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1
1933 Act File No. 33-50773
1940 Act File No. 811-7115
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 2 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 4 X
INSIGHT INSTITUTIONAL SERIES, INC.
(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 January 31, 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:
filed the Notice required by that Rule on __________________ or
intends to file the Notice required by that Rule on or about
____________; or
X during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of Insight Institutional
Series, Inc., which consists of two portfolios: (1) Insight Limited Term
Income Fund, and (2) Insight U.S. Government Fund, is comprised of the
following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-2) Cover Page.
Item 2. Synopsis (1-2) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-2) Financial Highlights; (1-
2) Performance Information.
Item 4. General Description of
Registrant (1-2) General Information; (1-
2) Investment Information; (1-2)
Investment Objective; (1-2)
Investment Policies;
(1-2) Investment Limitations.
Item 5. Management of the Fund (1-2) Insight Institutional Series,
Inc. Information; (1-
2) Management of the Corporation;
(1-2) Distribution of Fund Shares; (1-
2) Administration of the Fund; (1-2)
Expenses of the Fund.
Item 6. Capital Stock and Other
Securities (1-2) Dividends and Distributions; (1-
2) Shareholder Information; (1-2)
Voting Rights; (1-2) Tax
Information; (1-2) Federal
Income Tax; (1-2)
Pennsylvania Corporate and Personal
Property Taxes.
Item 7. Purchase of Securities Being
Offered (1-2) Net Asset Value; (1-
2) Investing in the Fund; (1-2)
Share Purchases; (1-2)
Minimum Investment Required; (1-2)
What Shares Cost.
Item 8. Redemption or Repurchase (1-2) Redeeming Shares; (1-
2) Through a Financial Institution;
(1-2) Directly by Mail;
(1-2) Receiving Payment;(1-2) Accounts
with Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-2) Cover Page.
Item 11. Table of Contents (1-2) Table of Contents.
Item 12. General Information and
History (1-2) General Information About the
Fund.
Item 13. Investment Objectives and
Policies (1-2) Investment Objective and
Policies; (1-
2) Types of Investments; (1-2)
Portfolio Turnover; (1-2)
Investment Limitations.
Item 14. Management of the Fund (1-2) Insight Institutional Series,
Inc. Management.
Item 15. Control Persons and Principal
Holders of Securities (1-2) Fund Ownership.
Item 16. Investment Advisory and Other
Services (1-2) Investment Advisory Services;
(1-2) Administrative Services;
(1-2) Shareholder Services Plan.
Item 17. Brokerage Allocation (1-2) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-2) Purchasing Shares; (1-
2) Determining Net Asset Value.
Item 20. Tax Status (1-2) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1-2) Total Return; (1-2) Yield;
(1-2) Performance Comparisons.
Item 23. Financial Statements Included in Part A.
Insight Limited Term Income Fund
(A Portfolio of Insight Institutional Series, Inc.)
Prospectus
The shares offered by this prospectus represent interests in Insight
Limited Term Income Fund (the "Fund"), a diversified investment portfolio
of Insight Institutional Series, Inc. (the "Corporation"), an open-end,
management investment company (a mutual fund).
The investment objective of the Fund is to seek a high level of current
income consistent with minimum fluctuation in principal value. The Fund's
weighted-average portfolio duration will at all times be limited to three
years or less.
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 shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information dated
January 31, 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 your financial institution.
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.
Prospectus dated January 31, 1995
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or r
redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES*
(AS A PERCENTAGE OF PROJECTED AVERAGE NET ASSETS)
Management Fee (after waiver) (1) 0.00%
12b-1 Fee. None
Total Other Expenses (after expense reimbursement)(2) 0.85%
Shareholder Services Fee 0.25%
Total Fund Operating Expenses 0.85%
(1)The estimated management fee has been reduced to reflect the
anticipated voluntary waiver of the management fee. The adviser
can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.70%.
(2)The Total Fund Operating Expenses are estimated to be 1.96% absent
the anticipated voluntary waiver of the management fee, and the
anticipated voluntary reimbursement of other expenses.
*Total Fund Operating Expenses are estimated based on average
expenses expected to be incurred during the fiscal year ending
September 30, 1995. During the course of this period, expenses may
be more or less than the average amount shown.
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder of the Fund
will bear, either directly or indirectly. For more complete descriptions
of the various costs and expenses, see "Insight Institutional Series, Inc.
Information" and "Investing in the Fund." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
EXAMPLE 1 year 3 years
You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
(2) redemption at the end of each
time period. $9 $ 27
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR
ENDING SEPTEMBER 30, 1995.
GENERAL INFORMATION
The Corporation was incorporated under the laws of the State of Maryland
on October 11, 1993. The Articles of Incorporation permit the Corporation
to offer separate portfolios and classes of shares. As of the date of this
prospectus, the Board of Directors (the "Directors") has established two
separate portfolios: Insight U.S. Government Fund and Insight Limited Term
Income Fund. This prospectus relates only to the shares of Insight Limited
Term Income Fund.
The Fund is designed for institutions seeking current income through a
professionally managed, diversified portfolio investing primarily in
corporate debt obligations. A minimum initial investment of $1 million is
required.
Fund shares are sold and redeemed at net asset value without a sales
load imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to seek a high level of current
income consistent with minimum fluctuation in principal value. The
investment objective cannot be changed without approval of shareholders.
While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of investment grade debt obligations. Under normal
circumstances, the Fund will invest at least 65% of the value of its total
assets in debt obligations rated in one of the three highest categories by
a nationally recognized statistical rating organization. The Fund is not
required to sell securities if the 65% investment level changes due to
increases or decreases in the market value of portfolio securities. The
Fund's weighted-average portfolio duration will at all times be limited to
three years or less.
The net asset value of the Fund is expected to fluctuate with changes in
interest rates and bond market conditions, although this fluctuation should
be more moderate than that of a fund with a longer average portfolio
duration. The adviser, however, will attempt to minimize principal
fluctuation through, among other things, diversification, careful credit
analysis and security selection, and adjustments of the Fund's average
portfolio duration. In periods of rising interest rates and falling bond
prices, the adviser may shorten the Fund's average duration to minimize the
effect of declining bond values on the Fund's net asset value. Conversely,
during times of falling interest rates and rising prices a longer average
duration to three years may be sought. Unless indicated otherwise, the
investment policies may be changed by the Directors without the approval of
shareholders. Shareholders will be notified before any material change in
these investment policies becomes effective.
Acceptable Investments. The Fund invests in a professionally managed,
diversified portfolio consisting primarily of corporate debt obligations,
and may also invest in U.S. government obligations and asset-backed
securities. The Fund may also invest in derivative instruments of such
securities, including instruments with demand features or credit
enhancement, as well as money market instruments and cash.
The securities in which the Fund invests principally are:
o domestic and foreign issues of corporate debt obligations having
floating or fixed rates of interest and rated in one of the four
highest categories by a nationally recognized statistical rating
organization rated Aaa, Aa, A or Baa by Moody's Investors
Service, Inc. ("Moody's"), or AAA, AA, A or BBB by Standard &
Poor's Ratings Group ("Standard & Poor's"), or Fitch Investors
Service, Inc. ("Fitch"), or which are of comparable quality in
the judgment of the adviser;
o rated commercial paper which matures in 270 days or less so long
as at least one rating is considered high quality by a
nationally recognized statistical rating organization (such
ratings would include Prime-1 or Prime-2 by Moody's, A-1 or A-2
by Standard & Poor's, or F-1 or F-2 by Fitch), or which is of
comparable quality in the judgment of the adviser;
o asset-backed securities rated in one of the four highest
categories by a nationally recognized statistical rating
organization, or which are of comparable quality in the judgment
of the adviser;
o direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes and bonds;
o notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as Federal Home Loan Banks, Federal
National Mortgage Association, Government National Mortgage
Association, Farm Credit Banks, Tennessee Valley Authority,
Export-Import Bank of the United States, Commodity Credit
Corporation, Federal Financing Bank, Student Loan Marketing
Association, Federal Home Loan Mortgage Corporation, or National
Credit Union Administration;
o time deposits (including savings deposits and certificates of
deposit) and bankers acceptances in commercial or savings banks
whose accounts are insured by the Bank Insurance Fund ("BIF") or
the Savings Association Insurance Fund ("SAIF"), both of which
are administered by the Federal Deposit Insurance Corporation
("FDIC"), including certificates of deposit issued by and other
time deposits in foreign branches of FDIC insured banks or who
have at least $100 million in capital; and
o repurchase agreements collateralized by eligible investments.
The Fund will not invest in corporate debt obligations having a rating
of less than BBB by Standard & Poor's or Fitch, or Baa by Moody's. Bonds
rated BBB by Standard & Poor's or Fitch, or Baa by Moody's, have
speculative characteristics. Changes in economic conditions or other
circumstances are more likely to lead to weakened capacity to make
principal and interest payments than higher rated bonds. 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. The prices of
fixed income securities fluctuate inversely to the direction of interest
rates. A description of the rating categories is contained in the Appendix
to the Statement of Additional Information.
Corporate Debt Obligations. The Fund invests in corporate debt
obligations, including corporate bonds, notes, medium term notes,
and debentures, which may have floating or fixed rates of
interest.
Floating Rate Corporate Debt Obligations. The Fund expects to
invest in floating rate corporate debt obligations, including
increasing rate securities. Floating rate securities are generally
offered at an initial interest rate which is at or above
prevailing market rates. The interest rate paid on these
securities is then reset periodically (commonly every 90 days) to
an increment over some predetermined interest rate index. Commonly
utilized indices include the three-month Treasury bill rate, the
six-month Treasury bill rate, the one-month or three-month London
Interbank Offered Rate (LIBOR), the prime rate of a bank, the
commercial paper rates, or the longer-term rates on U.S. Treasury
securities.
Some of the floating rate corporate debt obligations in which the
Fund may invest include floating rate corporate debt securities
issued by savings and loans and collateralized by adjustable rate
mortgage loans, also known as collateralized thrift notes. Many of
these collateralized thrift notes have received AAA ratings from
nationally recognized statistical rating organizations.
Collateralized thrift notes differ from traditional "pass through"
certificates in which payments made are linked to monthly payments
made by individual borrowers net of any fees paid to the issuer or
guarantor of such securities. Collateralized thrift notes pay a
floating interest rate which is tied to a pre-determined index,
such as the six-month Treasury bill rate. Floating rate corporate
debt obligations also include securities issued to fund commercial
real estate construction.
Increasing rate securities, which currently do not make up a
significant share of the market in corporate debt securities, are
generally offered at an initial interest rate which is at or above
prevailing market rates. Interest rates are reset periodically
(most commonly every 90 days) at different levels on a
predetermined scale. These levels of interest are ordinarily set
at progressively higher increments over time. Some increasing rate
securities may, by agreement, revert to a fixed rate status. These
securities may also contain features which allow the issuer the
option to convert the increasing rate of interest to a fixed rate
under such terms, conditions, and limitations as are described in
each issue's prospectus.
Fixed Rate Corporate Debt Obligations. The Fund will also invest
in fixed rate securities, including fixed rate securities with
short-term characteristics. Fixed rate securities with short-term
characteristics are long-term debt obligations but are treated in
the market as having short maturities because call features of the
securities may make them callable within a short period of time. A
fixed rate security with short-term characteristics would include
a fixed income security priced close to call or redemption price
or a fixed income security approaching maturity, where the
expectation of call or redemption is high.
Fixed rate securities tend to exhibit more price volatility during
times of rising or falling interest rates than securities with
floating rates of interest. This is because floating rate
securities, as described above, behave like short-term instruments
in that the rate of interest they pay is subject to periodic
adjustments based on a designated interest rate index. Fixed rate
securities pay a fixed rate of interest and are more sensitive to
fluctuating interest rates. In periods of rising interest rates
the value of a fixed rate security is likely to fall. Fixed rate
securities with short-term characteristics are not subject to the
same price volatility as fixed rate securities without such
characteristics. Therefore, they behave more like floating rate
securities with respect to price volatility.
Variable Rate Demand Notes. Variable rate demand notes are long-
term corporate debt instruments that have variable or floating
interest rates and provide the Fund with the right to tender the
security for repurchase at its stated principal amount plus
accrued interest. Such securities typically bear interest at a
rate that is intended to cause the securities to trade at par. The
interest rate may float or be adjusted at regular intervals
(ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Many variable
rate demand notes allow the Fund to demand the repurchase of the
security on not more than seven days prior notice. Other notes
only permit the Fund to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand
Features."
Asset-Backed Securities. Asset-backed securities are created by
the grouping of certain governmental, government related and
private loans, receivables and other lender assets into pools.
Interests in these pools are sold as individual securities.
Payments from the asset pools may be divided into several
different tranches of debt securities, with some tranches entitled
to receive regular installments of principal and interest, other
tranches entitled to receive regular installments of interest,
with principal payable at maturity or upon specified call dates,
and other tranches only entitled to receive payments of principal
and accrued interest at maturity or upon specified call dates.
Different tranches of securities will bear different interest
rates, which may be fixed or floating.
Because the loans held in the asset pool often may be prepaid
without penalty or premium, asset-backed securities can be subject
to higher prepayment risks than most other types of debt
instruments. Prepayment risks on mortgage securities tend to
increase during periods of declining mortgage interest rates,
because many borrowers refinance their mortgages to take advantage
of the more favorable rates. Depending upon market conditions, the
yield that the Fund receives from the reinvestment of such
prepayments, or any scheduled principal payments, may be lower
than the yield on the original mortgage security. As a
consequence, mortgage securities may be a less effective means of
"locking in" interest rates than other types of debt securities
having the same stated maturity and may also have less potential
for capital appreciation. For certain types of asset pools, such
as collateralized mortgage obligations, prepayments may be
allocated to one tranche of securities ahead of other tranches, in
order to reduce the risk of prepayment for the other tranches.
Prepayments may result in a capital loss to the Fund to the extent
that the prepaid mortgage securities were purchased at a market
premium over their stated amount. Conversely, the prepayment of
mortgage securities purchased at a market discount from their
stated principal amount will accelerate the recognition of
interest income by the Fund, which would be taxed as ordinary
income when distributed to the shareholders.
The credit characteristics of asset-backed securities also differ
in a number of respects from those of traditional debt securities.
The credit quality of most asset-backed securities depends
primarily upon the credit quality of the assets underlying such
securities, how well the entity issuing the securities is
insulated from the credit risk of the originator or any other
affiliated entities, and the amount and quality of any credit
enhancement to such securities.
Non-Mortgage Related Asset-Backed Securities. The Fund may invest
in non-mortgage related asset-backed securities including, but not
limited to, interests in pools of receivables, such as credit card
and accounts receivable and motor vehicle and other installment
purchase obligations and leases. These securities may be in the
form of pass-through instruments or asset-backed obligations. The
securities, all of which are issued by non-governmental entities
and carry no direct or indirect government guarantee, are
structurally similar to collateralized mortgage obligations and
mortgage pass-through securities, which are described below.
However, non-mortgage related asset-backed securities present
certain risks that are not presented by mortgage securities,
primarily because these securities do not have the benefit of the
same security interest in the related collateral. Credit card
receivables, for example, are generally unsecured, while the
trustee of asset-backed securities backed by automobile
receivables may not have a proper security interest in all of the
obligations backing such receivables.
Mortgage-Related Asset-Backed Securities. The Fund may also invest
in various mortgage-related asset-backed securities. These types
of investments may include adjustable rate mortgage securities,
collateralized mortgage obligations, real estate mortgage
investment conduits, or other securities collateralized by or
representing an interest in real estate mortgages (collectively,
"mortgage securities"). Many mortgage securities are issued or
guaranteed by government agencies. The interest rates paid on the
mortgage securities in which the Fund invests generally are
readjusted at intervals of one year or less to an increment over
some predetermined interest rate index. Adjustable rate mortgage
securities which use indices that lag changes in market rates
should experience greater price volatility than adjustable rate
mortgage securities that closely mirror the market. In addition,
the value of mortgage securities in which the Fund invests may be
affected if market interest rates rise or fall faster and farther
than any allowable caps or floors on the underlying residential
mortgage loans.
Bank Instruments. The Fund only invests in Bank Instruments either issued
by an institution having capital, surplus and undivided profits over $100
million or insured by the BIF or the SAIF. Bank Instruments may include
Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of Deposit
("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The banks issuing
these instruments are not necessarily subject to the same regulatory
requirements that apply to domestic banks, such as reserve requirements,
loan requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping and the public availability of information.
Credit Facilities. Demand notes are borrowing arrangements between a
corporation and an institutional lender (such as the Fund) payable upon
demand by either party. The notice period for demand typically ranges from
one to seven days, and the party may demand full or partial payment.
Revolving credit facilities are borrowing arrangements in which the lender
agrees to make loans up to a maximum amount upon demand by the borrower
during a specified term. As the borrower repays the loan, an amount equal
to the repayment may be borrowed again during the term of the facility. The
Fund generally acquires a participation interest in a revolving credit
facility from a bank or other financial institution. The terms of the
participation require the Fund to make a pro rata share of all loans
extended to the borrower and entitles the Fund to a pro rata share of all
payments made by the borrower. Demand notes and revolving facilities
usually provide for floating or variable rates of interest.
Credit Enhancement. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. The Fund
typically evaluates the credit quality and ratings of credit enhanced
securities based upon the financial condition and ratings of the party
providing the credit enhancement (the "credit enhancer"), rather than the
issuer. Generally, the Fund will not treat credit enhanced securities as
having been issued by the credit enhancer for diversification purposes.
However, under certain circumstances applicable regulations may require the
Fund to treat the securities as having been issued by both the issuer and
the credit enhancer. The bankruptcy, receivership or default of the credit
enhancer will adversely affect the quality and marketability of the
underlying security.
Average Portfolio Duration. Although the Fund will not maintain a stable
net asset value, the adviser will seek to limit, to the extent consistent
with the Fund's investment objective of current income, the magnitude of
fluctuations in the Fund's net asset value by limiting the dollar-weighted
average duration of the Fund's portfolio. Duration is a commonly used
measure of the potential volatility of the price of a debt security, or the
aggregate market value of a portfolio of debt securities, prior to
maturity. Securities with shorter durations generally have less volatile
prices than securities of comparable quality with longer durations. The
Fund should be expected to maintain a higher average duration during
periods of lower expected market volatility, and a lower average duration
during periods of higher expected market volatility. In any event, the
Fund's dollar-weighted average duration will not exceed three years.
Demand Features. The Fund may acquire securities that are subject to puts
and standby commitments ("demand features") to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the
underlying security. The Fund uses these arrangements to provide the Fund
with liquidity and not to protect against changes in the market value of
the underlying securities. The bankruptcy, receivership or default by the
issuer of the demand feature, or a default on the underlying security or
other event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand features
that are exercisable even after a payment default on the underlying
security are treated as a form of credit enhancement.
Interest Rate Swaps. The Fund reserves the right to engage in interest rate
swap transactions; however, the Securities and Exchange Commission has
questioned whether the Investment Company Act of 1940 permits open-end
investment companies to engage in these transactions. Therefore, the Fund
will not engage in these transactions until the Securities and Exchange
Commission has determined that these transactions are permitted, and the
Fund has included appropriate disclosure in an amendment to this prospectus
and notified shareholders of its intention to engage in these transactions.
