FEDERATED INSURANCE SERIES, 485APOS, 1999-02-18

FEDERATED INSURANCE SERIES
485APOS, 1999-02-18

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1933 Act File No. 33-69268
1940 Act File No. 811-8042

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----

Pre-Effective Amendment No. .......................

Post-Effective Amendment No. 20 ........................... X
---- -----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 21 .........................................X
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FEDERATED INSURANCE SERIES

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds, 5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000

(Address of Principal Executive Offices)

(412) 288-1900

(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,

Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

_ immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)

X on April 20, 1999 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.

Copies To:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP

2101 L Street, N.W.
Washington, D.C. 20037

PROSPECTUS

FEDERATED AMERICAN LEADERS FUND II

(A Portfolio of Federated Insurance Series)

A large cap value mutual fund investing primarily in common stocks of high
quality companies.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

Fund shares are available exclusively as a funding vehicle for life insurance
companies writing variable life insurance policies and variable annuity
contracts. They are subject to investment limitations that do not apply to other
mutual funds available directly to the general public. Therefore, any comparison
of these two types of mutual funds would be inappropriate. This prospectus
should be accompanied by the prospectuses for such variable contracts.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

april 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to achieve long-term growth of capital. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the strategies and policies described in this
prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

The value of equity securities in the Fund's portfolio will go up and down.
These fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's Share price may
decline and you could lose money. Other risks of investing in the Fund include
Sector Risk, Risks Related to Investing for Value, and Risk of Foreign
Investing.

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 or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated American Leaders Fund II as of the calendar
year-end for each of 4 years.

The `y' axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 5.00% up to 35.00%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features 4 distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar for the calendar years 1995 through 1998. The percentages
noted are: 33.71%, 21.58%, 32.34%, and 17.62%. The bar chart shows the
variability of the Fund's actual total returns on a calendar year-end basis. The
Fund does not impose a sales charge (load). Hence, the total returns displayed
above are based on net asset value. Within the period shown in the Chart, the
Fund's highest quarterly return was 16.18% (quarter ended December 31, 1998).
Its lowest quarterly return was (11.94%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURN

LIFE OF THE FUND1 1 YEAR

Fund 20.73% 17.62%
S&P 500 __% 28.61%
LGIFA __% 13.58%
1 Since inception date of February 10, 1994.

The table shows the Fund's average annual total returns compared to the Standard
and Poor's 500 Index (S&P 500) and the Lipper Growth and Income Funds Average
(LGIFA) for the calendar periods ending December 31, 1998. Past performance does
not necessarily predict future performance. This information provides you with
historical performance so that you can analyze whether the Fund's investment
risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing primarily in equity
securities of companies that are generally leaders in their industries,
characterized by sound management and have the ability to finance expected
growth. The Adviser attempts to identify good long-term values through
disciplined investing and careful fundamental research. The Fund's holdings
ordinarily will be in large capitalization companies that are in the top 25% of
their industries with regard to revenues.

The Adviser ranks the future performance potential of companies, based on
valuation models which attempt to identify companies trading at low valuation
relative to their history, to the market and to their expected future growth. To
determine the timing of purchases and sales of portfolio securities, the Adviser
looks at recent stock price performance and the direction of current fiscal year
earning estimates. In addition, the Adviser performs traditional fundamental
analysis to select the most promising companies for the Fund's portfolio.

PORTFOLIO TURNOVER

The Fund may actively trade its portfolio securities in an attempt to achieve
its investment objective. Active trading will cause the Fund to have an
increased portfolio turnover rate, which is likely to generate shorter-term
gains (losses) for its shareholders, which are taxed at a higher rate than
longer-term gains (losses). Actively trading portfolio securities increases the
Fund's trading costs and may have an adverse impact on the Fund's performance.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

COMMON STOCKS

Common stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
after the issuer pays its creditors and any preferred stockholders. As a result,
changes in an issuer's earnings directly influence the value of its common
stock.

AMERICAN DEPOSITARY RECEIPTS

American Depositary Receipts represent interests in underlying securities issued
by a foreign company, but traded in another market than the underlying security.
The foreign securities underlying American Depositary Receipts (ADRs) are traded
in the U.S. ADRs provide a way to buy shares of foreign-based companies in the
U.S. rather than in overseas markets. ADRs are also traded in U.S. dollars,
eliminating the need for foreign exchange transactions. Depositary Receipts
involve the Risk of Foreign Investing.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

STOCK MARKET RISKS

The Fund's investment adviser attempts to manage market risk of investing in
individual securities by limiting the amount the Fund invests in each stock.

SECTOR RISK

Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may perform differently than other sectors or as the market as a whole. As the
adviser allocates more of the Fund's portfolio holdings to a particular sector,
the Fund's performance will be more susceptible to any economic, business or
other developments which generally affect that sector.

RISKS RELATED TO INVESTING FOR VALUE

Due to their relatively low valuations, Value stocks are typically less volatile
than Growth stocks. For instance, the price of a Value stock may experience a
smaller increase on an analyst's upward earnings estimate revision, a positive
fundamental development, or other positive market development. Further, Value
stocks tend to have higher dividend yields than Growth stocks. This means they
depend less on price changes for returns. Accordingly, they might not
participate in upward market movements, but may be less adversely affected in a
down market compared to lower yielding stocks.

RISK OF FOREIGN INVESTING

Exchange rates for currency fluctuate daily. The combination of currency risk
and market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.

Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable that those of the United States. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

WHAT DO SHARES COST?

Shares can be purchased or redeemed by participating insurance companies any day
the New York Stock Exchange (NYSE) is open. Transaction requests received in
proper form are processed at the next calculated net asset value (NAV). NAV is
determined at the end of regular trading (normally 4:00 p.m. Eastern time) each
day the NYSE is open.

HOW IS THE FUND SOLD?

The Fund's Distributor markets the Shares described in this prospectus to
insurance companies as funding vehicles for variable annuity contracts and
variable life insurance policies issued by the insurance companies.

The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals for
marketing and servicing Shares. The Distributor is a subsidiary of Federated
Investors, Inc. (Federated).

HOW TO PURCHASE AND REDEEM SHARES

Shares are used solely as the investment vehicle for separate accounts of
participating insurance companies offering variable annuity contracts and
variable life insurance policies. The general public has access to the Fund only
by purchasing a variable annuity contract or variable life insurance policy
(thus becoming a contract owner).

Shares are not sold directly to the general public.

Purchase orders must be received by your participating insurance company by 4:00
p.m. (Eastern time). The order will be processed at the NAV calculated on that
day if the Fund receives from the participating insurance company:

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

The Fund intends to comply with variable asset diversification regulations. If
the Fund fails to comply with these regulations, contracts invested in the Fund
will not be treated as annuity, endowment, or life insurance contracts under the
Internal Revenue Code.

Contract owners should review the applicable contract prospectus for information
concerning the federal income tax treatment of their contracts and distributions
from the Fund to the separate accounts.

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Advisers. The Adviser manages the Fund's assets, including
buying and selling portfolio securities. The Adviser's address is Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779

The Fund's portfolio managers are:

Michael P. Donnelly has been a portfolio manager of the Fund since April
1997. Mr. Donnelly joined Federated Investors, Inc. or its predecessor in 1989
as an Investment Analyst and has been a Portfolio Manager and a Vice President
of the Fund's adviser since 1994. Mr. Donnelly is a Chartered Financial Analyst
and received his M.B.A. from the University of Virginia.

Arthur J. Barry has been a portfolio manager of the Fund since October
1998. Mr. Barry joined Federated Investors, Inc. or its predecessor in 1994 as
an Investment Analyst. He served as an Assistant Vice President of the Fund's
investment adviser from 1997 through June 1998 and has been a Vice President of
the adviser since July 1998. Mr. Barry is a Chartered Financial Analyst. He
earned his M.S.I.A. with concentrations in finance and accounting from Carnegie
Mellon University.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which total approximately $111 billion in assets as
of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees.

More than 4,000 investment professionals make Federated Funds available to their
customers.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Fund.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns assume reinvestment of any dividends and distributions.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(Financial Highlights to be filed by amendment.)

