19
- ----------------------------------------------------------------------------------------------------
Shares redeemed (20,005)
- ---------------------------------------------------------------------------------------------------- ------------
Shares outstanding, end of period 176,573
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
*For the period from February 2, 1994 (date of initial public investment) to
March 31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Funds investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.70 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee. Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the fee is based on
the level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during any fiscal year shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICE PLAN--Under the terms of a shareholder service agreement
with Federated Shareholder Services ("FSS") the Fund will pay FSS up to 0.25 of
1% of average net assets for the Fund for the period. This fee is to obtain
certain personnel services for shareholders and the maintenance of shareholder
accounts.
ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative
service expenses incurred by the Fund will be borne initially by Adviser and are
estimated at $34,100 and $30,822, respectively. The Fund has agreed to reimburse
the Adviser for the organizational expenses and start-up administrative expenses
initially borne by the Adviser during the five-year period following January 19,
1994 (date the Fund first became effective).
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer agent and dividend disbursing agent for the Fund.
The fee is based on the size, type, and number of accounts and transactions made
by shareholders.
Certain of the Officers and Directors of the Corporation are Officers and
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1994 were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------------
PURCHASES $ 1,824,594
- --------------------------------------------------------------------------------------------------- -------------
SALES $ 85,355
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