An interest rate swap is an agreement between two parties to exchange
interest payment obligations without an exchange of underlying securities.
The Fund intends to utilize interest rate swaps primarily to acquire
floating rates of interest which may be tied to various indices as
described above.
Financial Futures And Options On Futures. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio
against changes in interest rates. Financial futures contracts call for the
delivery of particular debt instruments at a certain time in the future.
The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery
of the instrument at the specified future time.
The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its
portfolio against decreases in value. When the Fund writes a call option on
a futures contract, it is undertaking the obligation of selling a futures
contract at a fixed price at any time during a specified period if the
option is exercised. Conversely, as purchaser of a put option on a futures
contract, the Fund is entitled (but not obligated) to sell a futures
contract at the fixed price during the life of the option.
The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the
Fund's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets. When the
Fund purchases a futures contract, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contract (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.
Risks. When the Fund uses financial futures and options on
financial futures as hedging devices, there is a risk that the
prices of the securities subject to the futures contracts may not
correlate perfectly with the prices of the securities in the
Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities
to market changes. In addition, the Fund's investment adviser
could be incorrect in its expectations about the direction or
extent of market factors such as interest rate movements. In these
events, the Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the
investment adviser will consider liquidity before entering into
options 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.
Repurchase Agreements. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
U.S. government securities or other securities to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and price.
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.
Foreign Securities. The Fund may invest without limitation in foreign
securities, including foreign securities not publicly traded in the United
States. Investments in foreign securities involve special risks that differ
from those associated with investments in domestic securities. The risks
associated with investments in foreign securities relate to political and
economic developments abroad, as well as those that result from the
differences between the regulation of domestic securities and issuers and
foreign securities and issuers. These risks may include, but are not
limited to, expropriation, confiscatory taxation, currency fluctuations,
withholding taxes on interest, limitations on the use or transfer of
assets, political or social instability, ability to obtain or enforce court
judgments abroad and adverse diplomatic developments. Moreover, individual
foreign economies may differ favorably or unfavorably from the domestic
economy in such respects as growth of gross national product, the rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
Additional differences exist between investing in foreign and domestic
securities. Examples of such differences include: less publicly available
information about foreign issuers; credit risks associated with certain
foreign governments; the lack of uniform financial accounting standards
applicable to foreign issuers; less readily available market quotations on
foreign issues; the likelihood that securities of foreign issuers may be
less liquid or more volatile; generally higher foreign brokerage
commissions; and unreliable mail service between countries.
Currency Risks. Foreign securities are denominated in foreign
currencies. Therefore, the value in U.S. dollars of the Fund's
assets and income may be affected by changes in exchange rates and
regulations. Although the Fund values its assets daily in U.S.
dollars, it 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
realize a profit on the difference between the prices at which
they buy and sell currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund
will conduct its foreign currency exchange transactions either on
a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or through forward contracts to
purchase or sell foreign currencies.
Forward Foreign Currency Exchange Contracts. A forward foreign
currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These
contracts are traded directly between currency traders (usually
large commercial banks) and their customers. When the Fund enters
into a contract for the purchase or sale of a security denominated
in a foreign currency, it may want to establish the U.S. dollar
cost or proceeds, as the case may be. By entering into a forward
contract in U.S. dollars for the purchase or sale of the amount of
foreign currency involved in an underlying security transaction,
the Fund is able to protect itself against a possible loss between
trade and settlement dates resulting from an adverse change in the
relationship between the U.S. dollar and such foreign currency.
However, this tends to limit potential gains which might result
from a positive change in such currency relationships.
The Fund will not enter into forward foreign currency exchange
contracts or maintain a net exposure in such contracts where the
Fund would be obligated to deliver an amount of foreign currency
in excess of the value of the Fund's securities or other assets
denominated in that currency or denominated in a currency or
currencies that the adviser believes will reflect a high degree of
correlation with the currency with regard to price movements. The
Fund generally will not enter into forward foreign currency
exchange contracts with a term longer than one year.
Restricted And Illiquid Securities. The Fund intends to invest in
restricted securities. 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. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Directors to
be liquid, non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to 15% of
the value of its net assets.
Lending Of Portfolio Securities. In order to generate additional income,
the Fund may lend portfolio securities on a short-term or a long-term basis
up to one-third of the value of its total assets 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 investment adviser has determined are creditworthy under
guidelines established by the Directors. In these loan arrangements, the
Fund will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned.
When-Issued And Delayed Delivery Transactions. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more/less
than the market value of the securities on the settlement date. The Fund
may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the
sale of such commitments.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a percentage of its cash value with an arrangement to buy it
back on a set date) or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value
of its total assets and pledge up to 15% of the value of those
assets to secure such borrowings; or
o with respect to 75% of the value of its total assets, invest
more than 5% in securities of any one issuer.
The above investment limitations cannot be changed without shareholder
approval. The following investment limitation, however, may be changed by
the Directors without shareholder approval. Shareholders will be notified
before any material change in this investment limitation becomes effective.
The Fund will not:
o invest more than 5% of the value of its total assets in
securities of issuers that have records of less than three years
of continuous operations including the operation of any
predecessor.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and all other
assets, less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased through a financial institution (such as a bank or
investment dealer) who has a sales agreement with the distributor,
Federated Securities Corp., or once an account has been established,
directly from Federated Securities Corp. either by mail or wire. The Fund
reserves the right to reject any purchase request.
Through a Financial Institution. An investor may call his financial
institution to place an order to purchase shares of the Fund. Orders
through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 p.m. (Eastern time) and must be transmitted by the
broker to the Fund before 5:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price.
Directly by Mail. An investor may place an order to purchase shares of the
Fund by mail directly from Federated Securities Corp. once an account has
been established. To purchase shares of the Fund by mail, send a check made
payable to Insight Limited Term Income Fund to: Federated Services Company,
P.O. Box 8604, Boston, Massachusetts 02266-8604.
Conversion to Federal Funds. It is the Fund's policy to be as fully
invested as possible so that maximum interest may be earned. To this end,
all payments from shareholders must be in federal funds or be converted
into federal funds before shareholders begin to earn dividends. State
Street Bank and Trust Company ("State Street Bank") acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
Directly by Wire. To purchase shares of the Fund directly from Federated
Securities Corp. by Federal Reserve wire once an account has been
established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank
receives payment by wire.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1 million.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an
order is received. There is no sales load imposed by the Fund. However,
certain unaffiliated financial institutions may charge fees for services
provided which may relate to ownership of shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to services provided and the fees charged for those
services.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday
through Friday, except 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 during 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.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share account for each shareholder. Share certificates are not issued
unless requested on the application or by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during
the month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Distributions of any net
realized long-term capital gains will be made at least once every twelve
months. Dividends and distributions are automatically reinvested in
additional shares of the Fund on payment dates at net asset value, unless
cash payments are requested by shareholders on the application or by
writing to Federated Securities Corp.
Dividends are declared just prior to determining net asset value. If an
order for shares is placed on the preceding business day, shares purchased
by wire begin earning dividends on the business day wire payment is
received by State Street Bank. If the order for shares and payment by wire
are received on the same day, shares begin earning dividends on the next
business day. Shares purchased by check begin earning dividends on the
business day after the check is converted, upon instruction of the transfer
agent, into federal funds.
Shares earn dividends through the business day that proper written
redemption instructions are received by State Street Bank.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after
State Street Bank receives the redemption request. Redemptions will be made
on days on which the Fund computes its net asset value. Redemption requests
must be received in proper form and can be made through a financial
institution, or directly from the Fund by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling his financial
institution (such as a bank or an investment dealer) to request the
redemption. Shares will be redeemed at the net asset value next determined
after the Fund receives the redemption request from the financial
institution. Redemption requests must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in
order for shares to be redeemed at that day's net asset value. The
financial institution is responsible for promptly submitting redemption
requests and providing proper written redemption instructions to the Fund.
The financial institution may charge customary fees and commissions for
this service. Redemption requests through a registered broker/dealer must
be received by the broker before 4:00 p.m. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for shares to be redeemed at that day's net asset value. If at any
time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on
behalf of a shareholder, an authorization form permitting the Fund to
accept redemption requests by telephone must first be completed. Telephone
redemption instructions may be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or
market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such
as "Directly by Mail," should be considered.
DIRECTLY BY MAIL
Shareholders may also redeem shares by sending a written request to
Federated Services Company, c/o State Street Bank and Trust Company, P.O.
Box 8604, Boston, Massachusetts 02266-8604. This written request must
include the shareholder's name, the Fund name, the Fund account number, and
the share or dollar amount to be redeemed. Shares will be redeemed at their
net asset value next determined after State Street Bank receives the
redemption request.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders may call the Fund for assistance in redeeming by mail.
Signatures. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record
with the Fund, or a redemption payable other than to the shareholder of
record must have signatures on written redemption requests guaranteed by:
o a trust company or commercial bank whose deposits are insured by
the BIF, which is administered by the FDIC;
o a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
o a savings bank or savings and loan association whose deposits
are insured by the SAIF, which is administered by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Fund and its transfer agent
reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT
By Check. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after receipt of a proper
written redemption request provided State Street Bank has received payment
for shares from the shareholder.
By Wire. Normally redemption proceeds will be wired the following business
day, but in no event more than seven days, after receipt of the redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may redeem shares in any account, and pay the proceeds to the shareholder,
if the account balance falls below a required minimum value of $1 million
due to shareholder redemptions. This requirement does not apply, however,
if the balance falls below $1 million because of changes in the Fund's net
asset value. Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
INSIGHT INSTITUTIONAL SERIES, INC. INFORMATION
MANAGEMENT OF THE CORPORATION
Board of Directors. The Fund is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs
and for exercising all the Corporation's powers except those reserved for
the shareholders. The Executive Committee of the Board of Directors handles
the Directors' responsibilities between meetings of the Directors.
Investment Adviser. Investment decisions for the Fund are made by
Federated Advisers (the "Adviser"), the Fund's investment adviser, subject
to direction by the Directors. 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 0.70 of 1% of the Fund's average daily net
assets. Under the investment advisory contract, which provides for
voluntary waivers of expenses by the Adviser, the Adviser may
voluntarily waive some or all of its fee. The Adviser can
terminate this voluntary waiver of some or all of its advisory fee
at any time at its sole discretion. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
Adviser's Background. Federated Advisers, a Delaware business
trust organized on April 11, 1989, is a registered investment
adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees
of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Advisers and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies
and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. Total
assets under management or administration by these and other
subsidiaries of Federated Investors are approximately $76 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.
Portfolio Managers' Background. Deborah A. Cunningham and Randy
Bauer have been the Fund's portfolio managers since its inception.
Ms. Cunningham joined Federated Investors in 1981 and has been a
Vice President of the Fund's investment adviser since 1993. Ms.
Cunningham served as an Assistant Vice President of the investment
adviser from 1989 until 1992, and from 1986 until 1989 she acted
as an investment analyst. Ms. Cunningham is a Chartered Financial
Analyst and received her M.S.B.A. in Finance from Robert Morris
College. Mr. Bauer joined Federated Investors in 1989 and is an
Assistant Vice President of the Fund's investment adviser. Mr.
Bauer served as an Assistant Vice President of the International
Banking Division of 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.
Other Payments to Financial Institutions. In addition to periodic
payments to financial institutions under the Shareholder Services Plan,
certain financial institutions may be compensated by the adviser or its
affiliates for the continuing investment of customers' assets in certain
funds, including the Fund, advised by those entities. These payments will
be made directly by the distributor or adviser from their assets, and will
not be made from the assets of the Fund or by the assessment of a sales
load on shares.
The Glass-Steagall Act limits the ability of a depository institution (such
as a commercial bank or a savings and loan association) to become an
underwriter or distributor of securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
capacities described in this prospectus or should Congress relax current
restrictions on depository institutions, the Directors will consider
appropriate changes in the administrative services.
State securities laws governing the ability of depository
institutions to act as underwriters or distributors of securities may
differ from interpretations given to the Glass-Steagall Act and,
therefore, banks and financial institutions may be required to
register as dealers pursuant to state law.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. 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:
Maximum Administrative Fee Average Aggregate Daily 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 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 to voluntarily waive a portion
of its fee.
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.
Custodian. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
Transfer Agent and Dividend Disbursing Agent. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
Independent Public Accountants. The independent public accountants for
the Fund are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
Shareholders of the Fund pay their allocable portion of Fund and
Corporation expenses.
The Corporation expenses for which shareholders pay their allocable portion
include, but are not limited to, the cost of: organizing the Corporation
and continuing its existence; registering the Corporation with federal and
state securities authorities; Directors' fees; auditors' fees; meetings of
Directors; legal fees of the Corporation; association membership dues and
such non-recurring and extraordinary items as may arise from time to time.
The Fund expenses for which shareholders pay their allocable portion
include, but are not limited to, the cost of: investment advisory and
administrative services; printing prospectuses and other Fund documents for
shareholders; registering the Fund and shares of the Fund with federal and
state securities commissions; taxes and commissions; issuing, purchasing,
repurchasing and redeeming shares; fees for custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents and registrars;
printing, mailing, auditing, accounting and legal expenses; reports to
shareholders and governmental agencies; meetings of shareholders and proxy
solicitations therefor; insurance premiums; and such non-recurring and
extraordinary items as may arise from time to time.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund is entitled to one vote at all meetings of
shareholders. All shares of all portfolios in the Corporation have equal
voting rights except that in matters affecting only a particular portfolio,
only shares of that portfolio are entitled to vote.
As a Maryland Corporation, the Fund is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under
certain circumstances.
Directors may be removed by a majority vote of the shareholders at a
special meeting. A special meeting of shareholders shall be called by the
Directors upon the request of shareholders owning at least 10% of the
Fund's outstanding shares of all series entitled to vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies.
Unless otherwise exempt, shareholders are required to pay federal income
tax on any dividends and other distributions, including capital gains
distributions, received. This applies whether dividends and distributions
are received in cash or as additional shares. Distributions representing
long-term capital gains, if any, will be taxable to shareholders as long-
term capital gains no matter how long the shareholders have held their
shares. Information on the tax status of dividends and distributions is
provided annually.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
The Fund is not subject to Pennsylvania corporate or personal property
taxes. Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its 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
gains 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.
The Fund is sold without any sales charge or other similar non- recurring
charges. From time to time, the Fund may advertise its performance using
certain financial publications and/or compare its
performancetocertainindices.
INSIGHT LIMITED TERM INCOME FUND
(A PORTFOLIO OF INSIGHT INSTITUTIONAL SERIES, INC.)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
Assets:
Cash __________ $300
Liabilities: __ ______________---
___
Net Assets for 30 shares of capital stock outstanding $300
Net Assets Consist of:
Paid-in Capital $300
Total Net Assets $300
Net Asset Value, Offering Price, and Redemption Price Per Share
(net assets of $300/30 shares of capital stock outstanding)
$10.00
NOTES:
(1) Insight Institutional Series, Inc. (the "Corporation") was
established as a Maryland corporation under the Articles of
Incorporation dated October 11, 1993, and has had no operations since
that date other than those relating to organization matters,
including the issuance on December 28, 1993 of 10 shares of the
Insight Limited Term Income Fund at $10.00 per share to Federated
Administrative Services, the Administrator to the Fund. Expenses of
organization incurred by the Corporation, estimated at $33,100, were
borne initially by the Administrator. The Corporation has agreed to
reimburse the Administrator during the five year period following the
date the Corporation's registration first became effective.
(2) Reference is made to "Management of the Corporation,"
"Administration of the Fund," and "Tax Information," in this
Prospectus for a description of the investment advisory fee,
administration and other services and other federal tax aspects of
the Fund.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Insight Institutional Series, Inc.
(Insight Limited Term Income Fund):
We have audited the accompanying statement of assets and liabilities of the
Insight Limited Term Income Fund (an investment portfolio of Insight
Institutional Series, Inc., a Maryland Corporation), as of September 30,
1994. This financial statement is the responsibility of the Corporation's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the aforementioned financial statement presents fairly, in
all material respects, the financial position of Insight Limited Term
Income Fund (an investment portfolio of Insight Institutional Series, Inc.)
as of September 30, 1994, in conformity with generally accepted accounting
principles.
Pittsburgh, Pennsylvania
ARTHUR ANDERSEN LLP
January 25, 1995
ADDRESSES
Insight Limited Term Income Fund
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Distributor
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
Federated Advisers
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Custodian
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts
02266-8604
Transfer Agent and Dividend Disbursing Agent
Federated Services Company
Federated Investors Tower
Pittsburgh, Pennsylania 15222-3779
Independent Public Accountants
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, Pennsylvania 15222
Insight Limited
Term Income Fund
PROSPECTUS
A Diversified Portfolio of
Insight Institutional Series, Inc.
an Open-End, Management
Investment Company
January 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
45765Q201
3112402A (1/95)
INSIGHT LIMITED TERM INCOME FUND
(A PORTFOLIO OF INSIGHT INSTITUTIONAL SERIES, INC.)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Insight Limited Term Income Fund (the "Fund") dated
January 31, 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 January 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE
FUND 1
INVESTMENT OBJECTIVE AND
POLICIES 1
Types of Investments 1
Non-Mortgage Related Asset-
Backed Securities 1
Adjustable Rate Mortgage
Securities ("ARMS") 1
Collateralized Mortgage
Obligations ("CMOs") 2
Real Estate Mortgage
Investment Conduits
("REMICs") 2
Resets of Interest 2
Caps and Floors 2
Foreign Bank Instruments 3
Futures and Options
Transactions 3
MEDIUM TERM NOTES AND DEPOSIT
NOTES 4
Average Life 4
Weighted Average Portfolio
Duration 5
When-Issued and Delayed
Delivery Transactions 5
Lending of Portfolio
Securities 5
Restricted and Illiquid
Securities 5
Repurchase Agreements 6
Reverse Repurchase
Agreements 6
Portfolio Turnover 6
INVESTMENT LIMITATIONS 6
INSIGHT INSTITUTIONAL SERIES,
INC. MANAGEMENT 8
Officers and Directors 8
The Funds 12
Fund Ownership 12
Directors Compensation 13
Director Liability 13
INVESTMENT ADVISORY SERVICES 14
Adviser to the Fund 14
Advisory Fees 14
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT 14
ADMINISTRATIVE SERVICES 15
BROKERAGE TRANSACTIONS 15
PURCHASING SHARES 15
DETERMINING NET ASSET VALUE 15
Determining Market Value of
Securities 15
REDEEMING SHARES 16
Redemption in Kind 16
TAX STATUS 16
The Fund's Tax Status 16
Shareholders' Tax Status 16
TOTAL RETURN 16
YIELD 17
PERFORMANCE COMPARISONS 17
APPENDIX 18
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio of Insight Institutional Series, Inc. (the
"Corporation"). The Corporation was incorporated under the laws of the
State of Maryland on October 11, 1993.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to seek a high level of current
income consistent with minimum fluctuation in principal value. The
investment objective stated above cannot be changed without approval of
shareholders. The investment policies stated below may be changed by the
Board of Directors ("Directors") without shareholder approval. Shareholders
will be notified before any material change in the investment policies
becomes effective.