FEDERATED AMERICAN LEADERS FUND II

A Portfolio of Federated Insurance Series

A Statement of Additional Information (SAI) dated April 20, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the annual report
and other information without charge, call your investment professional or the
Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

INVESTMENT COMPANY ACT FILE NO. 811-8042
CUSIP 313916405

3113010A (2/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED AMERICAN LEADERS FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated American Leaders Fund II
(Fund), dated April 20, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.

april 20, 1999

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
Mixed Funding and Shared Funding
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses

CUSIP313916405

3113010B (2/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from Equity Growth and Income Fund to Federated American Leaders Fund II on
February 26, 1996.

The Fund's investment adviser is Federated Advisers (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

EQUITY SECURITIES

Equity securities represent a share of the issuer's earnings and assets, after
the issuer pays its liabilities. Generally, issuers have discretion as to the
payment of any dividends or distributions. As a result, investors cannot predict
the income they will receive from equity securities. However, equity securities
offer greater potential for appreciation than many other types of securities,
because their value increases directly with the value of the issuer's business.
The following describes the types of equity securities in which the Fund
invests.

COMMON STOCKS

Common Stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
after the issuer pays its creditors and any preferred stockholders. As a
result, changes in an issuer's earnings directly influence the value of its
common stock.

PREFERRED STOCKS

Preferred stocks have the right to receive specified dividends or
distributions before the payment of dividends or distributions on common
stock. Some preferred stocks also participate in dividends and distributions
paid on common stock. Preferred stocks may provide for the issuer to redeem
the stock. The Fund may treat such redeemable preferred stock as a fixed
income security.

REITS

REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax
if they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial
real estate market.

WARRANTS

Warrants give the Fund the option to buy the issuer's stock or other equity
securities at a specified price. The Fund may buy the designated shares by
paying the exercise price before the warrant expires. Warrants may become
worthless if the price of the stock does not rise above the exercise price
by the expiration date. RIGHTS are the same as warrants, except they are
typically issued to existing stockholders.

<PAGE>

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be fixed or adjusted periodically. The issuer must also repay
the principal amount of the security, normally within a specified time. Fixed
income securities provide more regular income than equity securities. However,
the returns on fixed income securities are limited and normally do not increase
with the issuer's earnings. This limits the potential appreciation of fixed
income securities as compared to equity securities.

A security's YIELD measures the annual income earned on a security as a
percentage of its price. Securities with higher credit risks generally have
higher yields. A security's yield will increase or decrease depending upon
whether it costs less (a "discount") or more (a "premium") than the principal
amount. Under normal market conditions, securities with longer maturities will
also have higher yields. If the issuer may redeem the security before its
scheduled maturity, the price and yield on a discount or premium security may
change based upon the probability of an early redemption.

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest Credit
Risk.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). Some
GSEs are supported by the full, faith and credit of the United States. Other
GSEs receive support through federal subsidies, loans or other benefits. A
few GSEs have no explicit financial support, but are regarded as having
implied support because the federal government sponsors their activities.
Investors regard agency securities as having low Credit Risk, but not as low
as Treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against Credit Risk, it does
not reduce the Market and prepayment risks of these mortgage backed
securities.

CORPORATE DEBT SECURITIES

COMMERCIAL PAPER

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use
the proceeds (or borrowings from bank loans) to repay maturing paper. If the
issuer cannot continue to obtain liquidity in this fashion, its commercial
paper may default. The short maturity of commercial paper reduces both the
Market and Credit Risks as compared to other debt securities of the same
issuer.

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a
dealer or bank, to repurchase the security for its face value upon demand.
The Fund treats demand instruments as short-term securities, even though
their stated maturity may extend beyond one year.

<PAGE>

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security. An
investor must wait until maturity to receive interest and principal, which
increases the Market and Credit Risks of a zero coupon security.

There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs, IOs and POs are
the most common forms of stripped zero coupon securities. In addition, some
securities give the issuer the option to deliver additional securities in place
of cash interest payments, thereby increasing the amount payable at maturity.
These are referred to as pay-in-kind or PIK securities.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Yankee instruments are denominated in U.S. dollars and
issued by U.S. branches of foreign banks. Eurodollar instruments are denominated
in U.S. dollars and issued by non-U.S. branches of U.S. or foreign banks.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase Agreements are transactions in which a Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
an agreed upon interest rate effective for the period the Fund owns the
security subject to repurchase. The agreed upon interest rate is unrelated
to the interest rate on the underlying security. The Funds will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Adviser to be
creditworthy.

A Fund's custodian or subcustodian is required to take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian
will monitor the value of the underlying security each day to ensure that
the value of the security always equals or exceeds the repurchase price.

Repurchase Agreements are subject to Credit Risk.

SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient
means of carrying out its investment policies and managing its uninvested
cash. It should be noted that investment companies incur certain expenses,
such as management fees, and, therefore, any investment by the Fund in
shares of other investment companies may be subject to such duplicate
expenses.

WHEN ISSUED TRANSACTIONS

When Issued Transactions are arrangements in which a Fund purchases
securities for a set price, with payment and delivery scheduled for a future
time. During the period between purchase and settlement, no payment is made
by the Fund to the issuer and no interest accrues to the Fund. The Fund
records the transaction when it agrees to purchase the securities and
reflects their value in determining the price of its shares. 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.
Therefore, when issued transactions create Bond Market Risk for the Fund.
When issued transactions also involve Credit Risk in the event of a
counterparty default.

<PAGE>

FOREIGN SECURITIES

Foreign Securities are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and traded outside of the U.S.
In addition to the risks normally associated with U.S. securities of the
same type, Foreign Securities are subject to risks related to the issuer's
country and that country's currency.

DEPOSITARY RECEIPTS

Depositary Receipts represent interests in underlying securities issued
by a foreign company, but traded in another market than the underlying
security. The foreign securities underlying American Depositary Receipts
(ADRs) are traded in the U.S. ADRs provide a way to buy shares of
foreign-based companies in the U.S. rather than in overseas markets.
ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and
International Depositary Receipts (IDRs), are traded globally or outside
the U.S. Depositary Receipts involve many of the same risks of investing
directly in foreign securities.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in the prospectus. Additional risk factors are
outlined below.

EQUITY SECURITIES INVESTMENT RISKS
LIQUIDITY RISKS

Equity securities that are not widely held may trade less frequently than more
widely held securities. This limits trading opportunity making it more difficult
to sell or buy the securities at a favorable price or time. In response, the
fund may have to lower the price, sell other securities, or give up an
investment opportunity, any of which could have a negative effect on its
performance. Infrequent trading may also lead to greater price volatility.

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price. Market capitalization is determined by multiplying the number of
outstanding shares by the current market price per share.

In addition, investing in small capitalization companies entails greater risk
because these companies may have unproven track records, limited product or
service base, limited access to capital and may be more likely to fail than
larger, more established companies.

FIXED INCOME SECURITIES INVESTMENT RISKS
BOND MARKET RISK

Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices of
fixed income securities fall.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

CREDIT RISK

Credit risk is the possibility that an issuer will default (the issuer fails to
repay interest and principal when due). If an issuer defaults, the Fund will
lose money.

Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services. Fixed income securities receive
different credit ratings depending on the rating service's assessment of the
likelihood of default by the issuer. The lower the credit rating, the greater
the credit risk. In the case of unrated securities, the Fund must rely entirely
upon the Adviser's credit assessment.

Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of the security and
the yield of a U.S. Treasury security with a comparable maturity (the "spread")
measures the additional interest received for taking risk. Spreads may increase
generally in response to adverse economic or market conditions. A security's
spread may also increase if the security's rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will cause
the price of the security to decline.

Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or disrupt management of the Fund's portfolio .

CALL RISK

Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a "call") at a price below it's current market price. An
increase in the likelihood of a call may reduce the security's price.

If a fixed income security is called, the Fund may have to reinvest the proceeds
in other fixed income securities with lower interest rates, higher credit risks,
or other less favorable characteristics.

LIQUIDITY RISKS

Fixed income securities that have noninvestment grade credit ratings, have not
been rated or that are not widely held may trade less frequently than more
widely held securities. This limits trading opportunities, making it more
difficult to sell or buy the security at a favorable price or time. In response,
the Fund may have to lower the price, sell other securities, or give up an
investment opportunity, any of which could have a negative effect on its
performance. Infrequent trading may also lead to greater price volatility.

Liquidity risk refers to the possibility that the Fund may not be able to sell a
security or close out a derivative contract when it wants to. If this happens,
the Fund will be required to continue to hold the security or keep the position
open, and the Fund could incur losses.

OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, generally
entail greater risks than investment grade securities. For example, their prices
are more volatile, their values are more negatively impacted by economic
downturns, and their trading market may be more limited.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regulations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the Fund
will not be treated as annuity, endowment, or life insurance contracts.

STATE INSURANCE REGULATIONS

The Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies offered by certain insurance companies. The
contracts will seek to be offered in as many jurisdictions as possible. Certain
states have regulations concerning, among other things, the concentration of
investments, sales and purchases of futures contracts, and short sales of
securities. If applicable, the Fund may be limited in its ability to engage in
such investments and to manage its portfolio with desired flexibility. The Fund
will operate in material compliance with the applicable insurance laws and
regulations of each jurisdiction in which contracts will be offered by the
insurance companies which invest in the Fund.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow money
directly or through reverse repurchase agreements as a temporary, extraordinary,
or emergency measure 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, and then only in amounts not in
excess of one-third of the value of its total assets; provided that, while
borrowings and reverse repurchase agreements outstanding exceed 5% of the Fund's
total assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if, as a result of such purchase, 25% or
more of its total assets would be invested in any one industry. However, the
Fund may at any time invest 25% or more of its total assets in cash or cash
items and securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

The Fund will not purchase 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
secured by real estate or interests in real estate.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Fund from purchasing
or holding corporate or U.S. government bonds, debentures, notes, certificates
of indebtedness or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted by the Fund's
investment objectives and policies or the Trust's Declaration of Trust.

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 securities in accordance with its investment objectives, policies, and
limitations.

DIVERSIFICATION OF INVESTMENTS

With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities issued
and/or guaranteed by the U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) if, as a result, more
than 5% of its total assets would be invested in the securities of that issuer.
Also, the Fund will not purchase more than 10% of any class of the outstanding
voting securities of any one issuer. For these purposes, the Fund considers
common stock and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other differences.

The above investment limitations cannot be changed unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act. The following limitation, however, may be changed by the
Board without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including, among others, repurchase agreements providing
for settlement more than seven days after notice, and certain restricted
securities not determined to be liquid under criteria established by the
Trustees.

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 association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items."

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. The Fund did not borrow money, sell securities short, or invest in
reverse repurchase agreements in excess of 5% of the value of its total assets
during the last fiscal year and has no present intent to do so in the coming
fiscal year. Short selling may accelerate the recognition of gains.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and

for all other securities, at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its NAV, the Fund
values foreign securities at the latest closing price on the exchange on which
they are traded immediately prior to the closing of the NYSE. Certain foreign
currency exchange rates may also be determined at the latest rate prior to the
closing of the NYSE. Foreign securities quoted in foreign currencies are
translated into U.S. dollars at current rates. Occasionally, events that affect
these values and exchange rates may occur between the times at which they are
determined and the closing of the NYSE. If such events materially affect the
value of portfolio securities, these securities may be valued at their fair
value as determined in good faith by the Fund's Board, although the actual
calculation may be done by others.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

Shares used as investments for both variable annuity contracts and variable life
insurance policies is called "mixed funding." Shares used as investments by
separate accounts of unaffiliated life insurance companies is called "shared
funding."

The Fund does engage in mixed funding and shared funding. Although the Fund does
not currently foresee any disadvantage to contract owners due to differences in
redemption rates, tax treatment, or other considerations resulting from mixed
funding or shared funding, the Trustees will closely monitor the operation of
mixed funding and shared funding and will consider appropriate action to avoid
material conflicts and take appropriate action in response to any material
conflicts which occur. Such action could result in one or more participating
insurance companies withdrawing their investment in the Fund.

HOW IS THE FUND SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis.

<PAGE>

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

SUBACCOUNTING SERVICES

Certain participating insurance companies may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Participating insurance companies holding Shares in a fiduciary,
agency, custodial, or similar capacity may charge or pass through subaccounting
fees as part of or in addition to normal trust or agency account fees. They may
also charge fees for other services that may be related to the ownership of
Shares. This information should, therefore, be read together with any agreement
between the customer and the participating insurance company about the services
provided, the fees charged for those services, and any restrictions and
limitations imposed.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund Shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Trust have
equal voting rights, except that in matters affecting only a particular Fund,
only Shares of that Fund are entitled to vote.

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Trust's outstanding shares
of all series entitled to vote.

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Aetna Insurance Co. of
America, Hartford, CT owned approximately 6,798,148 shares (35.28%); Aetna Life
Insurance & Annuity Co., Hartford, CT owned approximately 6,167,212 shares
(32.01%); Life of Virginia, Richmond, VA owned approximately 3,542,544 shares
(18.39%); and Great-West Life & Annuity Ins. Co., Englewood, CO owned
approximately 1,249,897 shares (6.49%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.

FOREIGN INVESTMENTS

If the Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed
income securities denominated in foreign currencies, it is difficult to project
currency effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to shareholders
could later be designated as a return of capital, rather than income, for income
tax purposes, which may be of particular concern to simple trusts.

If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of eight
funds and The Federated Fund Complex is comprised of 54 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

NAME
BIRTHDATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITION WITH TRUST PRINCIPAL OCCUPATIONS FROM FROM TRUST AND
FOR PAST 5 YEARS TRUST** FUND COMPLEX

JOHN F. DONAHUE*+ Chief Executive Officer and Director or $0 $0 for the
Birthdate: July 28, 1924 Trustee of the Federated Fund Complex; Trust and
Federated Investors Chairman and Director, Federated Investors, 54 other
Tower Inc.; Chairman and Trustee, Federated investment
1001 Liberty Avenue Advisers, Federated Management, and companies
Pittsburgh, PA Federated Research; Chairman and Director, in the Fund
CHAIRMAN AND TRUSTEE Federated Research Corp., and Federated Complex
Global Research Corp.; Chairman, Passport
Research, Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund $939.76 $113,860.22 for
Birthdate: February 3, Complex; Director, Member of Executive the
1934 Committee, Children's Hospital of Trust and
15 Old Timber Trail Pittsburgh; formerly: Senior Partner, Ernst 54 other
Pittsburgh, PA & Young LLP; Director, MED 3000 Group, investment
TRUSTEE Inc.; Director, Member of Executive companies
Committee, University of Pittsburgh. in the Fund
Complex

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1033.89 $125,264.48for
Birthdate: June 23, 1937 Complex; President, Investment Properties the
Wood/IPC Commercial Corporation; Senior Vice President, Trust and
Dept. John R. Wood and Associates, Inc., 54 other
John R. Wood Realtors; Partner or Trustee in private investment
Associates, Inc. real estate ventures in Southwest Florida; companies
Realtors formerly: President, Naples Property in the Fund
3255 Tamiami Trial Management, Inc. and Northgate Village Complex
North Naples, FL Development Corporation.