TYPES OF INVESTMENTS
The Fund pursues its investment objective by investing primarily in a
diversified portfolio of U.S. government securities and investment grade
corporate debt obligations and asset-backed securities. At least 65% of the
value of the total assets of the Fund shall be invested in securities that
are rated in one of the three highest categories by a nationally recognized
statistical rating organization rated Aaa, Aa, or A by Moody's Investors
Service, Inc. ("Moody's"), or AAA, AA, or A by Standard & Poor's Ratings
Group ("Standard & Poor's") or Fitch Investors Service, Inc. ("Fitch"). The
Fund's weighted-average portfolio duration will at all times be limited to
three years or less.
The investment portfolio includes the following securities:
o corporate debt securities rated within the four highest categories by a
nationally recognized statistical rating organization, including bonds,
notes, and indentures;
o asset-backed securities;
o U.S. government securities, including U.S. Treasury bills, notes, and
bonds, and securities issued by agencies and instrumentalities of the
U.S. government; and
o repurchase agreements.
NON-MORTGAGE RELATED ASSET-BACKED SECURITIES
Non-mortgage related asset-backed securities present certain risks that are
not presented by mortgage-backed securities. Primarily, these securities do
not have the benefit of the same security interest in the related
collateral. Credit card receivables are generally unsecured and the debtors
are entitled to the protection of a number of state and federal consumer
credit laws, many of which give such debtors the right to set off certain
amounts owed on the credit cards, thereby reducing the balance due. Most
issuers of asset-backed securities backed by motor vehicle installment
purchase obligations permit the servicer of such receivables to retain
possession of the underlying obligations. If the servicer sells these
obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related asset-
backed securities. Further, if a vehicle is registered in one state and is
then registered because the owner and the obligor move to another state,
such re-registration could defeat the original security interest in the
vehicle in certain cases. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under
state laws, the trustee with the holders of asset-backed securities backed
by automobile receivables may not have a proper security interest in all of
the obligations backing such receivables. Therefore, there is a possibility
that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS")
ARMS are pass-through mortgage securities representing interests in
adjustable rather than fixed interest rate mortgages. The ARMS in which the
Fund invests are issued by the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), and the
Federal Home Loan Mortgage Corporation ("FHLMC") as well as other private
issuers and are actively traded. The underlying mortgages which
collateralize ARMS issued by GNMA are fully guaranteed by the Federal
Housing Administration ("FHA") or Veterans Administration ("VA"), while
those collateralizing ARMS issued by FHLMC or FNMA are typically
conventional residential mortgages conforming to strict underwriting size
and maturity constraints.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
CMOs are bonds issued by single-purpose, stand-alone finance subsidiaries
or trusts of financial institutions, government agencies, investment
bankers, or companies related to the construction industry. CMOs purchased
by the Fund may be:
o collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government;
o collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities;
o collateralized by pools of mortgages in which payment of principal and
interest is dependent upon the underlying pool of mortgages with no U.S.
government guarantee; or
o securities in which the proceeds of the issuance are invested in
mortgage securities and payment of the principal and interest is
supported by the credit of an agency or instrumentality of the U.S.
government.
All CMOs purchased by the Fund are investment grade, as rated by a
nationally recognized statistical rating organization.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS")
REMICs are offerings of multiple class real estate mortgage-backed
securities which qualify and elect treatment as such under provisions of
the Internal Revenue Code. Issuers of REMICs may take several forms, such
as trusts, partnerships, corporations, associations, or segregated pools of
mortgages. Once REMIC status is elected and obtained, the entity is not
subject to federal income taxation. Instead, income is passed through the
entity and is taxed to the person or persons who hold interests in the
REMIC. A REMIC interest must consist of one or more classes of "regular
interests," some of which may offer adjustable rates of interest, and a
single class of "residual interests." To qualify as a REMIC, substantially
all the assets of the entity must be in assets directly or indirectly
secured principally by real property.
RESETS OF INTEREST
The interest rates paid on the ARMS, CMOs, and REMICs in which the Fund
invests generally are readjusted at intervals of one year or less to an
increment over some predetermined interest rate index. There are two main
categories of indices: those based on U.S. Treasury securities and those
derived from a calculated measure, such as a cost of funds index or a
moving average of mortgage rates. Commonly utilized indices include the one-
year and five-year constant maturity Treasury Note rates, the three-month
Treasury Bill rate, the 180-day Treasury Bill rate, rates on longer-term
Treasury securities, the National Median Cost of Funds, the one-month or
three-month London Interbank Offered Rate (LIBOR), the prime rate of a
specific bank, or commercial paper rates. Some indices, such as the one-
year constant maturity Treasury Note rate, closely mirror changes in market
interest rate levels.
To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence, ARMS
which use indices that lag changes in market rates should experience
greater price volatility than adjustable rate mortgage securities that
closely mirror the market.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs, and REMICs in
which the Fund invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may
change up or down: (1) per reset or adjustment interval, and (2) over the
life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and
interest payments rather than limiting interest rate changes. These payment
caps may result in negative amortization.
The value of mortgage securities in which the Fund invests may be affected
if market interest rates rise or fall faster and farther than the allowable
caps or floors on the underlying residential mortgage loans. Additionally,
even though the interest rates on the underlying residential mortgages are
adjustable, amortization and prepayments may occur, thereby causing the
effective maturities of the mortgage securities in which the Fund invests
to be shorter than the maturities stated in the underlying mortgages.
FOREIGN BANK INSTRUMENTS
Eurodollar Certificates of Deposit ("ECDs"), Eurodollar Time Deposits
("ETDs"), Yankee Certificates of Deposit ("Yankee CDs"), and Europaper are
subject to somewhat different risks than domestic obligations of domestic
issuers. Examples of these risks include international, economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholdings
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing bank, and the possible impact of interruptions
of the flow of international currency transactions. Different risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan requirements, loan limitations,
examinations, accounting, auditing, and recording keeping and the public
availability of information. These factors will be carefully considered by
the Fund's adviser in selecting investments for the Fund.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying
and selling financial futures contracts, buying put options on portfolio
securities and listed put options on futures contracts, and writing call
options on futures contracts. The Fund may also write covered call options
on portfolio securities to attempt to increase its current income. The Fund
currently does not intend to invest more than 5% of its total assets in
options transactions.
FINANCIAL FUTURES CONTRACTS
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. In the fixed income securities market, price moves 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
agree to purchase securities in the future at a predetermined price
(i.e., "go long") to hedge against a decline in market interest
rates.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures
contracts. 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 contract
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.
The Fund would purchase put options on futures contracts to protect
portfolio securities against decreases in value resulting from an
anticipated increase in market interest rates. 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 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 the premium
paid for the contract will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts to hedge its portfolio
against an increase in market interest rates. 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 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 goes down 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 offset the drop in value of the Fund's fixed income
portfolio which is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of
it by the buyer, the Fund may close out the option by buying an
identical option. If the hedge is successful, the cost of the second
option will be less than the premium received by the Fund for the
initial option. The net premium income of the Fund will then offset
the decrease in value of the hedged securities.
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.
"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 or U.S. Treasury bills 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 futures contract initial margin 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.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. 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
The Fund may also write covered call options to generate income. 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. 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).
MEDIUM TERM NOTES AND DEPOSIT NOTES
Medium term notes ("MTNs") and Deposit Notes are similar to corporate debt
obligations as described in the prospectus. MTNs and Deposit Notes trade
like commercial paper, but may have maturities from 9 months to ten years.
AVERAGE LIFE
Average life, as applicable to asset-backed securities, is computed by
multiplying each principal repayment by the time of payment (months or
years from the evaluation date), summing these products, and dividing the
sum by the total amount of principal repaid. The weighted-average life is
calculated by multiplying the maturity of each security in a given pool by
its remaining balance, summing the products, and dividing the result by the
total remaining balance.
WEIGHTED AVERAGE PORTFOLIO DURATION
Duration is a commonly used measure of the potential volatility of the
price of a debt security, or the aggregate market value of a portfolio of
debt securities, prior to maturity. Duration measures the magnitude of the
change in the price of a debt security relative to a given change in the
market rate of interest. The duration of a debt security depends upon three
primary variables: the security's coupon rate, maturity date and the level
of market interest rates for similar debt securities. Generally, debt
securities with lower coupons or longer maturities will have a longer
duration than securities with higher coupons or shorter maturities.
Duration is calculated by dividing the sum of the time-weighted values of
cash flows of a security or portfolio of securities, including principal
and interest payments, by the sum of the present values of the cash flows.
Certain debt seucrities, such as asset-backed securities, may be subject to
prepayment at irregular intervals. The duration of these instruments will
be calculated based upon assumptions established by the investment adviser
as the the probable amount and sequence of principal prepayments.
Mathematically, duration is measured as follows:
Duration = PVCF1(1) + PVCF2(2) + PVCF3(3) + ... + PVCFn(n)
PVTCF PVTCF PVTCF PVTCF
where
PVCTFt = the present value of the cash flow in period t discounted at
the prevailing yield-to-maturity
t = the period when the cash flow is received
n = remaining number of periods until maturity
PVTCF = total present value of the cash flow from the bond where the
present value is determined using the prevailing yield-to-
maturity.
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 are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of more
than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
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 Directors to determine the liquidity of certain
restricted securities is permitted under the Securities and Exchange
Commission ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a non-
exclusive safe harbor for certain secondary market transactions involving
securities subject to restrictions on resale under federal securities laws.
The Rule provides an exemption from registration for resales of otherwise
restricted securities to qualified institutional buyers. The Rule was
expected to further enhance the liquidity of the secondary market for
securities eligible for resale under Rule 144A. The Fund believes that the
Staff of the SEC has left the question of determining the liquidity of all
restricted securities to the Directors. The Directors 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.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that a defaulting seller
files for bankruptcy or becomes insolvent, disposition of securities by the
Fund might be delayed pending court action. The Fund believes that under
the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. A reverse
repurchase transaction is 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. The use of reverse repurchase
agreements may enable the Fund to avoid selling portfolio instruments at a
time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will
be able to avoid selling portfolio instruments at a disadvantageous time.
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 are maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt
to achieve the Fund's investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual rate of
portfolio turnover exceeding 100%.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell securities short or purchase securities on
margin, other than in connection with the purchase and sale of
financial futures, but may obtain such short-term credits as are
necessary for clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets, including the
amounts borrowed. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding. During the period any reverse repurchase agreements are
outstanding, but only to the extent necessary to assure completion of
the reverse repurchase agreements, the Fund will restrict the
purchase of portfolio instruments to money market instruments
maturing on or before the expiration date of the reverse repurchase
agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the
borrowing. Margin deposits for the purchase and sale of financial
futures contracts and related options are not deemed to be a pledge.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer if as
a result more than 5% of the value of its total assets would be
invested in the securities of that issuer or the Fund would own more
than 10% of the outstanding voting securities of that issuer.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale
of real estate or in securities which are secured by real estate or
interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, except that the Fund
may purchase and sell financial futures contracts and related
options.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value 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 Directors.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of 1933
in connection with the sale of restricted securities which the Fund
may purchase pursuant to its investment objective, policies, and
limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. This shall not
prevent the Fund from purchasing or holding U.S. government
obligations, money market instruments, variable rate demand notes,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies and limitations.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry, except it may invest 25% or more of the value of
its total assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total
assets in securities of companies, including their predecessors, that
have been in operation for less than three years. With respect to
asset-backed securities, the Fund will treat the originator of the
asset pool as the company issuing the security for purposes of
determining compliance with this limitation.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral
exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may not own securities of other investment companies except
as part of a merger, consolidation, reorganization, or other
acquisition.
DEALING IN PUTS AND CALLS
The Fund will not purchase puts, calls, straddles, spreads, or any
combination of them, if by reason thereof the value of such
securities would exceed 5% of its total assets.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of the 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 does not expect to borrow money, pledge securities or invest in
stock of closed-end investment companies during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."
INSIGHT INSTITUTIONAL SERIES, INC. MANAGEMENT
OFFICERS AND DIRECTORS
Officers and Directors are listed with their addresses, principal
occupations, and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp.,
Federated Services Company, Federated Administrative Services, Inc., and
the Funds (as defined below).
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
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, Vice President of the Corporation.
Thomas G. Bigley
28th Floor
One Oxford Centre
Pittsburgh, PA 15219
Director
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
Director
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
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
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
Director
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
__________________________________________________________________________
_____________________________
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Vice President and Director
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 L. Flaherty, Jr.@
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
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
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
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.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director
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
Director
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
__________________________________________________________________________
_____________________________
J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp.; President, Passport Research, Ltd.; Trustee, Federated
Administrative Services, Federated Services Company, and Federated
Shareholder Services; President or Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairman and Director of the Corporation.
Edward C. Gonzales*
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.; Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Director is deemed to be an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended.
@ Member of the Fund's Executive Committee. The Executive Committee of
the Board of Directors handles the responsibilities of the Board of
Directors between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series, II; Cash Trust
Series,Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth Trust; Federated High
Yield Trust; Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Institutional Trust; Federated
Intermediate Government Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government Trust; Federated Short-Term
U.S. Government Trust; Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for
U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc.-1999; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; The Medalist Funds; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds;
The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the outstanding shares of the
Fund.
DIRECTORS COMPENSATION
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO DIRECTORS FROM
POSITION WITH FROM CORPORATION
CORPORATION CORPORATION*# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Corporation and
Chairman and Director 69 other investment companies in the Fund
Complex
Thomas G. Bigley, $ -0- $ 24,991 for the Corporation and
Director 50 other investment companies in the Fund
Complex
John T. Conroy, Jr., $ -0- $ 136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
William J. Copeland, $ -0- $ 136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
James E. Dowd, $ -0- $ 136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Richard B. Fisher, $ -0- $ -0- for the Corporation and
President andDirector 9 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $ -0- $136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Peter E. Madden, $ -0- $ 104,880 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Gregor F. Meyer, $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Wesley W. Posvar, $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Marjorie P. Smuts, $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
*Information is furnished for the period from October 12, 1993,
organization of the Corporation, to September 30, 1994.
#The aggregate compensation is provided for the Corporation which is
comprised of 2 portfolios.
DIRECTOR LIABILITY
The Corporation's Articles of Incorporation provide that the Directors will
not be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers (the "Adviser"). It
is a subsidiary of Federated Investors. All of 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. John F. Donahue,
Chairman and Trustee of Federated Advisers, is Chairman and Trustee of
Federated Investors, and Chairman and Director of the Fund. J. Christopher
Donahue, President and Trustee of Federated Advisers, is President and
Trustee of Federated Investors, Trustee of Federated Administrative
Services and Federated Services Company, and Vice President of the Fund.
John W. McGonigle, Vice President, Secretary and Trustee of Federated
Advisers, is Vice President, Secretary, General Counsel, and Trustee of
Federated Investors, Trustee of Federated Services Company, Executive Vice
President, Secretary, and Trustee of Federated Administrative Services,
Executive Vice President and Director of Federated Securities Corp., and
Vice President and Secretary of the Fund. The Adviser shall not be liable
to the Fund or any shareholder for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed upon it by
its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
STATE EXPENSE LIMITATION
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 fee, 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 will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
expense limitation, the investment advisory fee paid will be reduced
by the amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be waived by the
Adviser will be limited, in any single fiscal year, by the amount of
the investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
SHAREHOLDER SERVICING
In return for providing shareholder servicing to its customers who from
time to time may be owners of record or beneficial owners of shares of the
Fund, a financial institution may receive payments from the Fund at a rate
not exceeding 0.25 of 1% of the average daily net assets of the shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
services may include, but are not limited to, the provision of personal
services and maintenance of shareholder accounts.
Federated Securities Corp. may also pay financial institutions a fee based
upon the net asset value of the Fund shares beneficially owned by the
financial institution's clients or customers. This fee is in addition to
amounts paid under the Shareholder Services Plan and will be reimbursed by
the Adviser.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee paid to the transfer agent is based upon the
size, type and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Corporation's accounting
records. The fee paid for this service is based upon the level of the
Fund's average net assets for the period plus out-of-pocket expenses.
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus.
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
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Directors.
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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated funds and other
accounts. To the extent that receipt of these services may supplant
services for which the Adviser or its affiliates might otherwise have paid,
it would tend to reduce their expenses.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open
for business. The procedure for purchasing shares of the Fund is explained
in the prospectus under "Investing in the Fund."
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 values of the Fund's securities are determined as follows:
o as provided by an independent pricing service;
o for short-term obligations, according to the mean bid and asked prices,
as furnished by an independent pricing service, or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost unless the Directors determine this is not
fair value; or
o at fair value as determined in good faith by the Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o other market data.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for
the cost of wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Corporation is obligated to redeem shares solely in cash up to $250,000
or 1% of the Fund's net asset value, whichever is less, for any one
shareholder within a 90-day period.
Any redemption beyond this amount will also be in cash unless the Directors
determine that payments should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way that net asset value is determined. The
portfolio instruments will be selected in a manner that the Directors deem
fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
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.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. No portion of any income
dividend paid by the Fund is eligible for the dividends received deduction
available to corporations.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have
held the Fund shares.
TOTAL RETURN
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the offering price per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
The yield of the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the offering price per share of the
Fund on the last day of the period. This value is 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 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio duration;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the 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 yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
o MERRILL LYNCH SHORT-TERM DEBT INDEX.
O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in offering price over a
specific period of time. From time to time, the Fund will quote its
Lipper ranking in the "Short-Term Investment Grade Debt Funds" category
in advertising and sales literature.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
APPENDIX
STANDARD AND POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
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.
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 to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-
1 repayment capacity will normally be evidenced by the following
characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structure with 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.
STANDARD AND POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This designation 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.
FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having the strongest degree of assurance for timely payment.
FITCH-2--(VERY GOOD GRADE) ISSUES
Insight U.S. Government Fund
(A Portfolio of Insight Institutional Series, Inc.)
Prospectus
The shares offered by this prospectus represent interests in Insight U.S.
Government Fund (the "Fund"), a diversified investment portfolio of Insight
Institutional Series, Inc. (the "Corporation"), an open-end, management
investment company (a mutual fund).
The investment objective of the Fund is to provide current income. The Fund
invests primarily in a diversified portfolio of U.S. government securities.
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 shares of the Fund. Keep this prospectus for future
reference.
The Fund has also filed a Statement of Additional Information dated
January 31, 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 your financial institution.
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.
Prospectus dated January 31, 1995
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price) None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of
offering price) None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or
redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES*
(AS A PERCENTAGE OF PROJECTED AVERAGE NET ASSETS)
Management Fee (after waiver) (1) 0.00%
12b-1 Fee. None
Total Other Expenses (after expense reimbursement)(2) 0.85%
Shareholder Services Fee 0.25%
Total Fund Operating Expenses 0.85%
(1)The estimated management fee has been reduced to reflect the
anticipated voluntary waiver of the management fee. The adviser
can terminate this voluntary waiver at any time at its sole
discretion. The maximum management fee is 0.70%.
(2)The Total Fund Operating Expenses are estimated to be 1.96% absent
the anticipated voluntary waiver of the management fee, and the
anticipated voluntary reimbursement of other expenses.
*Total Fund Operating Expenses are estimated based on average
expenses expected to be incurred during the fiscal year ending
September 30, 1995. During the course of this period, expenses may
be more or less than the average amount shown.