TRUSTEE

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $939.76 $47,958.02for
Birthdate: September 3, Complex; formerly: Partner, Andersen the
1939 Worldwide SC. Trust and
175 Woodshire Drive 29 other
Pittsburgh, PA investment
TRUSTEE companies
in the Fund
Complex

WILLIAM J. COPELAND Director or Trustee of the Federated Fund $1033.89 $125,264.48 for
Birthdate: July 4, 1918 Complex; Director and Member of the the
One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; Trust and
Pittsburgh, PA formerly: Vice Chairman and Director, PNC 54 other
TRUSTEE Bank, N.A., and PNC Bank Corp.; Director, investment
Ryan Homes, Inc. companies
in the Fund

Previous Postions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

JAMES E. DOWD, ESQ. Director or Trustee of the Federated Fund $1033.89 $125,264.48for
Birthdate: May 18, 1922 Complex; Attorney-at-law; Director, The the
571 Hayward Mill Road Emerging Germany Fund, Inc. Trust and
Concord, MA 54 other
TRUSTEE Previous Postions: President, Boston Stock investment

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $939.76 $113,860.22 for
Birthdate: October 11, Complex; Professor of Medicine, University the
1932 of Pittsburgh; Medical Director, University Trust and
3471 Fifth Avenue of Pittsburgh Medical Center - Downtown; 54 other
Suite 1111 Hematologist, Oncologist, and Internist, investment
Pittsburgh, PA University of Pittsburgh Medical Center; companies
TRUSTEE Member, National Board of Trustees, in the Fund
Leukemia Society of America. Complex

EDWARD L. FLAHERTY, Director or Trustee of the Federated Fund $1033.89 $125,264.48 for
JR., ESQ. # Complex; Attorney, of Counsel, Miller, the
Birthdate: June 18, 1924 Ament, Henny & Kochuba; Director Emeritus, Trust and
Miller, Ament, Henny & Eat'N Park Restaurants, Inc.; formerly: 54 other
Kochuba Counsel, Horizon Financial, F.A., Western investment
205 Ross Street Region; Partner, Meyer and Flaherty. companies
Pittsburgh, PA in the Fund
TRUSTEE Complex
PETER E. MADDEN Director or Trustee of the Federated Fund $939.76 $113,860.22 for
Birthdate: March 16, Complex; formerly: Representative, the
1942 Commonwealth of Massachusetts General Trust and
One Royal Palm Way Court; President, State Street Bank and 54 other
100 Royal Palm Way Trust Company and State Street Corporation. investment
Palm Beach, FL companies
TRUSTEE Previous Postions: Director, VISA USA and in the Fund
VISA International; Chairman and Director, Complex
Massachusetts Bankers Association;

Director, Depository Trust Corporation.

JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $939.76 $113,860.22 for
J.D., S.J.D. Complex; President, Law Professor, Duquesne the
Birthdate: December 20, University; Consulting Partner, Mollica & Trust and
1932 Murray. 54 other
President, Duquesne investment
University Previous Postions: Dean and Professor of companies
Pittsburgh, PA Law, University of Pittsburgh School of in the Fund
TRUSTEE Law; Dean and Professor of Law, Villanova Complex
University School of Law.

WESLEY W. POSVAR Director or Trustee of the Federated Fund $939.76 $113,860.22 for
Birthdate: September Complex; President, World Society of the
14, 1925 Ekistics (metropolitan planning), Athens; Trust and
1202 Cathedral of Professor, International Politics; 54 other
Learning Management Consultant; Trustee, Carnegie investment
University of Pittsburgh Endowment for International Peace, RAND companies
Pittsbugh, PA Corporation, Online Computer Library in the Fund
TRUSTEE Center, Inc., National Defense University Complex
and U.S. Space Foundation; President
Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory
Council for Environmental Policy and
Technology, Federal Emergency Management
Advisory Board; Trustee, Czech Management

Center, Prague.

Previous Postions: Professor, United States
Military Academy; Professor, United States

Air Force Academy.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $939.76 $113,860.22 for
Birthdate: June 21, 1935 Complex; Public the
4905 Bayard Street Relations/Marketing/Conference Planning. Trust and
Pittsburgh, PA 54 other
TRUSTEE Previous Postions: National Spokesperson, investment
Aluminum Company of America; business owner. companies
in the Fund
Complex

JOHN S. WALSH++ Director or Trustee of some of the $0 $0 for the
Birthdate: November 28, Federated Funds; President and Director, Trust and
1957 Heat Wagon, Inc.; President and Director, 23 other
2007 Sherwood Drive Manufacturers Products, Inc.; President, investment
Valparaiso, IN Portable Heater Parts, a division of companies
TRUSTEE Manufacturers Products, Inc.; Director, in the Fund
Walsh & Kelly, Inc.; formerly: Vice Complex
President, Walsh & Kelly, Inc.

J. CHRISTOPHER DONAHUE+* President or Executive Vice President of $0 $0 for the
Birthdate: April 11, the Federated Fund Complex; Director or Trust and
1949 Trustee of some of the Funds in the 16 other
Federated Investors Federated Fund Complex; President and investment
Tower Director, Federated Investors, Inc.; companies
1001 Liberty Avenue President and Trustee, Federated Advisers, in the Fund
Pittsburgh, PA Federated Management, and Federated Complex
PRESIDENT AND TRUSTEE Research; President and Director, Federated
Research Corp. and Federated Global
Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.

<PAGE>

EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birthdate: October 22, the Federated Fund Complex; President, Trust and
1930 Executive Vice President and Treasurer of 1 other
Federated Investors some of the Funds in the Federated Fund investment
Tower Complex; Vice Chairman, Federated company
1001 Liberty Avenue Investors, Inc.; Vice President, Federated in the Fund
Pittsburgh, PA Advisers, Federated Management, Federated Complex
EXECUTIVE VICE PRESIDENT Research, Federated Research Corp.,
Federated Global Research Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated
Securities Corp.; Trustee, Federated
Shareholder Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of $0 $0 for the
Birthdate: October 26, the Federated Fund Complex; Executive Vice Trust and
1938 President, Secretary, and Director, 54 other
Federated Investors Federated Investors, Inc.; Trustee, investment
Tower Federated Advisers, Federated Management, companies
1001 Liberty Avenue and Federated Research; Director, Federated in the Fund
Pittsburgh, PA Research Corp. and Federated Global Complex
EXECUTIVE VICE Research Corp.; Director, Federated
PRESIDENT AND SECRETARY Services Company; Director, Federated
Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; $0 $0 for the
Birthdate: June 17, Vice President - Funds Financial Services Trust and
1954 Division, Federated Investors, Inc.; 54 other
Federated Investors Formerly: various management positions investment
Tower within Funds Financial Services Division of companies
1001 Liberty Avenue Federated Investors, Inc. in the Fund
Pittsburgh, PA Complex
TREASURER

RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birthdate: May 17, 1923 Funds in the Federated Fund Complex; Trust and
Federated Investors Director or Trustee of some of the Funds in 6 other
Tower the Federated Fund Complex; Executive Vice investment
1001 Liberty Avenue President, Federated Investors, Inc.; companies
Pittsburgh, PA Chairman and Director, Federated Securities in the Fund
VICE PRESIDENT Corp. Complex
HENRY A. FRANTZEN Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: November 28, various other Funds in the Federated Fund Trust and
1942 Complex; Executive Vice President, 3 other
Federated Investors Federated Investment Counseling, Federated investment
Tower Global Research Corp., Federated Advisers, companies
1001 Liberty Avenue Federated Management, Federated Research, in the Fund
Pittsburgh, PA and Passport Research, Ltd.; Registered Complex
CHIEF INVESTMENT OFFICER Representative, Federated Securities Corp.;
Vice President, Federated Investors, Inc.;
Formerly: Executive Vice President,
Federated Investment Counseling
Institutional Portfolio Management Services
Division; Chief Investment Officer/Manager,
International Equities, Brown Brothers
Harriman & Co.; Managing Director, BBH
Investment Management Limited.
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: March 3, 1949 various other Funds in the Federated Fund Trust and
Federated Investors Complex; Executive Vice President, 41 other
Tower Federated Investment Counseling, Federated investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, companies
Pittsburgh, PA Federated Management, Federated Research, in the Fund
CHIEF INVESTMENT OFFICER and Passport Research, Ltd.; Registered Complex
Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated Investors,
Inc.; Formerly: Executive Vice President and Senior
Vice President, Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated Research
Corp., Federated Advisers, Federated Management,
Federated Research, and Passport Research, Ltd.

J. THOMAS MADDEN Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: October 22, various other Funds in the Federated Fund Trust and
1945 Complex; Executive Vice President, 12 other
Federated Investors Federated Investment Counseling, Federated investment
Tower Global Research Corp., Federated Advisers, companies
1001 Liberty Avenue Federated Management, Federated Research, in the Fund
Pittsburgh, PA and Passport Research, Ltd.; Vice Complex
CHIEF INVESTMENT OFFICER President, Federated Investors, Inc.;
Formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior Vice
President, Federated Research Corp.,
Federated Advisers, Federated Management,
Federated Research, and Passport Research,
Ltd.

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

++ Mr. Walsh became a member of the Board of Trustees on January 1, 1999. He did
not earn any fees for serving the Fund Complex since these fees are reported as
of the end of the last calendar year. He did not receive any fees as of the
fiscal year end of the Trust.