The purpose of this table is to assist an investor in
understanding the various costs and expenses that a shareholder of the Fund
will bear, either directly or indirectly. For more complete descriptions
of the various costs and expenses, see "Insight Institutional Series, Inc.
Information" and "Investing in the Fund." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
EXAMPLE 1 year 3 years
You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and
(2) redemption at the end of each
time period. $9 $ 27
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. THIS EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR
ENDING SEPTEMBER 30, 1995.
INSIGHT U.S. GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Independent Public Accountants.
Year Ended
September 30, 1994*
Net asset value, beginning of period $10.00
Income from investment operations
Net investment income 0.29
Net realized and unrealized gain (loss) on investments
(0.01)
Total from investment operations 0.28
Less distributions
Dividends to shareholders from net investment income
(0.29)
Net asset value, end of period $ 9.99
Total return N/A
Ratios to Average Net Assets
Expenses 0% (a)
Net Investment Income 3.71% (a)
Expense waiver/reimbursement (b) 19.68% (a)
Supplemental Data
Net assets, end of period (000 omitted)
$100
Portfolio turnover rate 104%
*Reflects operations for the period from December 15, 1993 (start of
business) to September 30, 1994.
For the period ended September 30, 1994, the only sales of shares were to
Federated Administrative Services,
the Administrator of the Fund.
(a) Computed on an annualized basis.
(b) The Adviser waived $13,579 of the investment advisory fee and
reimbursed other expenses, which represents 17.18% of average net assets,
to comply with certain state expense limitations. The remainder of the
waiver/reimbursement was voluntary. This expense decrease is reflected in
both the expense and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Corporation was incorporated under the laws of the State of Maryland
on October 11, 1993. The Articles of Incorporation permit the Corporation
to offer separate portfolios and classes of shares. As of the date of this
prospectus, the Board of Directors (the "Directors") has established two
separate portfolios: Insight U.S. Government Fund and Insight Limited Term
Income Fund. This prospectus relates only to the shares of Insight U.S.
Government Fund.
The Fund is designed for institutions seeking current income through a
professionally managed, diversified portfolio of U.S. government
securities. A minimum initial investment of $1 million is required.
Fund shares are sold and redeemed at net asset value without a sales
load imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders.
While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies
described in this prospectus.
INVESTMENT POLICIES
The Fund will limit its investments to those that are permitted for
purchase by federally chartered savings associations pursuant to applicable
rules, regulations or interpretations of the Office of Thrift Supervision
and by federal credit unions under the Federal Credit Union Act and the
rules, regulations and interpretations of the National Credit Union
Administration. Should additional permitted investments be allowed as a
result of future changes in applicable regulations or federal laws, the
Fund reserves the right, without shareholder approval, to make such
investments consistent with the Fund's investment objective, policies and
limitations. Further, should existing statutes or regulations change so as
to cause any securities held by the Fund to become ineligible for purchase
by federally chartered savings associations or federal credit unions, the
Fund will dispose of those securities at times advantageous to the Fund.
As operated within the limitations applicable to investments by federally
chartered savings associations and federal credit unions, and pursuant to
current interpretation by the Office of the Comptroller of the Currency,
the Fund will also serve as an appropriate vehicle for a national bank as
an investment for its own account.
The investment policies described below cannot be changed without
shareholder approval.
Acceptable Investments. The Fund pursues its investment objective by
investing primarily in a diversified portfolio of U.S. government
securities. Under normal circumstances, the Fund will invest at least 65%
of the value of its total assets in securities that are issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The
securities in which the Fund invests principally are:
o direct obligations of the U.S. Treasury, such as U.S. Treasury
bills, notes and bonds;
o obligations of U.S. government agencies or instrumentalities,
such as Federal Home Loan Banks, Federal National Mortgage
Association, Government National Mortgage Association, Banks for
Cooperatives (including National Bank for Cooperatives), ^Farm
Credit Banks, Tennessee Valley Authority, Export-Import Bank of
the United States, Commodity Credit Corporation, Federal
Financing Bank, Student Loan Marketing Association, Federal Home
Loan Mortgage Corporation, or National Credit Union
Administration; and
o repurchase agreements collateralized by eligible investments.
The government securities in which the Fund may invest are backed in a
variety of ways by the U.S. government or its agencies or
instrumentalities. Some of these securities, such as Government National
Mortgage Association ("Ginnie Mae") mortgage-backed securities, are backed
by the full faith and credit of the U.S. government. Other securities, such
as obligations of the Federal National Mortgage Association ("Fannie Mae")
or Federal Home Loan Mortgage Corporation ("Freddie Mac"), are backed by
the credit of the agency or instrumentality issuing the obligations, but
not the full faith and credit of the U.S. government. No assurances can be
given that the U.S. government will provide financial support to these
other agencies or instrumentalities, because it is not obligated to do so.
Mortgage-Backed Securities. Mortgage-backed securities are securities that
directly or indirectly represent a participation in, or are secured by and
payable from, mortgage loans on real property. There are currently three
basic types of mortgage-backed securities: (i) those issued or guaranteed
by the U.S. government or one of its agencies or instrumentalities, such as
Ginnie Mae, Fannie Mae and Freddie Mac; (ii) those issued by private
issuers that represent an interest in or are collateralized by mortgaged-
backed securities issued or guaranteed by the U.S. government or one of its
agencies or instrumentalities; and (iii) those issued by private issuers
that represent an interest in or are collateralized by whole loans or
mortgage-backed securities without a government guarantee but usually
having some form of private credit enhancement.
Adjustable Rate Mortgage Securities ("ARMS"). ARMS are pass-
through mortgage securities with adjustable rather than fixed
interest rates. The ARMS in which the Fund invests are issued by
Ginnie Mae, Fannie Mae, and Freddie Mac and are actively traded.
The underlying mortgages which collateralize ARMS issued by Ginnie
Mae are fully guaranteed by the Federal Housing Administration or
Veterans Administration, while those collateralizing ARMS issued
by Fannie Mae or Freddie Mac are typically conventional
residential mortgages conforming to strict underwriting size and
maturity constraints.
Collateralized Mortgage Obligations ("CMOs"). CMOs are debt
obligations collateralized by mortgage loans or mortgage pass-
through securities. Typically, CMOs are collateralized by Ginnie
Mae, Fannie Mae or Freddie Mac certificates, but may be
collateralized by whole loans or private pass-through securities.
CMOs may have fixed or floating rates of interest.
The Fund will invest only in CMOs that are rated AAA by a
nationally recognized statistical rating organization. The CMOs in
which the Fund may invest may be: (i) securities which are
collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (ii) securities which are
collateralized by pools of mortgages in which payment of principal
and interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; and (iii) other
securities in which the proceeds of the issuance are invested in
mortgage-backed securities and payment of the principal and
interest is supported by the credit of an agency or
instrumentality of the U.S. government.
Real Estate Mortgage Investment Conduits ("REMICs"). REMICs are
offerings of multiple class real estate mortgage-backed securities
which qualify and elect treatment as such under provisions of the
Internal Revenue Code. Issuers of REMICs may take several forms,
such as trusts, partnerships, corporations, associations, or
segregated pools of mortgages. Once REMIC status is elected and
obtained, the entity is not subject to federal income taxation.
Instead, income is passed through the entity and is taxed to the
person or persons who hold interests in the REMIC. A REMIC
interest must consist of one or more classes of "regular
interests," some of which may offer adjustable rates of interest,
and a single class of "residual interests." To qualify as a REMIC,
substantially all the assets of the entity must be in assets
directly or indirectly secured principally by real property.
Regulatory Compliance. In accordance with the Rules and
Regulations of the NCUA, unless the purchase is made solely to
reduce interest-rate risk, the Fund will not invest in any CMO or
REMIC security that meets any of the following three tests: (1)
the CMO or REMIC has an expected average life greater than 10
years; (2) the average life of the CMO or REMIC extends by more
than 4 years assuming an immediate and sustained parallel shift in
the yield curve of plus 300 basis points, or shortens by more than
6 years assuming an immediate and sustained parallel shift in the
yield curve of minus 300 basis points; or (3) the estimated change
in the price of the CMO or REMIC is more than 17%, due to an
immediate and sustained parallel shift in the yield curve of plus
or minus 300 basis points.
Neither test (1) nor (2) above apply to floating or adjustable
rate CMOs or REMICs with all of the following characteristics:
(a) the interest rate of the instrument is reset at least
annually; (b) the interest rate is below the contractual cap of
the instrument; (c) the instrument is tied to a widely-used market
rate; and (d) the instrument varies directly (not inversely) and
is reset in proportion with the index's changes.
The Fund may not purchase a residual interest in a CMO or REMIC.
In addition, the Fund will not purchase zero coupon securities
with maturities greater than 10 years.
Mortgage-backed securities may be subject to certain prepayment risks
because the underlying mortgage loans may be prepaid without penalty or
premium. Prepayment risks on mortgage securities tend to increase during
periods of declining mortgage interest rates, because many borrowers
refinance their mortgages to take advantage of the more favorable rates.
Depending upon market conditions, the yield that the Fund receives from the
reinvestment of such prepayments, or any scheduled principal payments, may
be lower than the yield on the original mortgage security. As a
consequence, mortgage securities may be a less effective means of "locking
in" interest rates than other types of debt securities having the same
stated maturity and may also have less potential for capital appreciation.
For certain types of asset pools, such as collateralized mortgage
obligations, prepayments may be allocated to one tranche of securities
ahead of other tranches, in order to reduce the risk of prepayment for the
other tranches.
Prepayments may result in a capital loss to the Fund to the extent that the
prepaid mortgage securities were purchased at a market premium over their
stated amount. Conversely, the prepayment of mortgage securities purchased
at a market discount from their stated principal amount will accelerate the
recognition of interest income by the Fund, which would be taxed as
ordinary income when distributed to the shareholders.
Repurchase Agreements. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
U.S. government securities or other securities to the Fund and agree at the
time of sale to repurchase them at a mutually agreed upon time and price.
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.^
Restricted And Illiquid Securities. The Fund intends to invest in
restricted securities. 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. The Fund will limit investments in illiquid securities,
including certain restricted securities not determined by the Directors to
be liquid, and repurchase agreements providing for settlement in more than
seven days after notice, to 15% of the value of its net assets.
Lending Of Portfolio Securities. In order to generate additional income,
the Fund may lend portfolio securities on a short-term or a long-term basis
up to one-third of the value of its total assets 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 investment adviser has determined are creditworthy under
guidelines established by the Directors. In these loan arrangements, the
Fund will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned.
When-Issued And Delayed Delivery Transactions. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may
vary from the purchase prices. Accordingly, the Fund may pay more/less
than the market value of the securities on the settlement date. The Fund
may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at
later dates. The Fund may realize short-term profits or losses upon the
sale of such commitments.
INVESTMENT LIMITATIONS
The Fund will not:
o borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for
a percentage of its cash value with an arrangement to buy it
back on a set date) or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value
of its total assets and pledge up to 15% of the value of those
assets to secure such borrowings;
o invest more than 5% of the value of its total assets in
securities of issuers that have records of less than three years
of continuous operations including the operation of any
predecessor. (This limitation does not apply to issuers of asset-
backed securities that are collateralized by securities or
mortgages issued or guaranteed as to prompt payment of principal
and interest by an agency of the U.S. government); or
o invest more than 10% of its total assets in securities issued by
other investment companies. (This limitation does not apply to
securities acquired as a part of a merger, consolidation,
reorganization or other acquisition.) To the extent that the
Fund invests in securities issued by other investment companies,
the Fund will indirectly bear its proportionate share of any
fees and expenses paid by such companies in addition to the fees
and expenses payable directly by the Fund.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by
dividing the sum of the market value of all securities and all other
assets, less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open.
Shares may be purchased through a financial institution (such as a bank or
investment dealer) who has a sales agreement with the distributor,
Federated Securities Corp., or once an account has been established,
directly from Federated Securities Corp. either by mail or wire. The Fund
reserves the right to reject any purchase request.
Through A Financial Institution. An investor may call his financial
institution to place an order to purchase shares of the Fund. Orders
through a financial institution are considered received when the Fund is
notified of the purchase order. Purchase orders must be received by the
financial institution and transmitted to the Fund before 4:00 p.m. (Eastern
time) in order for shares to be purchased at that day's price. It is the
financial institution's responsibility to transmit orders promptly.
Purchase orders through a registered broker/dealer must be received by the
broker before 4:00 p.m. (Eastern time) and must be transmitted by the
broker to the Fund before 5:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price.
Directly By Mail. An investor may place an order to purchase shares of
the Fund by mail directly from Federated Securities Corp. once an account
has been established. To purchase shares of the Fund by mail, send a check
made payable to Insight U.S. Government Fund to: ^Federated Services
Company, ^ P.O. Box 8604, Boston, Massachusetts 02266-8604.
Conversion To Federal Funds. It is the Fund's policy to be as fully
invested as possible so that maximum interest may be earned. To this end,
all payments from shareholders must be in federal funds or be converted
into federal funds before shareholders begin to earn dividends. State
Street Bank and Trust Company ("State Street Bank") acts as the
shareholder's agent in depositing checks and converting them to federal
funds.
Directly By Wire. To purchase shares of the Fund directly from Federated
Securities Corp. by Federal Reserve wire once an account has been
established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank
receives payment by wire.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $1 million.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an
order is received. There is no sales load imposed by the Fund. However,
certain unaffiliated financial institutions may charge fees for services
provided which may relate to ownership of shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to services provided and the fees charged for those
services.
The net asset value is determined at 4:00 p.m. (Eastern time), Monday
through Friday, except 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 during 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.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a
share account for each shareholder. Share certificates are not issued
unless requested on the application or by contacting the Fund.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during
the month.
DIVIDENDS AND DISTRIBUTIONS
Dividends are declared daily and paid monthly. Distributions of any net
realized long-term capital gains will be made at least once every twelve
months. Dividends and distributions are automatically reinvested in
additional shares of the Fund on payment dates at net asset value, unless
cash payments are requested by shareholders on the application or by
writing to Federated Securities Corp.
Dividends are declared just prior to determining net asset value. If an
order for shares is placed on the preceding business day, shares purchased
by wire begin earning dividends on the business day wire payment is
received by State Street Bank. If the order for shares and payment by wire
are received on the same day, shares begin earning dividends on the next
business day. Shares purchased by check begin earning dividends on the
business day after the check is converted, upon instruction of the transfer
agent, into federal funds.
Shares earn dividends through the business day that proper written
redemption instructions are received by State Street Bank.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after
State Street Bank receives the redemption request. Redemptions will be made
on days on which the Fund computes its net asset value. Redemption requests
must be received in proper form and can be made through a financial
institution, or directly from the Fund by written request.
THROUGH A FINANCIAL INSTITUTION
A shareholder may redeem shares of the Fund by calling his financial
institution (such as a bank or an investment dealer) to request the
redemption. Shares will be redeemed at the net asset value next determined
after the Fund receives the redemption request from the financial
institution. Redemption requests must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in
order for shares to be redeemed at that day's net asset value. The
financial institution is responsible for promptly submitting redemption
requests and providing proper written redemption instructions to the Fund.
The financial institution may charge customary fees and commissions for
this service. Redemption requests through a registered broker/dealer must
be received by the broker before 4:00 p.m. (Eastern time) and must be
transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for shares to be redeemed at that day's net asset value. If at any
time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.
Before a financial institution may request redemption by telephone on
behalf of a shareholder, an authorization form permitting the Fund to
accept redemption requests by telephone must first be completed. Telephone
redemption instructions may be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or
market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption, such
as "Directly by Mail," should be considered.
DIRECTLY BY MAIL
Shareholders may also redeem shares by sending a written request to
Federated Services Company, c/o State Street Bank and Trust Company, P.O.
Box 8604, Boston, Massachusetts 02266-8604. This written request must
include the shareholder's name, the Fund name, the Fund account number, and
the share or dollar amount to be redeemed. Shares will be redeemed at their
net asset value next determined after State Street Bank receives the
redemption request.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders may call the Fund for assistance in redeeming by mail.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record
with the Fund, or a redemption payable other than to the shareholder of
record must have signatures on written redemption requests guaranteed by:
o a trust company or commercial bank whose deposits are insured
by the Bank Insurance Fund
("BIF");
o a member of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
o a savings bank or savings and loan association whose deposits
are insured by the Savings Association Insurance Fund ("SAIF"),
which is administered by the FDIC; or
o any other "eligible guarantor institution," as defined in the
Securities Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting
signature guarantees from the above institutions. The Fund may elect in the
future to limit eligible signature guarantors to institutions that are
members of a signature guarantee program. The Fund and its transfer agent
reserve the right to amend these standards at any time without notice.
RECEIVING PAYMENT
By Check. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after receipt of a proper
written redemption request provided State Street Bank has received payment
for shares from the shareholder.
By Wire. Normally, redemption proceeds will be wired the following business
day, but in no event more than seven days, after receipt of the redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund
may redeem shares in any account, and pay the proceeds to the shareholder,
if the account balance falls below a required minimum value of $1 million
due to shareholder redemptions. This requirement does not apply, however,
if the balance falls below $1 million because of changes in the Fund's net
asset value. Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
INSIGHT INSTITUTIONAL SERIES, INC. INFORMATION
MANAGEMENT OF THE CORPORATION
Board Of Directors. The Fund is managed by a Board of Directors. The
Directors are responsible for managing the Corporation's business affairs
and for exercising all the Corporation's powers except those reserved for
the shareholders. The Executive Committee of the Board of Directors handles
the Directors' responsibilities between meetings of the Directors.
Investment Adviser. Investment decisions for the Fund are made by
Federated Advisers (the "Adviser"), the Fund's investment adviser, subject
to direction by the Directors. 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 0.70 of 1% of the Fund's average daily net
assets. Under the investment advisory contract, which provides for
voluntary waivers of expenses by the Adviser, the Adviser may
voluntarily waive some or all of its fee. The Adviser can
terminate this voluntary waiver of some or all of its advisory fee
at any time at its sole discretion. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess
of limitations established by certain states.
Adviser's Background. Federated Advisers, a Delaware business
trust organized on April 11, 1989, is a registered investment
adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting)
shares of Federated Investors are owned by a trust, the trustees
of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated
Investors.
Federated Advisers and other subsidiaries of Federated Investors
serve as investment advisers to a number of investment companies
and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. Total
assets under management or administration by these and other
subsidiaries of Federated Investors are approximately $76 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.
Portfolio Managers' Background. Gary J. Madich, Kathleen M. Foody-
Malus and Susan M. Nason have been the Fund's portfolio managers
since its inception. Mr. Madich joined Federated Investors in 1984
and has been a Senior Vice President of the Fund's investment
adviser since 1993. Mr. Madich served as a Vice President of the
Fund's investment adviser from 1988 until 1993. Mr. Madich is a
Chartered Financial Analyst and received his M.B.A. in Public
Finance from the University of Pittsburgh. Ms. Foody-Malus joined
Federated Investors in 1983 and has been a Vice President of the
Fund's investment adviser since 1993. Ms. Foody-Malus served as an
Assistant Vice President of the Fund's investment adviser from
1990 until 1993, and from 1986 until 1990 she acted as an
investment analyst. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh. Ms. Nason
joined Federated Investors in 1987 and has been a Vice President
of the Fund's investment adviser since 1993. Ms. Nason served as
an Assistant Vice President of the investment adviser from 1990
until 1993, and from 1987 until 1990 she acted as an investment
analyst. Ms. Nason is a Chartered Financial Analyst and received
her M.B.A. in Finance from Carnegie Mellon University.
Other Payments to Financial Institutions. In addition to periodic
payments to financial institutions under the Shareholder Services Plan,
certain financial institutions may be compensated by the adviser or its
affiliates for the continuing investment of customers' assets in certain
funds, including the Fund, advised by those entitites. These payments will
be made directly by the distributor or adviser from their assets, and will
not be made from the assets of the Fund or by the assessment of a sales
load on shares.
The Glass-Steagall Act limits the ability of a depository institution (such
as a commercial bank or a savings and loan association) to become an
underwriter or distributor of securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
capacities described in this prospectus or should Congress relax current
restrictions on depository institutions, the Directors will consider
appropriate changes in the administrative services.
State securities laws governing the ability of depository
institutions to act as underwriters or distributors of securities may
differ from interpretations given to the Glass-Steagall Act and,
therefore, banks and financial institutions may be required to
register as dealers pursuant to state law.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. 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:
Maximum Administrative Fee Average Aggregate Daily 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 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.
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.
Custodian. State Street Bank and Trust Company, Boston, Massachusetts, is
custodian for the securities and cash of the Fund.
Transfer Agent And Dividend Disbursing Agent. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund and
dividend disbursing agent for the Fund.
Independent Public Accountants. The independent public accountants for the
Fund are Arthur Andersen LLP, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
Shareholders of the Fund pay their allocable portion of Fund and
Corporation expenses.
The Corporation expenses for which shareholders pay their allocable portion
include, but are not limited to, the cost of: organizing the Corporation
and continuing its existence; registering the Corporation with federal and
state securities authorities; Directors' fees; auditors' fees; meetings of
Directors; legal fees of the Corporation; association membership dues and
such non-recurring and extraordinary items as may arise from time to time.
The Fund expenses for which shareholders pay their allocable portion
include, but are not limited to, the cost of: investment advisory and
administrative services; printing prospectuses and other Fund documents for
shareholders; registering the Fund and shares of the Fund with federal and
state securities commissions; taxes and commissions; issuing, purchasing,
repurchasing and redeeming shares; fees for custodians, transfer agents,
dividend disbursing agents, shareholder servicing agents and registrars;
printing, mailing, auditing, accounting and legal expenses; reports to
shareholders and governmental agencies; meetings of shareholders and proxy
solicitations therefor; insurance premiums; and such non-recurring and
extraordinary items as may arise from time to time.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund is entitled to one vote at all meetings of
shareholders. All shares of all portfolios in the Corporation have equal
voting rights except that in matters affecting only a particular portfolio,
only shares of that portfolio are entitled to vote.
As a Maryland Corporation, the Fund is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Fund's operation and for the election of Directors under
certain circumstances.
Directors may be removed by a majority vote of the shareholders at a
special meeting. A special meeting of shareholders shall be called by the
Directors upon the request of shareholders owning at least 10% of the
Fund's outstanding shares of all series entitled to vote.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet
requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to
such companies.
Unless otherwise exempt, shareholders are required to pay federal income
tax on any dividends and other distributions received. This applies whether
dividends and distributions are received in cash or as additional shares.
Information on the tax status of dividends and distributions is provided
annually.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
The Fund is not subject to Pennsylvania corporate or personal property
taxes. Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its 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
gains 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.
The Fund is sold without any sales load or other similar non-recurring
charges. From time to time, the Fund may advertise its performance using
certain financial publications and/or compare its performance to certain
indices.
INSIGHT U.S. GOVERNMENT FUND
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1994
PRINCIPAL
Amount Value
U.S. Treasury Bills - 99.3%
$100,000 11/10/94 $99,373
Total Investments (identified cost, $99,498) $99,373+
+The cost of investments for federal tax purposes amounts to
$99,498. The net unrealized depreciation on a federal tax
basis amounts to $125 at September 30, 1994.
Note: The categories of investments are shown as a percentage of net
assets ($100,079) at September 30, 1994.
(See Notes which are an integral part of the Financial Statements)
INSIGHT U.S. GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1994
Assets:____________________________________________________
Investments in securities, at value (identified and tax cost, $99,498) $
99,373
Cash 1,083
Total assets 100,456
Liabilities:
Dividends payable _________
377
Net Assets for 10,020 shares of capital stock outstanding $
100,079
Net Assets Consists Of:
Paid-in capital $ 100,204
Unrealized appreciation (depreciation) on investments (125)
Total Net Assets $ 100,079
Net Asset Value, Offering Price, and Redemption Price Per Share
(net assets of $100,079/10,020 shares of capital stock outstanding)
$ 9.99
(See Notes which are an integral part of the Financial Statements)
INSIGHT U.S. GOVERNMENT FUND
STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1994*
Investment Income:__________________________________________________
Interest income $ 2,936
Expenses-
Investment advisory fee_______________________________ _ $
555
Custodian and portfolio accounting fees _ 10,002
Transfer and dividend disbursing agent fees and expenses _
4,998
Total expenses __ 15,555
Deduct-_______________________________________________
Waiver of investment advisory fee___________________ $ 555
Reimbursement of other operating expenses by Adviser 15,000
15,555
Net expenses 0
Net investment income 2,936
Realized and Unrealized Gain (Loss) on Investments:
Net change in unrealized appreciation (depreciation) on investments
(125)
Change in net assets from operations $ 2,811
*For the period from December 15, 1993 (start of business) to September 30,
1994.
(See Notes which are an integral part of the Financial Statements)
INSIGHT U.S. GOVERNMENT FUND
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
September 30, 1994*
Increase (Decrease) in Net Assets:
Operations-
Net investment income $ 2,936
Net change in unrealized appreciation (depreciation) of investments (125)
Change in net assets resulting from operations 2,811
Distributions to Shareholders
Dividends to shareholders from net investment income (2,936)
Capital Stock Transactions
Proceeds from sale of shares 100,250
Net asset value of shares issued to shareholders in payment of dividends
declared 4
Cost of shares redeemed (50)
Change in net assets from Fund share transactions 100,204
Change in net assets 100,079
Net Assets:
Beginning of period ---
End of period $100,079
*For the period from December 15, 1993 (start of business) to September 30,
1994.
(See Notes which are an integral part of the Financial Statements)
INSIGHT U.S. GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1994
(1) ORGANIZATION
Insight Institutional Series, Inc. (the "Corporation") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as an open-end,
management investment company. The Corporation consists of two,
diversified portfolios. The financial statements included herein present
only those of Insight U.S. Government Fund (the "Fund"). The financial
statements of the other portfolio is presented separately. The assets of
each portfolio are segregated and a shareholder's interest is limited to
the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
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. Investment Income, Expenses and Distributions-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
C. 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.
D. 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.
E. Other--Investment transactions are accounted for on the trade date.
INSIGHT U.S. GOVERNMENT FUND
(3) CAPITAL STOCK
At September 30, 1994, there were 10,020 shares of .001 per share par value
capital stock authorized. Transactions in capital stock were as follows:
YEAR ENDED
September 30, 1994*___
Shares sold 10,025
Shares issued to shareholders in payment of dividends
declared 0
Shares redeemed (5)
Net change resulting from Fund share transactions
10,020
*For the period from December 15, 1993 (start of business) to September 30,
1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Advisory Fee---Federated Advisers, the Fund's investment Adviser
(the "Adviser"), receives for its services an annual investment advisory
fee equal to 0.70 of 1% of the Fund's average daily net assets. The
Adviser waived a portion of its fee to comply with certain state expense
limitations. The Adviser may voluntarily choose to waive the remainder of
its fee and reimburse certain operating expenses of the Fund. The Adviser
can modify or terminate this voluntary waiver and reimbursement at any time
at its sole discretion.
Administrative Fee--Federated Administrative Services ("FAS") provides the
Fund with administrative personnel and services. The administrative fee
received during the period of the Adminstrative Services Agreement shall be
at least $125,000 per portfolio and $30,000 per each additional class of
shares. Due to no public investment in the Fund during the period, no such
expenses were incurred.
Shareholder Services Fee--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay
FSS up to .25 of 1% of average net assets for the Fund for the period.
This fee is to obtain certain personal services for shareholders and the
maintenance of shareholder accounts. Due to no public investment in the
Fund during the period, no such expenses were incurred.
Transfer and Dividend Disbursing Agent Fee-Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund.
The FServ fee is based on the size, type, and number of accounts and
transactions made by shareholders.
Orgainizational Expenses--Expenses of organization incurred by the
Corporation, estimated at $33,100, were borne initially by the
Administrator. The Corporation has agreed to reimburse the Administrator
for organizational expenses initially borne by the Administrator during the
five year period following the date the Corporation's registration first
became effective.
Certain of the Officers and Directors of the Corporation are Officers and
Trustees or Directors of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for
the period ended September 30, 1994, were as follows:
Purchases $ 208,587
Sales $ 110,000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Insight Institutional Series, Inc.
(Insight U.S. Government Fund):
We have audited the accompanying statement of assets and liabilities of
Insight U.S. Government Fund (an investment portfolio of Insight
Institutional Series, Inc., a Maryland Corporation), including the schedule
of portfolio investments, as of September 30, 1994, and the related
statements of operations and changes in net assets and the financial
highlights for the period from December 15, 1993 (start of business) to
September 30, 1994. These financial statements and financial highlights
are the responsibility of the Corporation's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of September 30, 1994, by correspondence with the
custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Insight U.S. Government Fund (an investment portfolio of Insight
Institutional Series, Inc.) as of September 30, 1994, the results of its
operations, the changes in its net assets, and its financial highlights for
the period from December 15, 1993 (start of business), to September 30,
1994, in conformity with generally accepted accounting principles.
Pittsburgh, Pennsylvania
ARTHUR ANDERSEN LLP
January 25, 1995
ADDRESSES
Insight U.S. Government 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 Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh,
Pennsylvania 15222
Insight U.S. Government
Fund
PROSPECTUS
A Diversification Portfolio of
Insight Institutional Series, Inc.,
an Open-End, Management
Investment Company
Prospectus dated January 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
45765Q102
3112401A (1/95)
INSIGHT U.S. GOVERNMENT FUND
(A PORTFOLIO OF INSIGHT INSTITUTIONAL SERIES, INC.)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Insight U.S. Government Fund (the "Fund") dated January
31, 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 January 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
GENERAL INFORMATION ABOUT THE
FUND 1
INVESTMENT OBJECTIVE AND
POLICIES 1
Types of Investments 1
Resets of Interest 1
Caps and Floors 1
When-Issued and Delayed
Delivery Transactions 1
Lending of Portfolio
Securities 2
Restricted and Illiquid
Securities 2
Repurchase Agreements 2
Reverse Repurchase
Agreements 2
Portfolio Turnover 2
INVESTMENT LIMITATIONS 3
INSIGHT INSTITUTIONAL SERIES,
INC. MANAGEMENT 5
Officers and Directors 5
The Funds 8
Fund Ownership 9
Directors Compensation 9
Director Liability 10
INVESTMENT ADVISORY SERVICES 10
Adviser to the Fund 10
Advisory Fees 10
SHAREHOLDER SERVICING 10
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT 11
ADMINISTRATIVE SERVICES 11
BROKERAGE TRANSACTIONS 11
PURCHASING SHARES 11
DETERMINING NET ASSET VALUE 11
Determining Market Value of
Securities 11
REDEEMING SHARES 12
Redemption in Kind 12
TAX STATUS 12
The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 13
YIELD 13
PERFORMANCE COMPARISONS 13
GENERAL INFORMATION ABOUT THE FUND
The Fund is a portfolio of Insight Institutional Series, Inc. (the
"Corporation"). The Corporation was incorporated under the laws of the
State of Maryland on October 11, 1993.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is to provide current income. The
investment objective and policies of the Fund cannot be changed without
approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests primarily in a diversified portfolio of U.S. government
securities. Under normal circumstances, the Fund will invest at least 65%
of the value of its total assets in securities that are issued or
guaranteed by the U.S. government, its agencies or instrumentalities. The
investment portfolio includes the following securities:
o U.S. government obligations, including U.S. Treasury bills, notes, and
bonds, and securities issued by agencies and instrumentalities of the
U.S. government;
o repurchase agreements; and
o money market instruments.
RESETS OF INTEREST
The interest rates paid on the adjustable rate mortgage securities
("ARMS"), collateralized mortgage obligations ("CMOs"), and real estate
mortgage investment conduits ("REMICs") in which the Fund invests generally
are readjusted at intervals of one year or less to an increment over some
predetermined interest rate index. There are two main categories of
indices: those based on U.S. Treasury securities and those derived from a
calculated measure, such as a cost of funds index or a moving average of
mortgage rates. Commonly utilized indices include the one-year and five-
year constant maturity Treasury Note rates, the three-month Treasury Bill
rate, the 180-day Treasury Bill rate, rates on longer-term Treasury
securities, the National Median Cost of Funds, the one-month or three-month
London Interbank Offered Rate (LIBOR), the prime rate of a specific bank,
or commercial paper rates. Some indices, such as the one-year constant
maturity Treasury Note rate, closely mirror changes in market interest rate
levels.
To the extent that the adjusted interest rate on the mortgage security
reflects current market rates, the market value of an adjustable rate
mortgage security will tend to be less sensitive to interest rate changes
than a fixed rate debt security of the same stated maturity. Hence, ARMS
which use indices that lag changes in market rates should experience
greater price volatility than adjustable rate mortgage securities that
closely mirror the market.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs, and REMICs in
which the Fund invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may
change up or down: (1) per reset or adjustment interval, and (2) over the
life of the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly principal and
interest payments rather than limiting interest rate changes. These payment
caps may result in negative amortization.
The value of mortgage securities in which the Fund invests may be affected
if market interest rates rise or fall faster and farther than the allowable
caps or floors on the underlying residential mortgage loans. Additionally,
even though the interest rates on the underlying residential mortgages are
adjustable, amortization and prepayments may occur, thereby causing the
effective maturities of the mortgage securities in which the Fund invests
to be shorter than the maturities stated in the underlying mortgages.
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 are maintained until the transaction has been
settled. The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the segregation of more
than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
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 Board of Directors ("Directors") to determine the
liquidity of certain restricted securities is permitted under the
Securities and Exchange Commission ("SEC") Staff position set forth in the
adopting release for Rule 144A under the Securities Act of 1933 (the
"Rule"). The Rule is a non-exclusive safe harbor for certain secondary
market transactions involving securities subject to restrictions on resale
under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under
Rule 144A. The Fund believes that the Staff of the SEC has left the
question of determining the liquidity of all restricted securities to the
Directors. The Directors 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.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities. In the event that a defaulting seller
files for bankruptcy or becomes insolvent, disposition of securities by the
Fund might be delayed pending court action. The Fund believes that under
the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. A reverse
repurchase transaction is 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. The use of reverse repurchase
agreements may enable the Fund to avoid selling portfolio instruments at a
time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will
be able to avoid selling portfolio instruments at a disadvantageous time.
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 are maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt
to achieve the Fund's investment objective. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual rate of
portfolio turnover exceeding 100%.
INVESTMENT LIMITATIONS
The Fund may not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT OR BUYING ON MARGIN
The Fund will not sell securities short or purchase securities on
margin, but may obtain such short-term credits as are necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets, including the
amounts borrowed. The Fund will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, it may pledge assets
having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of the
borrowing.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer if as
a result more than 5% of the value of its total assets would be
invested in the securities of that issuer or the Fund would own more
than 10% of the outstanding voting securities of that issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets
in any one industry, except it may invest 25% or more of the value of
its total assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale
of real estate or in securities which are secured by real estate or
interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value 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 Directors.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of 1933
in connection with the sale of restricted securities which the Fund
may purchase pursuant to its investment objective, policies, and
limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. This shall not
prevent the Fund from purchasing or holding U.S. government
obligations, money market instruments, variable rate demand notes,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies and limitations.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total
assets in securities of issuers that have records of less than three
years of continuous operations including the operation of any
predecessor.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral
exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may not own securities of open-end investment companies.
The Fund can acquire up to 3% of the total outstanding stock of
closed-end investment companies. The Fund will not be subject to any
other limitations with regard to the acquisition of securities of
closed-end investment companies so long as the public offering price
of the Fund's shares does not include a sales load exceeding 1-1/2%.
The Fund will purchase securities of closed-end investment companies
only in open-market transactions involving customary broker's
commissions. However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, reorganization or
other acquisition.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of the 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 does not expect to borrow money, pledge securities or invest in
stock of closed-end investment companies during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus, and
undivided profits in excess of $100,000 at the time of investment to be
"cash items."
INSIGHT INSTITUTIONAL SERIES, INC. MANAGEMENT
OFFICERS AND DIRECTORS
Officers and Directors are listed with their addresses, principal
occupations, and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp.,
Federated Services Company, Federated Administrative Services, Inc., and
the Funds (as defined below).
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Chairman and Director
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, Vice President of the Corporation.
Thomas G. Bigley
28th Floor
One Oxford Centre
Pittsburgh, PA 15219
Director
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
Director
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
Director
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Director
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
Director
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Professor of Medicine and Trustee, University of Pittsburgh;
Director of Corporate Health, University of Pittsburgh Medical Center;
Director, Trustee, or Managing General Partner of the Funds.
Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Vice President and Director
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 L. Flaherty, Jr.@
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
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
Director
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
Gregor F. Meyer
Two Gateway Center-Suite 674
Pittsburgh, PA
Director
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.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Director
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
Director
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Vice President
Tr
Trustee, or Managing General Partner of some of the Funds. Mr. Donahue is
the son of John F. Donahue, Chairmanand Director of the Corporation.
Edward C. Gonzales*
Federated Investors Tower
Pittsburgh, PA
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., and Passport Research, Ltd.; Executive
Vice President, Treasurer, and Director, Federated Securities Corp.;
Trustee, Federated Services Company and Federated Shareholder Services;
Chairman, Treasurer, and Trustee, Federated Administrative Services;
Trustee or Director of some of the Funds; Vice President and Treasurer of
the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and Secretary,
Federated Research Corp. and Passport Research, Ltd.; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Secretary and Trustee, Federated
Shareholder Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
* This Director is deemed to be an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended.
@ Member of the Corporation's Executive Committee. The Executive
Committee of the Board of Directors handles the responsibilities of the
Board of Directors between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies:
American Leaders Fund, Inc.; Annuity Management Series; Arrow Funds;
Automated Cash Management Trust; Automated Government Money Trust;
California Municipal Cash Trust; Cash Trust Series, II; Cash Trust Series
Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated ARMs Fund; Federated Exchange Fund, Ltd.; Federated GNMA Trust;
Federated Government Trust; Federated Growth Trust; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated Municipal Trust;
Federated Short-Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; First Priority Funds; Fixed Income
Securities, Inc.; Fortress Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.; Fund for
U.S. Government Securities, Inc.; Government Income Securities, Inc.; High
Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Equity
Income Fund, Inc.; Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty Term Trust, Inc.-1999; Liberty U.S.
Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid Cash
Trust; Managed Series Trust; The Medalist Funds; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds;
The Shawmut Funds; Short-Term Municipal Trust; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the outstanding shares of the
Fund.