** The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

The Adviser shall not be liable to the Trust or any Fund 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 Trust.

OTHER RELATED SERVICES

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

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. 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 may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

RESEARCH SERVICES

Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those 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.

For the fiscal year ended, December 31, 1998, the Fund's Adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $_______ for which the Fund
paid $_______ in brokerage commissions.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE
FEE FEDERATED FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 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. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte and Touche LLP is the independent public accountant for the Fund.

<PAGE>

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31,

1998 1997 1996
Advisory Fee Earned $__ $__ $__
Advisory Fee Reduction $__ $__ $__
Brokerage Commissions $__ $__ $__
Administrative Fee $__ $__ $__
12b-1 Fee $__
Shareholder Services Fee $__

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Unless otherwise stated, any quoted Share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of Shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield given for the 30-day period ended December 31, 1998.

30 -DAY PERIOD 1 YEAR SINCE INCEPTION
ON FEBRUARY 10, 1994

Total Return NA __% __%
Yield __% NA NA

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares 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 NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a thirty-day period; by (ii) the maximum
offering price per Share on the last day of the period. This number is then
annualized using semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each month
over a 12-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

<PAGE>

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

<PAGE>

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:

LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the growth and
income funds category in advertising and sales literature.

DOW JONES INDUSTRIAL AVERAGE is an unmanaged index representing share prices of
major industrial corporations, public utilities, and transportation companies.
Produced by the Dow Jones & Company, it is cited as a principal indicator of
market conditions.

STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the S&P index
assumes reinvestment of all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor are brokerage or other
fees calculated in the S&P figures.

MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset-backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated manages 9
mortgage-backed, 5 government/ agency and 19 government money market mutual
funds, with assets approximating $5.3 billion, $1.8 billion and $41.6 billion,
respectively. Federated trades approximately $425 million in U.S. government and
mortgage-backed securities daily and places approximately $25 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in U.S. government bond securities in 1969. Federated has been a
major force in the short- and intermediate-term government markets since 1982
and currently manages approximately $43.2 billion in government funds within
these maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated

advisory companies.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities, foundations/endowments,
insurance companies, and investment and financial advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Sales Division, Federated Securities Corp.

FINANCIAL INFORMATION

(Financial Statements to be filed by amendment.)

<PAGE>

INVESTMENT RATINGS

APPENDIX

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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.

BB--Debt rated BB has less near-term, vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB-rating.

B--Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied BB or BB-
rating.

CCC--Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial, or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B-rating.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC-debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

AAA--Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as gilt
edged. Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

AA--Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in AAA securities.

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.

BAA--Bonds which are rated BAA are considered as medium grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

BA--Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.

B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

<PAGE>

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

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.

BB--Bonds are considered speculative. The obligor's ability to pay interest and
repay principal may be affected over time by adverse economic changes. However,
business and financial alternatives can be identified which could assist the
obligor in satisfying its debt service requirements.

B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

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:

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

o Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

o Well established access to a range of financial markets and assured sources of
alternate liquidity.

PRIME-2--Issuers rated Prime-1 (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.

<PAGE>

STANDARD AND POOR'S 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 IBCA, 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 assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

FEDERATED AMERICAN LEADERS FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED GROWTH STRATEGIES FUND II

(A Portfolio of Federated Insurance Series)

A mutual fund seeking capital appreciation by investing primarily in growth
equity securities.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

april 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is capital appreciation. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing primarily in common stock
of companies with market capitalizations above $500 million that offer superior
growth prospects.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

The value of equity securities in the Fund's portfolio will go up and down.
These fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline and you could lose money. Other risks of investing in the Fund include:
Liquidity Risks, Risks Related to Company Size, Sector Risk, Risk of Foreign
Investing, and Risks Related to Investing for Growth.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Growth Strategies Fund II as of the calendar
year-end for each of 3 years. The `y' axis reflects the "% Total Return"
beginning with "-7.00%" and increasing in increments of 5.00% up to 33.00%. The
`x' axis represents calculation periods from the earliest calendar year end of
the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features 3 distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar for the calendar years 1996 through 1998. The percentages
noted are: 24.32%, 27.03%, and 17.44%. The bar chart shows the variability of
the Fund's actual total returns on a calendar year-end basis. The Fund does not
impose a sales charge (load). Hence, the total returns displayed above are based
on net asset value. Within the period shown in the Chart, the Fund's highest
quarterly return was 27.84% (quarter ended December 31, 1998). Its lowest
quarterly return was (20.08%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURN

LIFE OF THE FUND1 1 YEAR

Fund 22.85% 17.44%
S&P 500 __% 28.61%
LGFI __% __%
1 Since inception date of November 9, 1995.

The table shows the Fund's average annual total returns compared to the Standard
and Poor's 500 Index (S&P 500) and the Lipper Growth Fund Index (LGFI), which
are broad-based market indices. Past performance does not necessarily predict
future performance. This information provides you with historical performance so
that you can analyze whether the Fund's investment risks are balanced by its
potential rewards.

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing primarily in common stock
of companies with market capitalizations above $500 million (at the time of
purchase) that offer superior growth prospects. Market capitalization is
determined by multiplying the number of outstanding shares by the current market
price per share. Using its own quantitative process, the Adviser rates the
future performance potential of companies. The Adviser evaluates each company's
earnings quality in light of their current valuation to narrow the list of
attractive companies. The Adviser then evaluates product positioning, management
quality and sustainability of current growth trends of those companies. Using
this type of fundamental analysis, the Adviser selects the most promising
companies for the Fund's portfolio.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter- term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

COMMON STOCKS

AMERICAN DEPOSITARY RECEIPTS

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

STOCK MARKET RISKS

The Fund's investment adviser attempts to manage market risk of investing in
individual securities by limiting the amount the Fund invests in each stock.

RISKS RELATED TO INVESTING FOR GROWTH

Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on an analyst's downward earnings estimate revision,
a negative fundamental development, or other adverse market development.
Further, growth stocks tend to have lower dividend yields than value stocks.
This means they depend more on price changes for returns and may be more
adversely affected in a down market compared to higher yielding stocks.

SECTOR RISK

RISKS RELATED TO COMPANY SIZE

RISK OF FOREIGN INVESTING

Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

LIQUIDITY RISKS

Equity securities that are not widely held may trade less frequently than more
widely held securities. This limits trading opportunity, making it more
difficult to sell or buy the securities at a favorable price or time. In
response, the Fund may have to lower the price, sell other securities, or give
up an investment opportunity, any of which could have a negative effect on its
performance. Infrequent trading may also lead to greater price volatility.

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

James E. Grefenstette has been a portfolio manager of the Fund since the
Fund's inception. Mr. Grefenstette joined Federated Investors, Inc. or its
predecessor in 1992 and has been a Portfolio Manager and a Vice President of the
Fund's investment adviser since 1996. From 1994 until 1996, Mr. Grefenstette was
a Portfolio Manager and an Assistant Vice President of the Fund's investment
adviser. Mr. Grefenstette is a Chartered Financial Analyst; he received his M.S.
in Industrial Administration from Carnegie Mellon University.

Salvatore Esposito has been a portfolio manager of the Fund since August
1997. Mr. Esposito joined Federated Investors, Inc. or its predecessor in 1995
as an Investment Analyst of the Fund's investment adviser and has been an
Assistant Vice President of the Fund's investment adviser since October 1997.
From 1987 to 1995, Mr. Esposito served in various positions at PNC Bank,
culminating in that of Vice President/Lead Reviewer. Mr. Esposito earned his
M.B.A., concentrating in Finance, from Duquesne University.

More than 4,000 investment professionals make Federated Funds available to their
customers.

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(Financial Highlights to be filed by amendment.)

FEDERATED GROWTH STRATEGIES FUND II

A Portfolio of Federated Insurance Series

INVESTMENT COMPANY ACT FILE NO. 811-8042
CUSIP 313916702

G01283-01 (2/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED GROWTH STRATEGIES FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Growth Strategies Fund II
(Fund), dated April 20, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.

april 20, 1999

CUSIP313916702

G01283-02 (2/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from Growth Stock Fund to Federated Growth Strategies Fund II on February
26, 1996.