DIRECTORS COMPENSATION
AGGREGATE TOTAL COMPENSATION PAID
NAME , COMPENSATION TO DIRECTORS FROM
POSITION WITH FROM CORPORATION
CORPORATION CORPORATION*# AND FUND COMPLEX
John F. Donahue, $ -0- $ -0- for the Corporation and
Chairman and Director 69 other investment companies in the Fund
Complex
Thomas G. Bigley, $ -0- $ 24,991 for the Corporation and
Director 50 other investment companies in the Fund
Complex
John T. Conroy, Jr., $ -0- $ 136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
William J. Copeland, $ -0- $ 136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
James E. Dowd, $ -0- $ 136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Richard B. Fisher, $ -0- $ -0- for the Corporation and
President andDirector 9 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $ -0- $136,100 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Peter E. Madden, $ -0- $ 104,880 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Gregor F. Meyer, $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Wesley W. Posvar, $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
Marjorie P. Smuts, $ -0- $ 123,600 for the Corporation and
Director 65 other investment companies in the Fund
Complex
*Information is furnished for the period from October 12, 1993,
organization date of the Corporation, to September 30, 1994.
#The aggregate compensation is provided for the Corporation which is
comprised of 2 portfolios.
DIRECTOR LIABILITY
The Corporation's Articles of Incorporation provide that the Directors will
not be liable for errors of judgment or mistakes of fact or law. However,
they are not protected against any liability to which they would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers (the "Adviser"). It
is a subsidiary of Federated Investors. All of 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. John F. Donahue,
Chairman and Trustee of Federated Advisers, is Chairman and Trustee of
Federated Investors, and Chairman and Director of the Fund. J. Christopher
Donahue, President and Trustee of Federated Advisers, is President and
Trustee of Federated Investors, Trustee of Federated Administrative
Services and Federated Services Company, and Vice President of the Fund.
John W. McGonigle, Vice President, Secretary and Trustee of Federated
Advisers, is Vice President, Secretary , General Counsel, and Trustee of
Federated Investors, Trustee of Federated Services Company, Executive Vice
President, Secretary and Trustee of Federated Administrative Services,
Executive Vice President and Director of Federated Securities Corp., and
Vice President and Secretary of the Fund. The Adviser shall not be liable
to the Fund or any shareholder for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties imposed upon it by
its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
STATE EXPENSE LIMITATION
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 fee, 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 will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
expense limitation, the investment advisory fee paid will be reduced
by the amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be waived by the
Adviser will be limited, in any single fiscal year, by the amount of
the investment advisory fee.
This arrangement is not part of the advisory contract and may be
amended or rescinded in the future.
SHAREHOLDER SERVICING
In return for providing shareholder servicing to its customers who from
time to time may be owners of record or beneficial owners of shares of the
Fund, a financial institution may receive payments from the Fund at a rate
not exceeding 0.25 of 1% of the average daily net assets of the shares
beneficially owned by the financial institution's customers for whom it is
holder of record or with whom it has a servicing relationship. These
services may include, but are not limited to, the provision of personal
services and maintenance of shareholder accounts.
Federated Securities Corp. may also pay financial institutions a fee based
upon the net asset value of the Fund shares beneficially owned by the
financial institution's clients or customers. This fee is in addition to
amounts paid under the Shareholder Services Plan and will be reimbursed by
the Adviser.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee paid to the transfer agent is based upon the
size, type and number of accounts and transactions made by shareholders.
Federated Services Company also maintains the Corporation's accounting
records. The fee paid for this service is based upon the level of the
Fund's average net assets for the period plus out-of-pocket expenses.
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee as
described in the prospectus.
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
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Directors.
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. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided. Research services provided by
brokers may be used by the Adviser or by affiliates of Federated Investors
in advising Federated funds and other accounts. To the extent that receipt
of these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their
expenses.
PURCHASING SHARES
Except under certain circumstances described in the prospectus, shares are
sold at their net asset value on days the New York Stock Exchange is open
for business. The procedure for purchasing shares of the Fund is explained
in the prospectus under "Investing in the Fund."
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 values of the Fund's securities are determined as follows:
o as provided by an independent pricing service;
o for short-term obligations, according to the mean bid and asked prices,
as furnished by an independent pricing service, or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost unless the Directors determine this is not
fair value; or
o at fair value as determined in good faith by the Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o other market data.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not
charge for telephone redemptions, it reserves the right to charge a fee for
the cost of wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Corporation is obligated to redeem shares solely in cash up to $250,000
or 1% of the Fund's net asset value, whichever is less, for any one
shareholder within a 90-day period.
Any redemption beyond this amount will also be in cash unless the Directors
determine that payments should be in kind. In such a case, the Fund will
pay all or a portion of the remainder of the redemption in portfolio
instruments, valued in the same way that net asset value is determined. The
portfolio instruments will be selected in a manner that the Directors deem
fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
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.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional shares. No portion of any income
dividend paid by the Fund is eligible for the dividends received deduction
available to corporations.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have
held the Fund shares.
TOTAL RETURN
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment
to the ending redeemable value of that investment. The ending redeemable
value is computed by multiplying the number of shares owned at the end of
the period by the offering price per share at the end of the period. The
number of shares owned at the end of the period is based on the number of
shares purchased at the beginning of the period with $1,000, adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.
YIELD
The yield of the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
the Fund over a thirty-day period by the offering price per share of the
Fund on the last day of the period. This value is 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 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the 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 yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
o SALOMON BROTHERS MORTGAGE-BACKED SECURITIES INDEX--15 YEARS includes the
average of all 15-year mortgage securities, which include Federal Home Loan
Mortgage Corporation (Freddie Mac), Federal National Mortgage Association
(Fannie Mae), and Government National Mortgage Association (Ginnie Mae).
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in offering price over a specific period
of time. From time to time, the Fund will quote its Lipper ranking in the
"U.S. Mortgage Funds" category in advertising and sales literature.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
45765Q102
3112401B (1/95)
assigned this rating reflect an assurance of timely payment only slightly
less in degree than the strongest issues.
45765Q201
3112402B (1/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1)(i) Conformed copy of Articles of
Incorporation (1);
(ii) Conformed copy of Articles of Amendment
of Articles of Incorporation (2);
(2) Copy of By-Laws (1);
(3) Not Applicable;
(7) Not Applicable;
(8) Conformed copy of the Custodian Agreement;+
(9)(i) Conformed copy of Fund Accounting, Shareholder
Recordkeeping, and Custody Services Procurement
Agreement of the Registrant;+
(ii) Conformed copy of Administrative
Services Agreement;+
(iii)Conformed copy of Shareholder Services Plan;+
(iv) Conformed copy of Shareholder Services
Agreeement;+
(v) Form of Shareholder Services Sub-Contract;+
(10) Conformed copy of Opinion and Consent of
Counsel as to legality of shares being
registered (2);
(11) Conformed copy of the Consent of Independent
Public Accountants;+
(12) Not Applicable;
(13) Conformed copy of Initial Capital
Understanding (3);
(14) Not Applicable;
(15) Not Applicable;
(16) Not Applicable;
(17) Copy of Financial Data Schedules for Insight
Limited Term Income Fund and Insight U.S.
Government Fund;+
(18) Not applicable;
(19) Conformed copy of Power of Attorney.+
__________________________________________________
+ All exhibits have been filed electronically.
(1) Response is incorporated by reference to Registrant's Initial Registration
Statement on Form N-1A filed October 25, 1993. (File Nos. 33-50773 and
811-7115).
(2) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 21, 1993. (File Nos. 33-50773
and 811-7115).
(3) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1A filed January 13, 1994. (File Nos. 33-50773
and 811-7115).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 10, 1995_
Shares of capital stock
($0.001 per Share par value)
Insight Limited Term Income Fund 5
Insight U.S. Government Fund 5
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 "Insight Institutional Series, Inc.
Information - Management of the Corporation" in Part A. The
affiliations with the Registrant of four of the Trustees and one of
the Officers of the investment adviser are included in Part B of
this Registration Statement under "Trust Management - Officers and
Directors." The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson, (Partner, Wilson, Holbrook
and Bayard), 107 W. Market Street, Georgetown, Deleware 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; Randall A. Bauer, Jonathan C. Conley, Deborah A.
Cunningham, 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, Charles A. Ritter, and Christopher H.
Wiles, Vice Presidents; Edward C. Gonzales, Treasurer; and John W.
McGonigle, Secretary. The business address of each of the Officers
of the investment adviser is Federated Investors Tower, Pittsburgh,
PA 15222-3779. These individuals are also officers of a majority
of the investment advisers to the Funds listed in Part B of this
Registration Statement under "The Funds."
____________________
(1) Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 25, 1993. (File Nos.
33-50773 and 811-7115).
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; 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
U.S. Government Money Market Trust; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
The Medalist Funds; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; The Monitor Funds;
Municipal Securities Income Trust; New York Municipal Cash
Trust; 111 Corcoran Funds; Peachtree Funds; The Planters Funds;
Portage Funds; RIMCO Monument Funds; Federated Short-Term
Municipal Trust; The Shawmut Funds; Short-Term Municipal Trust;
Signet Select Funds; 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.
(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 President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice Vice President and
Federated Investors Tower President, and Treasurer, Treasurer
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice Vice President and
Federated Investors Tower President, and Assistant Secretary
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
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
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Name and Principal Positions and Offices Positions and Offices
Business Address__ ___With Underwriter__ With Underwriter__
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of
the following locations:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and
Portfolio Recordkeeper
Federated Administrative Federated Investors Tower
Services Pittsburgh, PA 15222-3779
Federated Advisers Federated Investors Tower
Investment Adviser Pittsburgh, PA 15222-3779
State Street Bank and P.O. Box 8604
Trust Company Boston, Massachusetts 02266
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
Directors 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, INSIGHT INSTITUTIONAL
SERIES, INC., certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 30th day of January, 1995.
INSIGHT INSTITUTIONAL SERIES, INC.
BY: /s/ Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
January 30, 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/ Charles H. Field
Charles H. Filed Attorney In Fact January 30, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Director
(Chief Executive Officer)
Richard B. Fisher* President
Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Director
John T. Conroy, Jr.* Director
William J. Copeland* Director
James E. Dowd* Director
Lawrence D. Ellis, M.D.* Director
Edward L. Flaherty, Jr.* Director
Peter E. Madden* Director
Gregor F. Meyer* Director
Wesley W. Posvar* Director
Marjorie P. Smuts* Director
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit 23 under Item 601/Reg S-K
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use in Post-
Effective Amendment No. 2 to Form N-1A Registration Statement of Insight
Institutional Series, Inc. of our report dated January 25, 1995, on the
financial statements of Insight Institutional Series, Inc. (consisting of
Insight U.S. Government Fund and Insight Limited Term Income Fund),
included in or made part of this registration statement.
By: ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania,
January 25, 1995
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of
INSIGHT INSTITUTIONAL SERIES, INC. and the Assistant General Counsel of
Federated Investors, and each of them, their true and lawful attorneys-in-
fact and agents, with full power of substitution and resubstitution for
them and in their names, place and stead, in any and all capacities, to
sign any and all documents to be filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to sign and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as each of them might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their or his substitute or substitutes, may lawfully do or
cause to be done by virtue thereof.
SIGNATURES TITLE DATE
_/s/ JOHN F. DONAHUE ____ Chairman and Director January 16, 1995
John F. Donahue (Chief Executive Officer)
/s/ RICHARD B. FISHER President and Director January 16, 1995
Richard B. Fisher
/s/ EDWARD C. GONZALES______ Vice President and Treasurer January 16, 1995
Edward C. Gonzales (Principal Financial and
Accounting Officer)
/s/ THOMAS G. BIGLEY________ Director January 16, 1995
Thomas G. Bigley
/s/ JOHN T. CONROY, JR._____ Director January 16, 1995
John T. Conroy, Jr.
/s/ WILLIAM J. COPELAND______ Director January 16, 1995
William J. Copeland
SIGNATURES TITLE DATE
/s/ JAMES E. DOWD____________ Director January 16, 1995
James E. Dowd
/s/ LAWRENCE D. ELLIS, M.D.__ Director January 16, 1995
Lawrence D. Ellis, M.D.
/s/ EDWARD L. FLAHERTY, JR.___ Director January 16, 1995
Edward L. Flaherty, Jr.
/s/ PETER E. MADDEN___________ Director January 16, 1995
Peter E. Madden
/s/ GREGOR F. MEYER___________ Director January 16, 1995
Gregor F. Meyer
/s/ WESLEY W. POSVAR___________ Director January 16, 1995
Wesley W. Posvar
/s/ MARJORIE P. SMUTS__________ Director January 16, 1995
Marjorie P. Smuts
Sworn to and subscribed before me this 16th day of January 16, 1995
/s/ MARIE M. HAMM
Notary Public
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/RegS-K
CUSTODIAN CONTRACT
Between
FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11Appointment of Agents 10
2.12Deposit of Fund Assets in Securities System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund Portfolio Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian Regarding Cash Movement 15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public Accountants/Auditors 16
6. Reports to Trust by Independent Public Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22
CUSTODIAN CONTRACT
This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as
it may be amended from time to time, (the "Trust"), which may be
Massachusetts business trusts or Maryland corporations or have such other
form of organization as may be indicated, on behalf of the portfolios
(hereinafter collectively called the "Funds" and individually referred to
as a "Fund") of the Trust, having its principal place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, and
STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company,
having its principal place of business at 225 Franklin Street, Boston,
Massachusetts, 02110, hereinafter called the "Custodian", and FEDERATED
SERVICES COMPANY, a Delaware Business trust company, having its principal
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, hereinafter called ("Company").
WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the
Funds shall be segregated from the assets of each of the other Funds
and from all other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds and all
payments of income, payments of principal or capital distributions
received by them with respect to all securities owned by the Funds
from time to time, and the cash consideration received by them for
shares ("Shares") of beneficial interest/capital stock of the Funds
as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less
responsibility or liability to the Trust or any of the Funds on
account of any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.
2.Duties of the Custodian With Respect to Property of the Funds Held by
the Custodian
2.1Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than
securities which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities depository or in a
book-entry system authorized by the U.S. Department of the
Treasury, collectively referred to herein as "Securities
System", or securities which are subject to a joint repurchase
agreement with affiliated funds pursuant to Section 2.14. The
Custodian shall maintain records of all receipts, deliveries and
locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing stocks, bonds and other securities
held by it under this Contract in such manner as the Custodian
shall determine from time to time to be advisable in order to
verify the accuracy of such inventory. With respect to
securities held by any agent appointed pursuant to Section 2.11
hereof, and with respect to securities held by any sub-custodian
appointed pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings of such
agent and from such sub-custodian as to the holdings of such sub-
custodian, it being understood that such reliance in no way
relieves the Custodian of its responsibilities under this
Contract. The Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1)Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2)Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3)In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 2.12 hereof;
(4)To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;
(5)To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6)To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or nominees
of the Custodian or into the name or nominee name of any
agent appointed pursuant to Section 2.11 or into the name
or nominee name of any sub-custodian appointed pursuant to
Section 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new securities are to be delivered to
the Custodian;
(7)Upon the sale of such securities for the account of a Fund,
to the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's
own failure to act in accordance with the standard of
reasonable care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of
this Contract;
(8)For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit
agreement; provided that, in any such case, the new
securities and cash, if any, are to be delivered to the
Custodian;
(9)In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights
or similar securities or the surrender of interim receipts
or temporary securities for definitive securities; provided
that, in any such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10)For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified
by the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund
or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11)For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian and a broker-
dealer registered under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options
Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with transactions for a Fund;
(13)For delivery in accordance with the provisions of any agree
ment among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction
for a Fund;
(14)Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by
holders of Shares for repurchase or redemption; and
(15)For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth
the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of
a particular Fund or in the name of any nominee of the Fund or
of any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund,
or in the name or nominee name of any agent appointed pursuant
to Section 2.11 or in the name or nominee name of any sub-
custodian appointed pursuant to Section 1. All securities
accepted by the Custodian on behalf of a Fund under the terms of
this Contract shall be in "street name" or other good delivery
form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only
to draft or order by the Custodian acting pursuant to the terms
of this Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from
or for the account of each Fund, other than cash maintained in a
joint repurchase account with other affiliated funds pursuant to
Section 2.14 of this Contract or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under
the Investment Company Act of 1940, as amended, (the "1940
Act"). Funds held by the Custodian for a Fund may be deposited
by it to its credit as Custodian in the Banking Department of
the Custodian or in such other banks or trust companies as it
may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be
qualified to act as a custodian under the 1940 Act and that each
such bank or trust company and the funds to be deposited with
each such bank or trust company shall be approved by vote of a
majority of the Board of Trustees/Directors ("Board") of the
Trust. Such funds shall be deposited by the Custodian in its
capacity as Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by the Trust,
the Custodian shall furnish the Trust, not later than twenty
(20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and
will deposit into each Fund's account such payments as are
received from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer Agent of any
receipt by it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of
checks, clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are deposited
into the Funds' accounts.
2.7Collection of Income.
(1)The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by
law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held by the
Custodian or its agent thereof and shall credit such
income, as collected, to each Fund's custodian account.
Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when
they become due and shall collect interest when due on
securities held hereunder. The collection of income due
the Funds on securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the responsibility of the
Trust. The Custodian will have no duty or responsibility
in connection therewith, other than to provide the Trust
with such information or data as may be necessary to assist
the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly
entitled.
(2)The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of
past due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1)Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of
title to futures contracts, to the Custodian (or any bank,
banking firm or trust company doing business in the United
States or abroad which is qualified under the 1940 Act to
act as a custodian and has been designated by the Custodian
as its agent for this purpose) registered in the name of
the Fund or in the name of a nominee of the Custodian
referred to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set
forth in Section 2.12 hereof or (c) in the case of
repurchase agreements entered into between the Trust and
any other party, (i) against delivery of the securities
either in certificate form or through an entry crediting
the Custodian's account at the Federal Reserve Bank with
such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of
securities owned by the Custodian along with written
evidence of the agreement by the Custodian to repurchase
such securities from the Fund;
(2)In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3)For the redemption or repurchase of Shares of a Fund issued
by the Trust as set forth in Section 2.10 hereof;
(4)For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to
be in whole or part capitalized or treated as deferred
expenses;
(5)For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6)For payment of the amount of dividends received in respect of
securities sold short;
(7)For any other proper purpose, but only upon receipt of, in a
ddition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on
behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting forth the
purpose for which such payment is to be made, declaring
such purpose to be a proper purpose, and naming the person
or persons to whom such payment is to be made.
2.9Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence
of specific written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to the Fund
for such securities to the same extent as if the securities had
been received by the Custodian.
2.10Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of
Incorporation and any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for
payment to holders of shares of such Fund who have delivered to
the Transfer Agent a request for redemption or repurchase of
their shares including without limitation through bank drafts,
automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the
Funds, the Custodian is authorized upon receipt of instructions
from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other
bank or trust company which is itself qualified under the 1940
Act and any applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the provisions of
this Section 2 as the Custodian may from time to time direct;
provided, however, that the appointment of any agent shall not
relieve the Custodian of its responsibilities or liabilities
hereunder.