The Fund's investment adviser is Federated Advisers (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

EQUITY SECURITIES represent a share of the issuer's earnings and assets, after
the issuer pays its liabilities. Generally, issuers have discretion as to the
payment of any dividends or distributions. As a result, investors cannot predict
the income they will receive from equity securities. However, equity securities
offer greater potential for appreciation than many other types of securities,
because their value increases directly with the value of the issuer's business.
The following describes the types of equity securities in which the Fund
invests.

COMMON STOCKS are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
after the issuer pays its creditors and any preferred stockholders. As a result,
changes in an issuer's earnings directly influence the value of its common
stock.

PREFERRED STOCKS have the right to receive specified dividends or distributions
before the payment of dividends or distributions on common stock. Some preferred
stocks also participate in dividends and distributions paid on common stock.
Preferred stocks may also permit the issuer to redeem the stock. The Fund may
treat such redeemable preferred stock as a fixed income security.

WARRANTS give the Fund the option to buy the issuer's stock or other equity
securities at a specified price. The Fund may buy the designated shares by
paying the exercise price before the warrant expires. Warrants may become
worthless if the price of the stock does not rise above the exercise price by
the expiration date. RIGHTS are the same as warrants, except they are typically
issued to existing stockholders.

FIXED INCOME SECURITIES pay interest, dividends or distributions at a specified
rate. The rate may be fixed or adjusted periodically. The issuer must also repay
the principal amount of the security, normally within a specified time. Fixed
income securities provide more regular income than equity securities. However,
the returns on fixed income securities are limited and normally do not increase
with the issuer's earnings. This limits the potential appreciation of fixed
income securities as compared to equity securities.

The following describes the types of fixed income securities in which the Fund
invests.

CORPORATE DEBT SECURITIES are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt security. The Credit Risks of corporate debt securities vary
widely among issuers.

DEMAND INSTRUMENTS are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.INSURANCE CONTRACTS include guaranteed investment
contracts, funding agreements and annuities.

CONVERTIBLE SECURITIES are fixed income securities that the Fund has the option
to exchange for equity securities at a specified CONVERSION PRICE. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities convertible into shares of common stock at a conversion price
of $10 per share. If the market value of the shares reached $12, the Fund could
realize an additional $2 per share by converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income securities
to compensate for the value of the conversion option. In addition, the
conversion price exceeds the market value of the underlying equity securities at
the time a convertible security is issued. Thus, convertible securities may
provide lower returns than non-convertible fixed income securities or equity
securities depending upon changes in the price of the underlying equity
securities. However, convertible securities permit the Fund to realize some of
the potential appreciation of the underlying equity securities with less risk of
losing its initial investment.

The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because of
their unique characteristics.

DERIVATIVE CONTRACTS are financial instruments that require payments based upon
changes in the values of designated (or "underlying") securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a "counterparty."

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all of the terms of the contract except for the
price. Investors make any payments due under their contracts through the
exchange. Most exchanges require investors to maintain margin accounts through
their brokers to cover their potential obligations to the exchange. Parties to
the contract make (or collect) daily payments to the margin accounts to reflect
losses (or gains) in the value of their contracts. This protects investors
against potential defaults by the counterparty. Trading contracts on an exchange
also allows investors to "close out" their contracts by entering into offsetting
contracts.

For example, a Fund could close out an open purchase (or sale) contract by
entering into an offsetting sale (or purchase) contract for the same amount of
the same assets and the same delivery date. If the offsetting purchase price is
less than the original sale price, the Fund realizes a gain; if it is more, the
Fund realizes a loss. Conversely, if the offsetting sale price is more than the
original purchase price, the Fund realizes a gain; if it is less, the Fund
realizes a loss. The Fund might not always be able to close out a position when
it wants to; if this happens, the Fund will be required to keep the contract
open (even if it is losing money on the contract ), and to make any payments
required under the contract (even if it has to sell portfolio securities at
unfavorable prices to do so), and the Fund could incur substantial losses.
Inability to close out a contract could also harm the Fund by preventing it from
disposing of or trading any assets it has been using to secure its obligations
under the contract.

Derivative contracts can also be traded "over-the-counter" ("OTC"), in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.

Depending upon how they are used and the relationships between the market value
of a derivative contract and the underlying asset, derivative contracts may
increase or decrease the Fund's exposure to Market Risk and Currency Risk, and
may also expose the Fund to Liquidity Risk and Leverage Risk. OTC contracts also
expose the Fund to Credit Risk in the event that a counterparty defaults on the
contract.

The Fund may trade in the following types of derivative contracts.

FUTURES CONTRACTS provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a price, date, and
time specified when the contract is made. Futures contracts traded OTC are
frequently referred to as "forward contracts." Entering into a contract to buy
is commonly referred to as buying or purchasing a contract or holding a long
position. Entering into a contract to sell is commonly referred to as selling a
contract or holding a short position.

Futures are considered to be commodity contracts.

The Fund may buy and sell financial futures and futures on indices.

OPTIONS are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period of time. A call
option gives the holder (buyer) the right to purchase the underlying asset from
the seller (writer) of the option. A put option gives the holder the right to
sell the underlying asset to the writer of the option. The writer of the option
receives a payment, or "premium," from the buyer, which the writer keeps
regardless of whether the buyer uses (or exercises) the option.

The Fund may:

Buy put options on portfolio securities and futures in anticipation of a
decrease in the value of the underlying asset.

Write call options on portfolio securities to generate income from premiums, and
in anticipation of a decrease or only limited increase in the value of the the
underlying asset. If a call written by a Fund is exercised, the Fund foregoes
any possible profit from an increase in the market price of the underlying asset
over the exercise price plus the premium received.

When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

FOREIGN SECURITIES are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and traded outside of the U.S. In
addition to the risks normally associated with U.S. securities of the same type,
Foreign Securities are subject to Country Risk and Currency Risk. Trading in
certain foreign markets is also subject to Liquidity Risk.

DEPOSITARY RECEIPTS represent interests in underlying securities issued by a
foreign company, but traded in another market than the underlying security. The
foreign securities underlying American Depositary Receipts (ADRs) are traded in
the U.S. ADRs provide a way to buy shares of foreign-based companies in the U.S.
rather than in overseas markets. ADRs are also traded in U.S. dollars,
eliminating the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally or
outside the U.S. Depositary Receipts involve many of the same risks of investing
directly in foreign securities, including Country Risk and Currency Risk.

FOREIGN EXCHANGE CONTRACTS. In order to convert U.S. dollars into the currency
needed to buy a foreign security, or to convert foreign currency received from
the sale of a foreign security into U.S. dollars, the Fund may enter into "spot"
currency trades. The Fund may also enter into derivative contracts in which a
foreign currency is an underlying asset. Use of these derivative contracts may
increase or decrease the Fund's exposure to Currency Risk.

FOREIGN GOVERNMENT SECURITIES generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International Bank for
Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Investment Bank and the Inter-American Development Bank.

Foreign government securities also include fixed income securities of
"quasi-governmental agencies" which are either issued by entities that are owned
by a national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit and
general taxing powers. Further, foreign government securities include mortgage-
related securities issued or guaranteed by national, state or provincial
governmental instrumentalities, including quasi-governmental agencies.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting an
agreed upon interest rate effective for the period the Fund owns the security
subject to repurchase. The agreed upon interest rate is unrelated to the
interest rate on the underlying security. The Funds will only enter into
repurchase agreements with banks and other recognized financial institutions,
such as broker/dealers, which are deemed by the Adviser to be creditworthy

A Fund's custodian or subcustodian is required to take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian will
monitor the value of the underlying security each day to ensure that the value
of the security always equals or exceeds the repurchase price.

Repurchase Agreements are subject to Credit Risk.

WHEN ISSUED TRANSACTIONS are arrangements in which a Fund purchases securities
for a set price, with payment and delivery scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. The Fund records the transaction
when it agrees to purchase the securities and reflects their value in
determining the price of its shares. 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. Therefore, when issued transactions
create Market Risk for the Fund. When issued transactions also involve Credit
Risk in the event of a counterparty default.

SECURITIES LENDING. A Fund may lend portfolio securities to firms that the
Adviser has determined are creditworthy.. In return,, it will receive either
cash or liquid securities as collateral from the borrower. A Fund will reinvest
cash collateral in securities that qualify as an otherwise acceptable investment
for the Fund. However, the Fund must pay interest to the borrower for the use of
any cash collateral. If the market value of the loaned securities increases, the
borrower must furnish additional collateral. While portfolio securities are on
loan, the borrower pays the Fund the equivalent of any dividends or interest
received on them. Loans are subject to termination at the option of the Fund or
the borrower. The Fund will not have the right to vote on securities while they
are being lent, but it will terminate a loan in anticipation of any important
vote. 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 collateral to a securities lending agent or broker.

Securities lending activities are subject to Market Risk and Credit Risk.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest its
assets in securities of other investment companies, including the securities of
affiliated money market funds, as an efficient means of carrying out its
investment policies and managing its uninvested cash. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses.

EQUITY SECURITIES INVESTMENT RISKS

LEVERAGE RISK

Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the fund's risk of loss and potential for gain. Investments can have
these same results if their returns are based on a multiple of a specified
index, security, or other benchmark.

FIXED INCOME SECURITIES INVESTMENT RISKS

BOND MARKET RISK

Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices of
fixed income securities fall.

CREDIT RISK

Credit risk is the possibility that an issuer will default (the issuer fails to
repay interest and principal when due). If an issuer defaults, the Fund will
lose money.

CALL RISK

LIQUIDITY RISKS

Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep the
position open, and the Fund could incur losses.

OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

LEVERAGE RISK

Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.

VARIABLE ASSET REGULATIONS

STATE INSURANCE REGULATIONS

INVESTMENT LIMITATIONS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if, as a result of such purchase, 25% or
more of the value of its total assets would be invested in any one industry.
However, the Fund may at times invest 25% or more of the value of its total
assets in cash or cash items (not including certificates of deposit), securities
issued or guaranteed by the U.S. government, its agencies or instrumentalities,
or repurchase agreements secured by such instruments.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities. The Fund reserves the right to
purchase financial futures and put options on stock index futures and on
financial futures.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, although it may invest in the
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.

BUYING ON MARGIN

The Fund will not purchase any securities on margin but may obtain such
short-term credits as may be necessary for the clearance of transactions and may
make margin payments in connection with buying financial futures, put options on
stock index futures, and put options on financial futures.

SELLING SHORT

The Fund will not sell securities short unless at all times when a short
position is open, it owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issuer as, and equal in amount to, the securities
sold short; and unless not more than 10% of the value of the Fund's net assets
(taken at current value) is held as collateral for such sales at any one time.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities, except as permitted by its investment
objective and policies, and except that the Fund may borrow money and engage in
reverse repurchase agreements only in amounts up to one-third of the value of
its net 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 where the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while any such
borrowings (including reverse repurchase agreements) are outstanding.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets except portfolio securities. This shall
not prevent the purchase or holding of corporate or government bonds,
debentures, notes, certificates of indebtedness, or other debt securities of an
issuer, repurchase agreements, or other transactions which are permitted by the
Fund's investment objective and policies or Declaration of Trust.

UNDERWRITING

INVESTING IN MINERALS

The Fund will not purchase interests in oil, gas, or other mineral exploration
or development programs, although it may purchase the securities of issuers
which invest in or sponsor such programs.

DIVERSIFICATION OF INVESTMENTS

The Fund will not purchase the securities of any issuer (other than securities
of the U.S. government, its agencies, or instrumentalities, or instruments
secured by securities of such issuers, such as repurchase agreements) if, as a
result, more than 5% of the value of its total assets would be invested in the
securities of such issuer or acquire more than 10% of any class of voting
securities of any issuer. For these purposes, the Fund takes all common stock
and all preferred stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.

The above investment limitations cannot be changed unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act. The following limitations, however, may be changed by
the Board without shareholder approval. Shareholders will be notified before any
material changes in these limitations become effective.

INVESTING IN ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement in
more than seven days after notice and certain restricted securities not
determined by the Trustees to be liquid.

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 10% of the value of
total assets at the time of the borrowing.

WRITING COVERED CALL OPTIONS

ACQUIRING SECURITIES

The Fund will not purchase securities of a company for the purpose of exercising
control or management. However, the Fund may invest in up to 10% of the voting
securities of any one issuer and may exercise its voting powers consistent with
the best interests of the Fund. In addition, the Fund, other companies advised
by the Fund's investment adviser, and other affiliated companies may together
buy and hold substantial amounts of voting stock of a company and may vote
together in regard to such company's affairs. In some such cases, the Fund and
its affiliates might collectively be considered to be in control of such
company. In some cases, Trustees and other persons associated with the Fund and
its affiliates might possibly become directors of companies in which the Fund
holds stock.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Trustees, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid the Fund will limit their purchase, together
with other illiquid securities, to 15% of its net assets.

PORTFOLIO TURNOVER

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o futures contracts and options are valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges.
Options traded in the over-the-counter market are valued according to the
mean between the last bid and the last asked price for the option as provided
by an investment dealer or other financial institution that deals in the
option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value.

for all other securities, at fair value as determined in good faith by the
Board.

TRADING IN FOREIGN SECURITIES

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

<PAGE>

HOW IS THE FUND SOLD?

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Aetna Retirement
Services 61286272-0, Hartford, CT owned approximately 1,957,039 shares (56.03%);
and Aetna Retirement Services 710294708-0, Hartford, CT owned approximately
1,522,041 shares (43.58%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

<PAGE>

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

NAME
BIRTHDATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITION WITH TRUST PRINCIPAL OCCUPATIONS FROM FROM TRUST AND
FOR PAST 5 YEARS TRUST** FUND COMPLEX

TRUSTEE

Previous Postions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

Director, Depository Trust Corporation.

Center, Prague.

Previous Postions: Professor, United States
Military Academy; Professor, United States

Air Force Academy.

<PAGE>

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

** The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 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. Federated Services Company may voluntarily waive a
portion of its fee and may reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte and Touche LLP is the independent public accountant for the Fund.

<PAGE>

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31,

1998 1997 1996
Advisory Fee Earned $__ $__ $__
Advisory Fee Reduction $__ $__ $__
Brokerage Commissions $__ $__ $__
Administrative Fee $__ $__ $__
12b-1 Fee $__
Shareholder Services Fee $__

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield given for the 30-day period ended December 31, 1998.

30 -DAY PERIOD 1 YEAR SINCE INCEPTION
ON NOVEMBER 9, 1995

Total Return NA __% __%
Yield __% NA NA

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

<PAGE>

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the
Investment Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

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 net asset value over a specified period of time. From
time to time, the Fund will quote its Lipper ranking in the "growth funds"
category in advertising and sales literature.

STANDARD & POOR'S ("S&P") LOW-PRICED INDEX compares a group of approximately
twenty actively traded stocks priced under $25 for one-month periods and
year-to-date.

STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, and financial and public
utility companies, can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the S&P index
assumes reinvestments of all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor are brokerage or other
fees calculated in the S&P figures.

STANDARD & POOR'S 500 is an unmanaged index of common stocks in industry,
transportation, finance, and public utilities denoting general market
performance, as monitored by S&P Corporation.

LIPPER GROWTH FUND AVERAGE is an average of the total returns for 251 growth
funds tracked by Lipper Analytical Services, Inc., and independent mutual fund
rating service.

LIPPER GROWTH FUND INDEX is an average of the net asset-valuated total returns
for the top 30 growth funds tracked by Lipper Analytical Services, Inc., an
independent mutual fund rating service.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

<PAGE>

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

(Financial Statements to be filed by amendment.)

<PAGE>

INVESTMENT RATINGS

APPENDIX

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

<PAGE>

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

o Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

o Well established access to a range of financial markets and assured sources of
alternate liquidity.