2.12Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1)The Custodian may keep securities of each Fund in a Securities
System provided that such
securities are represented in an account ("Account") of the
Custodian in the
Securities System which shall not include any assets of the
Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
(2)The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall identify
by book-entry those securities
belonging to each Fund;
(3)The Custodian shall pay for securities purchased for the account
of each Fund upon (i)
receipt of advice from the Securities System that such
securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the
Custodian to reflect such payment and transfer for the account
of the Fund. The
Custodian shall transfer securities sold for the account of a
Fund upon (i) receipt of
advice from the Securities System that payment for such securities
has been
transferred to the Account, and (ii) the making of an entry on the
records of the
Custodian to reflect such transfer and payment for the account
of the Fund. Copies of
all advices from the Securities System of transfers of securities
for the account of a
Fund shall identify the Fund, be maintained for the Fund by the
Custodian and be
provided to the Trust at its request. Upon request, the
Custodian shall furnish the
Trust confirmation of each transfer to or from the account of a
Fund in the form of a
written advice or notice and shall furnish to the Trust copies
of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of a Fund.
(4)The Custodian shall provide the Trust with any report obtained
by the Custodian on the
Securities System's accounting system, internal accounting
control and procedures for
safeguarding securities deposited in the Securities System;
(5)The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6)Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable
to the Trust for any loss or damage to a Fund resulting from use of
the Securities
System by reason of any negligence, misfeasance or misconduct of
the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or
any such agent to enforce effectively such rights as it may have
against the
Securities System; at the election of the Trust, it shall be
entitled to be subrogated
to the rights of the Custodian with respect to any claim
against the Securities System
or any other person which the Custodian may have as a consequence
of any such loss or
damage if and to the extent that a Fund has not been made whole
for any such loss or damage.
(7)The authorization contained in this Section 2.12 shall not
relieve the Custodian from
using reasonable care and diligence in making use of any
Securities System.
2.13Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of
any agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii)
for purpose of segregating cash or government securities in
connection with options purchased, sold or written for a Fund or
commodity futures contracts or options thereon purchased or sold
for a Fund, (iii) for the purpose of compliance by the Trust or
a Fund with the procedures required by any release or releases
of the SEC relating to the maintenance of segregated accounts by
registered investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause (iv), upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Board or of the Executive Committee
signed by an officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose or purposes
of such segregated account and declaring such purposes to be
proper corporate purposes.
2.14Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any assets of
a Fund and any affiliated funds which are subject to joint
repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in
accordance with applicable exemptive orders from the SEC. The
requirements of segregation set forth in Section 2.1 shall be
deemed to be waived with respect to such assets.
2.15Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund
held by it and in connection with transfers of securities.
2.16Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.
2.17Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls
and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put
options written by the Fund and the maturity of futures
contracts purchased or sold by the Fund) received by the
Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian
shall transmit promptly to the Trust all written information
received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to
take action with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify the
Custodian in writing at least three business days prior to the
date on which the Custodian is to take such action. However,
the Custodian shall nevertheless exercise its best efforts to
take such action in the event that notification is received
three business days or less prior to the date on which action is
required.
2.18Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person
previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b)
the Trust promptly causes such oral instructions to be confirmed
in writing. Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by the Board of
the Trust accompanied by a detailed description of procedures
approved by the Board, Proper Instructions may include
communications effected directly between electro-mechanical or
electronic devices provided that the Board and the Custodian are
satisfied that such procedures afford adequate safeguards for a
Fund's assets.
2.19Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1)make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it
may be allocated to the affected Fund;
(2)surrender securities in temporary form for securities in
definitive form;
(3)endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4)in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and
property of each Fund except as otherwise directed by the
Trust.
2.20Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent, certificate
or other instrument or paper reasonably believed by it to be
genuine and to have been properly executed on behalf of a Fund.
The Custodian may receive and accept a certified copy of a vote
of the Board of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or
(b) of any determination of or any action by the Board pursuant
to the Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written
notice to the contrary.
2.21Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3.Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep
the books of account of each Fund and/or compute the net asset value
per share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of
account and/or compute such net asset value per share. If so
directed, the Custodian shall also calculate daily the net income of
a Fund as described in the Fund's currently effective prospectus and
Statement of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total amounts of such
net income and, if instructed in writing by an officer of the Trust
to do so, shall advise the Transfer Agent periodically of the
division of such net income among its various components. The
calculations of the net asset value per share and the daily income
of a Fund shall be made at the time or times described from time to
time in the Fund's currently effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as
will meet the obligations of the Trust and the Funds under the 1940
Act, with particular attention to Section 31 thereof and Rules 31a-1
and 31a-2 thereunder, and specifically including identified cost
records used for tax purposes. All such records shall be the
property of the Trust and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of this
Contract, the Custodian will deliver all such records to the Trust,
to a successor Custodian, or to such other person as the Trust may
direct. The Custodian shall supply daily to the Trust a tabulation
of securities owned by a Fund and held by the Custodian and shall,
when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with
respect to its activities hereunder in connection with the
preparation of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any other
requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system,
internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts,
including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian for the
Fund under this Contract; such reports shall be of sufficient scope
and in sufficient detail, as may reasonably be required by the
Trust, to provide reasonable assurance that any material
inadequacies would be disclosed by such examination and, if there
are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however,
that the Custodian shall be held to any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above stated standard of reasonable care was not
part of this Contract. The Custodian shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15 hereof, the
Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without
liability for any action taken or thing done by it in carrying out
the terms and provisions of this Contract in accordance with the
above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and
notify the Trust promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification. The Trust shall have the option to defend the
Custodian against any claim which may be the subject of this
indemnification, and in the event that the Trust so elects it will
so notify the Custodian and thereupon the Trust shall take over
complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it
shall seek indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in any case in
which the Trust will be asked to indemnify the Custodian except with
the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect
to securities, which action involves the payment of money or which
action may, in the reasonable opinion of the Custodian, result in
the Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims
and liabilities (including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or its nominee
in connection with the performance of this Contract, except such as
may arise from it or its nominee's own failure to act in accordance
with the standard of reasonable care or any higher standard of care
which would be imposed upon the Custodian by any applicable law or
regulation if such above-stated standard of reasonable care were not
part of this Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to or for the
benefit of a Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and
pledges to the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the Fund's gross
assets, the specific securities to be designated in writing from
time to time by the Trust or the Fund's investment adviser. Should
the Trust fail to make such designation, or should it instruct the
Custodian to make advances exceeding the percentage amount set forth
above and should the Custodian do so, the Trust hereby agrees that
the Custodian shall have a security interest in all securities or
other property purchased for a Fund with the advances by the
Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes
of the requirements of the Uniform Commercial Code. Should the
Trust fail to cause a Fund to repay promptly any authorized charges
or advances of cash or securities, subject to the provision of the
second paragraph of this Section 8 regarding indemnification, the
Custodian shall be entitled to use available cash and to dispose of
pledged securities and property as is necessary to repay any such
advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of the Secretary
or an Assistant Secretary that the Board of the Trust has approved
the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further,
however, that the Trust shall not amend or terminate this Contract
in contravention of any applicable federal or state regulations, or
any provision of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by action of
its Board (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the
Trust, the Custodian shall, upon termination, deliver to such
successor custodian at the office of the Custodian, duly endorsed
and in the form for transfer, all securities then held by it
hereunder for each Fund and shall transfer to separate accounts of
the successor custodian all of each Fund's securities held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered
to the Custodian on or before the date when such termination shall
become effective, then the Custodian shall have the right to deliver
to a bank or trust company, which is a "bank" as defined in the 1940
Act, (delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian
all of each Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other properties remain in
the possession of the Custodian after the date of termination hereof
owing to failure of the Trust to procure the certified copy of the
vote referred to or of the Board to appoint a successor custodian,
the Custodian shall be entitled to fair compensation for its
services during such period as the Custodian retains possession of
such securities, funds and other properties and the provisions of
this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed hereto,
provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any
provision of the Declaration of Trust/Articles of Incorporation. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Contract.
12. Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Custodian at address for SSBT only: 225 Franklin Street,
Boston, Massachusetts, 02110, or to such other address as the Trust
or the Custodian may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the
obligations and liabilities assumed by the Trust and any Fund
pursuant to this Contract, including, without limitation, any
obligation or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the relevant Fund
and its assets and that the Custodian shall not seek satisfaction of
any such obligation from the shareholders of the relevant Fund, from
any other Fund or its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In addition, in
connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving
more than one Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for any such
claim between or among the Funds.
IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative
and its seal to be hereunder affixed effective as of the 1st day of
December, 1993.
ATTEST: INVESTMENT COMPANIES (Except those
listed below)
/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman
ATTEST: STATE STREET BANK AND TRUST
COMPANY
/s/ Ed McKenzie______________ By /s/ F. J. Sidoti, Jr.____________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President
ATTEST: FEDERATED SERVICES COMPANIY
/s/ Jeannette Fisher-Garber______ By /s/ James J. Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
1/11/94 Insight Institutional Series, Inc.
Insight Institutional Series, Inc. Page 1 1/25/95 ver. 1294v1
Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT
AGREEMENT made as of 12/01/94, by and between those investment companies
listed on Exhibit 1 as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Trust"), on behalf of the portfolios
(individually referred to herein as a "Fund" and collectively as "Funds") of
the Trust, and FEDERATED SERVICES COMPANY, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
with authorized and issued shares of capital stock or beneficial interest
("Shares"); and
WHEREAS, the Trust may desire to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company is willing to furnish such services; and
WHEREAS, the Trust may desire to appoint the Company as its transfer agent,
dividend disbursing agent if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept
such appointment; and
WHEREAS, the Trust may desire to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved list
of qualified banks if so indicated on Exhibit 1, and the Company desires to
accept such appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or another
agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for those
investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment
and agrees to furnish the services herein set forth in return for the
compensation as provided in Article 3 of this Section.
Article 2. The Company's Duties.
Subject to the supervision and control of the Trust's Board of Trustees or
Directors ("Board"), the Company will assist the Trust with regard to fund
accounting for the Trust, and/or the Funds, and/or the Classes, and in
connection therewith undertakes to perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be available by
market quotation, the Company may obtain a price by calling brokers
designated by the investment adviser of the fund holding the security,
or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a fair
value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the above sources of prices used as described are
deemed by the Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has comment.
Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents.
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate capital gains or losses of each of the Funds resulting from
sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules thereunder
in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Trust are
the property of the Trust and further agrees to surrender promptly to
the Trust such records upon the Trust's request;
G. At the request of the Trust, prepare various reports or other financial
documents required by federal, state and other applicable laws and
regulations; and
H. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the fees
agreed upon from time to time between the parties hereto. Such fees do
not include out-of-pocket disbursements of the Company for which the
Funds shall reimburse the Company upon receipt of a separate invoice.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees
of Trustees or Directors of the Trust; independent auditors expenses;
Federated Administrative Services and/or Federated Administrative
Services, Inc. legal and audit department expenses billed to Federated
Services Company for work performed related to the Trust, the Funds,
or the Classes; law firm expenses; or other expenses not specified in
this Article 3 which may be properly payable by the Funds and/or
classes.
C. The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing services under this Section One. Such person or persons may
be third-party service providers, or they may be officers and
employees who are employed by both the Company and the Funds. The
compensation of such person or persons shall be paid by the Company
and no obligation shall be incurred on behalf of the Trust, the Funds,
or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the Trust
hereby appoints the Company to act as, and the Company agrees to act as,
transfer agent and dividend disbursing agent for each Fund's Shares, and agent
in connection with any accumulation, open-account or similar plans provided to
the shareholders of any Fund ("Shareholder(s)"), including without limitation
any periodic investment plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the Trust,
or the Fund, and the Company promptly cause such oral instructions to be
confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Trust, or the Fund, and the Company are satisfied that such procedures afford
adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Trust as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be
paid out. The Company shall reconcile the amounts so requested
and the amounts actually received with the Custodian on a daily
basis. If a Shareholder is entitled to receive additional Shares
by virtue of any such distribution or dividend, appropriate
credits shall be made to the Shareholder's account, for
certificated Funds and/or Classes, delivered where requested;
and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall notify
the Funds on a daily basis of the total amount of redemption
requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a
regular basis or upon reasonable request with the total number
of Shares which are authorized and issued and outstanding, but
shall have no obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor the issuance of
such Shares or to take cognizance of any laws relating to the
issue or sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created and
maintained by the Company pursuant to this Agreement, which are
no longer needed by the Company in performance of its services
or for its protection. If not so turned over to the Fund, such
records and documents will be retained by the Company for six
years from the year of creation, during the first two of which
such documents will be in readily accessible form. At the end of
the six year period, such records and documents will either be
turned over to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in
each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and
any laws, rules and regulations of government authorities having
jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of blank
Share certificates and from time to time shall renew such supply upon
request of the Company. Such blank Share certificates shall be
properly signed, manually or by facsimile, if authorized by the Trust
and shall bear the seal of the Trust or facsimile thereof; and
notwithstanding the death, resignation or removal of any officer of
the Trust authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature
of such officer until otherwise directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as agreed upon
between the parties and as may be added to or amended from time to
time. Such fees may be changed from time to time subject to written
agreement between the Trust and the Company. Pursuant to information
in the Fund Prospectus or other information or instructions from the
Fund, the Company may sub-divide any Fund into Classes or other sub-
components for recordkeeping purposes. The Company will charge the
Fund the same fees for each such Class or sub-component the same as if
each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the
parties, as may be added to or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section Two may
be assigned by either party without the written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. The Company may without further consent on the part of the Trust
subcontract for the performance hereof with (A) State Street Bank and
its subsidiary, Boston Financial Data Services, Inc., a Massachusetts
Trust ("BFDS"), which is duly registered as a transfer agent pursuant
to Section 17A(c)(1) of the Securities Exchange Act of 1934, as
amended, or any succeeding statute ("Section 17A(c)(1)"), or (B) a
BFDS subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(1), or (C) a BFDS affiliate, or (D) such other provider
of services duly registered as a transfer agent under Section
17A(c)(1) as Company shall select; provided, however, that the Company
shall be as fully responsible to the Trust for the acts and omissions
of any subcontractor as it is for its own acts and omissions; or
C. The Company shall upon instruction from the Trust subcontract for the
performance hereof with an Agent selected by the Trust, other than
BFDS or a provider of services selected by Company, as described in
(2) above; provided, however, that the Company shall in no way be
responsible to the Trust for the acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement.
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and obtain
custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate the nature and the quality of the custodial services provided
by the Eligible Custodian;
B. employ the Eligible Custodian to serve on behalf of the Trust as
Custodian of the Trust's assets substantially on the terms set forth
as the form of agreement in Exhibit 2;
C. negotiate and enter into agreements with the Custodians for the benefit
of the Trust, with the Trust as a party to each such agreement. The
Company shall not be a party to any agreement with any such Custodian;
D. establish procedures to monitor the nature and the quality of the
services provided by the Custodians;
E. continuously monitor the nature and the quality of services provided by
the Custodians; and
F. periodically provide to the Trust (i) written reports on the activities
and services of the Custodians; (ii) the nature and amount of
disbursement made on account of the Trust with respect to each
custodial agreement; and (iii) such other information as the Board
shall reasonably request to enable it to fulfill its duties and
obligations under Sections 17(f) and 36(b) of the 1940 Act and other
duties and obligations thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual fee as agreed upon between the parties.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Trust and/or
Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the
parties, as may be added to or amended from time to time. In addition,
any other expenses incurred by the Company at the request or with the
consent of the Trust and/or the Fund, will be reimbursed by the
appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Trust and/or the Funds and a duly authorized officer of
the Company.
Article 12. Representations.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this Agreement,
the Trust shall file with the Company the following documents:
(1) A copy of the Charter and By-Laws of the Trust and all amendments
thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Trust or the Funds in the forms approved by the Board of the
Trust with a certificate of the Secretary of the Trust as to
such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and by-
laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements and
in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under the
1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
Article 15. Standard of Care and Indemnification.
A. Standard of Care
The Company shall be held to a standard of reasonable care in carrying
out the provisions of this Contract. The Company shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for the
Trust) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
B. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund shall
indemnify and hold the Company, including its officers, directors,
shareholders and their agents employees and affiliates, harmless
against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Trust or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase,
redemption or transfer of Shares and Shareholder account
information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties
contracted by or approved by the Trust of Fund for use in
the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Trust or the
Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities
laws or regulations of any state that such Shares be registered
in such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties of failure to
meet the standard of care set forth in 15.A. above.
C. Reliance
At any time the Company may apply to any officer of the Trust or Fund
for instructions, and may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by
the Company under this Agreement, and the Company and its agents or
subcontractors shall not be liable and shall be indemnified by the
Trust or the appropriate Fund for any action reasonably taken or
omitted by it in reliance upon such instructions or upon the opinion
of such counsel provided such action is not in violation of applicable
federal or state laws or regulations. The Company, its agents and
subcontractors shall be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual
or facsimile signatures of the officers of the Trust or the Fund, and
the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Trust exercise its rights
to terminate, all out-of-pocket expenses associated with the movement of
records and materials will be borne by the Trust or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Article 15 shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement executed
by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and the
Trust may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. Any such interpretive or
additional provisions shall be in a writing signed by both parties and shall
be annexed hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any provision
of the Charter. No interpretive or additional provisions made as provided in
the preceding sentence shall be deemed to be an amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Trust or the Company may hereafter specify, shall be
deemed to have been properly delivered or given hereunder to the respective
address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of the Trust.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by an authorized officer of the Trust, acting
as such, and neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
and the obligations of this Agreement are not binding upon any of the Trustees
or Shareholders of the Company, but bind only the property of the Company as
provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be assignable
with respect to the Trust or the Funds by either of the parties hereto except
by the specific written consent of the other party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust, the
Company shall upon termination of this Agreement deliver to such successor
agent at the office of the Company all properties of the Trust held by it
hereunder. If no such successor agent shall be appointed, the Company shall at
its office upon receipt of Proper Instructions deliver such properties in
accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date
when such termination shall become effective, then the Company shall have the
right to deliver to a bank or trust company, which is a "bank" as defined in
the 1940 Act, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$2,000,000, all properties held by the Company under this Agreement.
Thereafter, such bank or trust company shall be the successor of the Company
under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage,
power or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign to a
successor all of or a substantial portion of its business, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 28 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
ATTEST: INVESTMENT COMPANIES
(listed on Exhibit 1)
/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman
ATTEST: FEDERATED SERVICES COMPANY
/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
EXHIBIT 1
<TABLE>
<S> <C>
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes
12/01/94 INSIGHT INSTITUTIONAL SERIES, INC.
12/01/94 Insight Limited Term Income Fund
12/01/94 Insight U.S. Government Fund
FEDERATED SERVICES COMPANY provides the following services:
Fund Accounting
Shareholder Recordkeeping
Custody Services Procurement
</TABLE>
-1-
Exhibit 9ii under Form N-1A
Exhibit 10 under Item 601/Reg S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this first day of
March, 1994, between those investment companies listed on Exhibit 1, as may
be amended from time to time, having their principal office and place of
business at Federated Investors Tower, Pittsburgh PA 15222-3779
(individually referred to herein as "Fund" and collectively referred to as
"Funds), on behalf of the portfolios of the Funds, and Federated
Administrative Services, a Delaware business trust (herein called "FAS").
WHEREAS, the Funds desire to retain FAS as their Administrator to
provide them with Administrative Services (as herein defined), and FAS is
willing to render such services;
WHEREAS, the Funds are registered as open-end management investment
companies under the Investment Company Act of 1940, as amended (the "1940
Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares"); and
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. Appointment of Administrator. The Funds hereby appoint FAS as
Administrator of the Funds on the terms and conditions set forth in this
Agreement; and FAS hereby accepts such appointment and agrees to perform the
services and duties set forth in Section 2 of this Agreement in consideration
of the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject to the
supervision and control of the Funds' Boards of Trustees or Directors, as
applicable (the "Boards"), FAS will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Funds and each of their portfolios:
(a) prepare, file, and maintain the Funds'
governing documents and any amendments thereto, including the
Declaration of Trust or Articles of Incorporation, as
appropriate,(which has already been prepared and filed), the By-
laws and minutes of meetings of their Boards, Committees, and
shareholders;
(b) prepare and file with the Securities
and Exchange Commission and the appropriate state securities
authorities the registration statements for the Funds and the
Funds' shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements,
and such other documents all as may be necessary to enable the
Funds to make continuous offerings of their shares, as
applicable;
(c) prepare, negotiate, and administer
contracts on behalf of the Funds with, among others, each Fund's
investment adviser, distributor, custodian, and transfer agent,
subject to any applicable restrictions of the Boards or the 1940
Act;
(d) supervise the Funds' custodians in the
maintenance of the Funds' general ledgers and in the preparation
of the Funds' financial statements, including oversight of
expense accruals and payments, the determination of the net
asset value of the Funds and the declaration and payment of
dividends and other distributions to shareholders;
(e) calculate performance data of the
Funds for dissemination to information services covering the
investment company industry;
(f) prepare and file the Funds' tax
returns;
(g) examine and review the operations of
the Funds' custodians and transfer agents;
(h) coordinate the layout and printing of
publicly disseminated prospectuses and reports;
(i) perform internal audit examinations in
accordance with a charter to be adopted by FAS and the Funds;
(j) assist with the design, development,
and operation of the Funds;
(k) provide individuals reasonably
acceptable to the Funds' Boards for nomination, appointment, or
election as officers of the Funds, who will be responsible for
the management of certain of the Funds' affairs as determined by
the Funds' Boards; and
(l) consult with the Funds and their
Boards of Trustees or Directors, as appropriate, on matters
concerning the Funds and their affairs.
The foregoing, along with any additional services that FAS shall agree
in writing to perform for the Funds hereunder, shall hereafter be referred to
as "Administrative Services." Administrative Services shall not include any
duties, functions, or services to be performed for any Fund by such Fund's
investment adviser, distributor, custodian, transfer agent, or shareholder
service agent, pursuant to their respective agreements with such Fund.
3. Expenses. FAS shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be necessary or
convenient to provide the Administrative Services to the Fund, including the
compensation of FAS employees who serve on the Funds' Boards, or as officers
of the Funds. Each Fund shall be responsible for all other expenses incurred
by FAS on behalf of such Fund, including without limitation postage and
courier expenses, printing expenses, travel expenses, registration fees,
filing fees, fees of outside counsel and independent auditors, insurance
premiums, fees payable to members of such Fund's Board who are not FAS
employees, and trade association dues.
4. Compensation. For the Administrative Services provided, each
Fund hereby agrees to pay and FAS hereby agrees to accept as full
compensation for its services rendered hereunder an administrative fee at an
annual rate, payable daily, as specified below, based upon the total assets
of all of the Funds:
Maximum Administrative Average Daily Net Assets
Fee of the Funds
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received during any
year of this Agreement be less than, or be paid at a rate less than would
aggregate, $125,000, per individual Fund, with an additional $30,000 for each
class of shares added to any such Fund after the date hereof.
5. Standard of Care.
(a) FAS shall not be liable for any error
of judgment or mistake of law or for any loss suffered by any
Fund in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and
duties under this Agreement. FAS shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any
person, even though also an officer, trustee, partner, employee
or agent of FAS, who may be or become a member of such Fund's
Board, officer, employee or agent of any Fund, shall be deemed,
when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with
the duties of FAS hereunder) to be rendering such services to or
acting solely for such Fund and not as an officer, trustee,
partner, employee or agent or one under the control or direction
of FAS even though paid by FAS.
(b) This Section 5 shall survive
termination of this Agreement.
6. Duration and Termination. The initial term of this Agreement
with respect to each Fund shall commence on the date hereof, and extend for a
period of one year, renewable annually by the approval of the Board of
Directors/Trustees of each Fund.
7. Amendment. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. Limitations of Liability of Trustees or Officers, Employees,
Agents and Shareholders of the Funds. FAS is expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of each Fund
that is a Massachusetts business trust and agrees that the obligations
assumed by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FAS shall not seek satisfaction of
any such obligations from the shareholders of such Fund, the Trustees,
Officers, Employees or Agents of such Fund, or any of them.
9. Limitations of Liability of Trustees and Shareholders of FAS.
The execution and delivery of this Agreement have been authorized by the
Trustees of FAS and signed by an authorized officer of FAS, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FAS, but bind only the trust property of FAS as provided in
the Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given hereunder shall be
in writing (including facsimile communication) and shall be duly given if
delivered to any Fund at the following address: Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President and if delivered to FAS at
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
11. Miscellaneous. This Agreement constitutes the entire agreement
between the parties hereto and supersedes any prior agreement with respect to
the subject hereof whether oral or written. The captions in this Agreement
are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction
or effect. If any provision of this Agreement shall be held or made invalid
by a court or regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Section 5, hereof, this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Pennsylvania law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. Counterparts. This Agreement may be executed by different
parties on separate counterparts, each of which, when so executed and
delivered, shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. Assignment; Successors. This Agreement shall not be assigned by
any party without the prior written consent of FAS, in the case of assignment
by any Fund, or of the Funds, in the case of assignment by FAS, except that
any party may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control with
such party. Nothing in this Section 13 shall prevent FAS from delegating its
responsibilities to another entity to the extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Administrative Services
By: /s/ Edward C. Gonzales
Edward C. Gonzales
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Insight Institutional Series, Inc.
-1-
Exhibit 9 iii under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of this 1st
day of March, 1994, by the Boards of Directors or Trustees, as
applicable (the "Boards"), of those investment companies listed on
Exhibit 1 hereto as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (individually referred to herein as a "Fund"
and collectively as "Funds").
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate Federated Shareholder
Services ("FSS") for providing personal services and/or the maintenance
of shareholder accounts to the Funds and their shareholders. In
compensation for the services provided pursuant to this Plan, FSS may be
paid a monthly fee computed at the annual rate not to exceed .25 of 1%
of the average aggregate net asset value of the shares of each Fund held
during the month.
3. Any payments made by the Funds to FSS pursuant to this Plan
will be made pursuant to a "Shareholder Services Agreement" between FSS
and each of the Funds.
4. Quarterly in each year that this Plan remains in effect, FSS
shall prepare and furnish to the Boards of the Funds, and the Boards
shall review, a written report of the amounts expended under the Plan.
5. This Plan shall become effective with regard to each Fund
(i) after approval by majority votes of: (a) such Fund's Board; and (b)
the members of the Board of such Fund who are not interested persons of
such Fund and have no direct or indirect financial interest in the
operation of such Fund's Plan or in any related documents to the Plan
("Independent Trustees or Directors"), cast in person at a meeting
called for the purpose of voting on the Plan.
6. This Plan shall remain in effect with respect to each Fund
presently set forth on an exhibit and any subsequent Fund added pursuant
to an exhibit during the initial year of this Plan for the period of one
year from the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Fund at least annually by a
majority of the relevant Fund's Board and a majority of the Independent
Trustees or
Directors, of such Fund as applicable, cast in person at a meeting
called for the purpose of voting on the renewal of such Plan. If this
Plan is adopted with respect to a fund after the first annual approval
by the Trustees or Directors as described above, this Plan will be
effective as to that Fund at such time as Exhibit 1 hereto is amended to
add such Fund and will continue in effect until the next annual approval
of this Plan by the Funds' Boards and thereafter for successive periods
of one year subject to approval as described above.
7. All material amendments to this Plan must be approved by a
vote of the Board of each Fund and of the Independent Directors or
Trustees of such Fund, cast in person at a meeting called for such
purpose.
8. This Plan may be terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement; or
(b) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
9. While this Plan shall be in effect, the selection and
nomination of Independent Directors or Trustees of each Fund shall be
committed to the discretion of the Independent Directors or Trustees
then in office.
10. All agreements with any person relating to the
implementation of this Plan shall be in writing and any agreement
related to this Plan shall be subject to termination, without penalty,
pursuant to the provisions of Paragraph 8 herein.
11. This Plan shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this as of the date set forth
above.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Insight Institutional Series, Inc.
-1-
Exhibit 9iv under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES AGREEMENT
AGREEMENT made as of the first day of March, 1994, by and between
those investment companies listed on Exhibit 1, as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have
approved a Shareholder Services Plan (the "Plan") and this form of
Agreement (individually referred to herein as a "Fund" and collectively
as "Funds") and Federated Shareholder Services, a Delaware business
trust, having its principal office and place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services"). In
addition to providing Services directly to shareholders of the Funds,
FSS is hereby appointed the Funds' agent to select, negotiate and
subcontract for the performance of Services. FSS hereby accepts such
appointments. FSS agrees to provide or cause to be provided Services
which, in its best judgment (subject to supervision and control of the
Funds' Boards of Trustees or Directors, as applicable), are necessary or
desirable for shareholders of the Funds. FSS further agrees to provide
the Funds, upon request, a written description of the Services which FSS
is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS
and FSS agrees to accept as full compensation for its services rendered
hereunder a fee at an annual rate, calculated daily and payable monthly,
up to 0.25% of 1% of average net assets of each Fund.
For the payment period in which this Agreement becomes effective
or terminates with respect to any Fund, there shall be an appropriate
proration of the monthly fee on the basis of the number of days that
this Agreement is in effect with respect to such Fund during the month.
To enable the Funds to comply with an applicable exemptive order, FSS
represents that the fees received pursuant to this Agreement will be
disclosed to and authorized by any person or entity receiving Services,
and will not result in an excessive fee to FSS.
3. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year only if the form of this Agreement is approved at least annually by
the Board of each Fund, including a majority of the members of the Board
of the Fund who are not interested persons of the Fund and have no
direct or indirect financial interest in the operation of the Funds'
Plan or in any related documents to the Plan ("Independent Board
Members") cast in person at a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Independent Board Members of any
Fund or by a vote of a majority of the outstanding voting
securities of any Fund as defined in the Investment Company Act
of 1940 on sixty (60) days' written notice to the parties to
this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
5. FSS agrees to obtain any taxpayer identification number
certification from each shareholder of the Funds to which it provides
Services that is required under Section 3406 of the Internal Revenue
Code, and any applicable Treasury regulations, and to provide each Fund
or its designee with timely written notice of any failure to obtain such
taxpayer identification number certification in order to enable the
implementation of any required backup withholding.
6. FSS shall not be liable for any error of judgment or mistake
of law or for any loss suffered by any Fund in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FSS shall be entitled to
rely on and may act upon advice of counsel (who may be counsel for such
Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or
agent of any Fund, shall be deemed, when rendering services to such Fund
or acting on any business of such Fund (other than services or business
in connection with the duties of FSS hereunder) to be rendering such
services to or acting solely for such Fund and not as an officer,
trustee, partner, employee or agent or one under the control or
direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing
signed by the party against which an enforcement of the change, waiver,
discharge or termination is sought.
8. FSS is expressly put on notice of the limitation of
liability as set forth in the Declaration of Trust of each Fund that is
a Massachusetts business trust and agrees that the obligations assumed
by each such Fund pursuant to this Agreement shall be limited in any
case to such Fund and its assets and that FSS shall not seek
satisfaction of any such obligations from the shareholders of such Fund,
the Trustees, Officers, Employees or Agents of such Fund, or any of
them.
9. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
10. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to any Fund and to such Fund at the following address:
Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President and if delivered to FSS at Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President.
11. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 3
and 4, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
12. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
13. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by any Fund,
or of the Funds in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party. Nothing in this Section 13 shall prevent FSS from
delegating its responsibilities to another entity to the extent provided
herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year
first above written.
Investment Companies (listed
on Exhibit 1)
By: /s/ John F. Donahue
John F. Donahue
Chairman
Attest: /s/ John W. McGonigle
John W. McGonigle
Federated Shareholder Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
John W. McGonigle
Exhibit 1
Insight Institutional Series, Inc.
FSS subcontract 1
Exhibit 9 v under Form N-1A
Exhibit 10 under Item 601/Reg S-K
SHAREHOLDER SERVICES SUB-CONTRACT
This Agreement is made between the Financial Institution executing
this Agreement ("Provider") and Federated Shareholder Services ("FSS")
on behalf of the investment companies listed in Exhibit A hereto (the
"Funds"), for whom FSS administers the Shareholder Services Plan
("Plan") and who have approved this form of Agreement. In consideration
of the mutual covenants hereinafter contained, it is hereby agreed by
and between the parties hereto as follows:
1. FSS hereby appoints Provider to render or cause to be
rendered personal services to shareholders of the Funds and/or the
maintenance of accounts of shareholders of the Funds ("Services").
Provider agrees to provide Services which, in its best judgment, are
necessary or desirable for its customers who are investors in the Funds.
Provider further agrees to provide FSS, upon request, a written
description of the Services which Provider is providing hereunder.
2. During the term of this Agreement, the Funds will pay the
Provider fees as set forth in a written schedule delivered to the
Provider pursuant to this Agreement. The fee schedule for Provider may
be changed by FSS sending a new fee schedule to Provider pursuant to
Paragraph 9 of this Agreement. For the payment period in which this
Agreement becomes effective or terminates, there shall be an appropriate
proration of the fee on the basis of the number of days that this
Agreement is in effect during the quarter. To enable the Funds to
comply with an applicable exemptive order, Provider represents that the
fees received pursuant to this Agreement will be disclosed to its
customers, will be authorized by its customers, and will not result in
an excessive fee to the Provider.
3. The Provider understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving shareholder service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to
an arrangement where the fiduciary is to be compensated by the fund for
such investment. Receipt of such compensation could violate ERISA
provisions against fiduciary self-dealing and conflict of interest and
could subject the fiduciary to substantial penalties.
4. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management
of the Fund, unless a court of competent jurisdiction shall have
determined that the conduct of a majority of the Board of Trustees or
Directors of the Fund constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties. This paragraph 4 will
survive the term of this Agreement.
5. This Agreement shall continue in effect for one year from
the date of its execution, and thereafter for successive periods of one
year if the form of this Agreement is approved at least annually by the
Board of each Fund, including a majority of the members of the Board of
the Fund who are not interested persons of the Fund and have no direct
or indirect financial interest in the operation of the Fund's Plan or in
any related documents to the Plan ("Disinterested Board Members") cast
in person at a meeting called for that purpose.
6. Notwithstanding paragraph 5, this Agreement may be
terminated as follows:
(a) at any time, without the payment of any penalty, by
the vote of a majority of the Disinterested Board Members of the
Fund or by a vote of a majority of the outstanding voting
securities of the Fund as defined in the Investment Company Act
of 1940 on not more than sixty (60) days' written notice to the
parties to this Agreement;
(b) automatically in the event of the Agreement's
assignment as defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice
of its intention to terminate.
7. The Provider agrees to obtain any taxpayer identification
number certification from its customers required under Section 3406 of
the Internal Revenue Code, and any applicable Treasury regulations, and
to provide the Fund or its designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
8. The execution and delivery of this Agreement have been
authorized by the Trustees of FSS and signed by an authorized officer of
FSS, acting as such, and neither such authorization by such Trustees nor
such execution and delivery by such officer shall be deemed to have been
made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding
upon any of the Trustees or shareholders of FSS, but bind only the trust
property of FSS as provided in the Declaration of Trust of FSS.
9. Notices of any kind to be given hereunder shall be in
writing (including facsimile communication) and shall be duly given if
delivered to Provider at the address set forth below and if delivered to
FSS at Federated Investors Tower, Pittsburgh, PA 15222-3779, Attention:
President.
10. This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written. If any provision of this
Agreement shall be held or made invalid by a court or regulatory agency
decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. Subject to the provisions of Sections 5
and 6, hereof, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
shall be governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.
11. This Agreement may be executed by different parties on
separate counterparts, each of which, when so executed and delivered,
shall be an original, and all such counterparts shall together
constitute one and the same instrument.
12. This Agreement shall not be assigned by any party without
the prior written consent of FSS in the case of assignment by Provider,
or of Provider in the case of assignment by FSS, except that any party
may assign to a successor all of or a substantial portion of its
business to a party controlling, controlled by, or under common control
with such party.
13. This Agreement may be amended by FSS from time to time by
the following procedure. FSS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to
the amendment within thirty (30) days after its receipt, the amendment
will become part of the Agreement. The Provider's objection must be in
writing and be received by FSS within such thirty days.
14. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by FSS or by the vote of a majority of the Disinterested
Trustees or Directors, as applicable, or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to the Provider. This
Agreement may be terminated by Provider on sixty (60) days' written
notice to FSS.
15. The Provider acknowledges and agrees that FSS has entered
into this Agreement solely in the capacity of agent for the Funds and
administrator of the Plan. The Provider agrees not to claim that FSS is
liable for any responsibilities or amounts due by the Funds hereunder.
[Provider]
Address
City State Zip Code
Dated: By:
Authoried Signature
Title
Print Name of Authorized Signature
FEDERATED SHAREHOLDER SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:
Vice President
EXHIBIT A to Shareholder Services Sub-Contract with
Insight Institutional Series, Inc.
Funds covered by this Agreement:
Shareholder Service Fees
1. During the term of this Agreement, FSS will pay Provider a
quarterly fee. This fee will be computed at the annual rate of .25 of
1% of the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as FSS shall
from time to time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Agreement becomes
effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the Agreement is in
effect during the quarter.
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<NAME> INSIGHT LIMITED TERM INCOME FUND
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<PERIOD-END> SEP-30-1994
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<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> INSIGHT U.S. GOVERNMENT FUND
<PERIOD-TYPE> 10-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<INVESTMENTS-AT-COST> 99,498
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<OTHER-ITEMS-LIABILITIES> 8,348
<TOTAL-LIABILITIES> 8,348
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 100,204
<SHARES-COMMON-STOCK> 10,020
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (125)
<NET-ASSETS> 100,079
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,936
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<NET-CHANGE-FROM-OPS> 2,811
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<NUMBER-OF-SHARES-REDEEMED> 5
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,000
<AVERAGE-NET-ASSETS> 100,152
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.290
<PER-SHARE-GAIN-APPREC> (0.010)
<PER-SHARE-DIVIDEND> 0.290
<PER-SHARE-DISTRIBUTIONS> 000
<RETURNS-OF-CAPITAL> 000
<PER-SHARE-NAV-END> 9.990
<EXPENSE-RATIO> 0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> .000
</TABLE>
<TABLE> <S> <C>
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<SERIES>
<NUMBER> 3
<NAME> INSIGHT U.S. GOVERNMENT FUND
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<TOTAL-LIABILITIES> 8,348
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