<PAGE>

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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 IBCA, 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 assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

FEDERATED GROWTH STRATEGIES FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED HIGH INCOME BOND FUND II

(A Portfolio of Federated Insurance Series)

A mutual fund seeking high current income by investing primarily in a
professionally managed, diversified portfolio of fixed income securities.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

april 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to seek high current income. While there is
no assurance that the Fund will achieve its investment objective, it endeavors
to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund seeks excess returns by investing in a diversified portfolio of
high-yield, lower-rated corporate bonds.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

o The corporate bonds in which the fund invests have higher default risk than
investment-grade securities. Low-grade bonds are almost always
uncollateralized and subordinated to other debt that a firm has outstanding.

o Liquidity of individual corporate bonds varies considerably. Low-grade
corporate bonds have less liquidity than investment grade securities, which
means that trades in these securities will be made at larger bid-ask
spreads.

o Low-grade corporate bond returns are sensitive to both changes in prevailing
interest rates and stock returns. An increase in market interest rates may
result in a decrease in the value of Fund shares. The value of the Fund's
portfolio may also decline in tandem with a drop in the overall value of the
stock market.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated High Income Bond Fund II as of the calendar
year-end for each of 4 years.

The `y' axis reflects the "% Total Return" beginning with "-7.00%" and
increasing in increments of 5.00% up to 33.00%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features 4 distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar for the calendar years 1995 through 1998. The percentages
noted are: 20.38%, 14.31%, 13.83%, and 2.70%. The bar chart shows the
variability of the Fund's actual total returns on a calendar year-end basis. The
Fund does not impose a sales charge (load). Hence, the total returns displayed
above are based on net asset value. Within the period shown in the Chart, the
Fund's highest quarterly return was 5.79% (quarter ended September 30, 1996).
Its lowest quarterly return was (4.16%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURN

LIFE OF THE FUND1 1 YEAR

Fund 9.49% 2.70%
LBBHY 10.69% 0.59%
1 Since inception date of March 1, 1994.

The table shows the Fund's average annual total returns compared to the Lehman
Brothers ______ Index (LBBHY).

Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund provides exposure to the high-yield, lower-rated corporate bond market.
At least 65 percent of the Fund's assets are invested in these so-called "junk"
bonds, which are corporate bonds rated BB or lower. High-yield bonds now
represent over 15 percent of the value of publicly traded corporate bonds in the
United States. The adviser actively manages the Fund's portfolio seeking to
realize the large promised returns of high-yield bonds by minimizing default
risk and other risks through careful security selection and diversification. If
default risk can be minimized within a diversified portfolio, high-yield bonds
offer the potential for excess returns; meaning returns that are larger than
necessary in reference to high-grade securities to compensate for the actual
default experience of the portfolio.

The adviser selects securities seeking high yields, low relative credit risk,
and high portfolio diversification. If the issuer of a bond is unable to make
all coupon and principal payments as promised, realized yields will be less than
promised. The securities in which the Fund invests have high yields primarily
because of the market's greater uncertainty about default, and therefore about
the returns that will be in fact be realized.

The adviser attempts to ensure that each bond in which the Fund invests offers
superior potential return for the default risk being assumed by performing a
credit-intensive, fundamental analysis, which focuses on the financial condition
of the issuing firm. In addition to analyzing current financial condition, the
adviser examines each issuer's business and product strength, competitive
position, and management expertise. Further, the adviser considers current
economic, financial market, and industry factors, which may affect the issuer.

The adviser attempts to minimize the Fund's portfolio credit risk through
diversification. The adviser selects securities to maintain broad portfolio
diversification both by company and industry.

Interest rate risk is typically not a significant factor in the adviser's
security selection process. While market interest rates will affect the value of
the Fund's portfolio, the prices of high yield bonds are influenced to a much
greater extent by default and call risks than by changes in the general level of
interest rates. Higher default-risk bonds typically have shorter maturities than
investment grade securities, which reduces interest rate risk relative to credit
risk. Finally, the lack of large, active markets for many high-yield bonds makes
it impractical to actively manage the portfolio based upon the adviser's
forecasts of future interest rates. However, the adviser will actively manage
the quality of the Fund's portfolio to best position it based on the adviser's
forecasts of the economy and the business cycle.

Many high yield bonds are callable, which means that the issuer of the bond may
repurchase the bond at a price at, or close to, the principal amount of the
bond. In a lower interest rate environment, it may be to the issuer's advantage
to call a higher-yielding bond, thereby depriving the Fund of its ability to
enjoy the higher yield for the remaining life of the bond. The adviser considers
the call features of a bond in its selection process.

Some high-yield bonds may have equity features (such as accompanying warrants)
or be convertible into stock of the issuer. Both warrants and conversion
features allow the Fund to realize returns above the interest payments if the
issuer's stock price exceeds a designated strike price, but these securities
generally have lower yields than comparable fixed income securities. The adviser
may invest in these securities if it believes that total return from the bond
interest income and prospective capital appreciation of the issuer's stock may
exceed the total return from the bond interest income only.

The Fund may increase the portion of the portfolio that is invested in cash,
cash items, and shorter-term, investment grade fixed income securities during
adverse market conditions in order to minimize potential losses and maintain
liquidity to meet shareholder redemptions. This will reduce the potentially
greater long-term returns the Fund may have experienced if it remained invested
in high-yield bonds.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

The Fund invests primarily in lower-rated corporate fixed income securities.
Corporate debt securities are fixed income securities issued by U.S. or foreign
businesses. Notes, bonds, debentures and commercial paper are the most prevalent
types of corporate debt securities. The Fund may also purchase interests in bank
loans to companies.

The Fund treats preferred stock, which is redeemable by the issuer as a fixed
income security. Preferred stocks have the right to receive specified dividends
or distributions before the issuer makes payments on its common stock. Some
preferred stock also participates in dividends and distributions paid on common
stock.

The Fund invests in fixed income securities of issuers based outside the U.S.
The foreign securities in which the Fund invests are primarily traded outside
the U.S., but are predominantly denominated in U.S. dollars. Foreign securities
present certain risks in addition to those presented by domestic securities, but
high-yield fixed income securities of certain foreign issuers may be more
attractive in terms of yield and credit risk than those of domestic issuers.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

Zero coupon securities are discount securities which pay interest or principal
only at final maturity, unlike debt securities that provide periodic payments of
interest (referred to as a coupon payment). The difference between the purchase
price and the amount paid at maturity represents interest on the zero coupon
security. Because investors must wait until maturity to receive interest and
principal, zero coupon securities may have increased market and credit risks.

The credit risks of corporate debt securities vary widely among issuers. In
addition, the credit risk of an issuer's debt securities may vary based on their
priority for repayment. For example, higher-ranking (senior) securities have a
higher priority than lower ranking (subordinated) securities. This means that
the issuer might not make payments on subordinated securities while continuing
to make payments on senior securities. In addition, in the event of bankruptcy,
holders of senior securities may receive amounts otherwise payable to the
holders of subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer payments
under certain circumstances. For example, insurance companies issue securities
known as surplus notes that permit the insurance company to defer any payment
that would reduce its capital below regulatory requirements. Typically, both
senior and subordinated debt securities have a higher priority than redeemable
preferred stock. Most of the fixed income securities in which the Fund invests
will be uncollateralized and subordinated to other debt that a corporation has
outstanding.

Lower rated fixed income securities are securities rated below investment grade
by a Nationally Recognized Rating Service. Noninvestment grade fixed income
securities are rated BB or below by a Rating Service. There is no minimal
acceptable rating for a security to be purchased or held by the Fund and the
Fund may purchase or hold unrated securities and securities whose issuers are in
default.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

BOND MARKET RISKS

Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices of
fixed income securities fall.

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.

Fixed income securities generally compensate for greater credit risk by paying
interest at a higher rate. The difference between the yield of a security and
the yield of a U.S. Treasury security with a comparable maturity (the spread)
measures the additional interest paid for risk. Spreads may increase generally
in response to adverse economic or market conditions. A security's spread may
also increase if the security's rating is lowered, or the security is perceived
to have an increased credit risk. An increase in the spread will cause the price
of the security to decline.

CALL RISKS

Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An increase
in the likelihood of a call may reduce the security's price.

LIQUIDITY RISKS

Trading opportunities are more limited for fixed income securities that have not
received any credit ratings, have received ratings below investment grade or are
not widely held. These features may make it more difficult to sell or buy a
security at a favorable price or time. Consequently, the Fund may have to accept
a lower price to sell a security, sell other securities to raise cash or give up
an investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading of securities may also lead to an
increase in their price volatility.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, generally
entail greater market, credit and liquidity risks than investment grade
securities. For example, their prices are more volatile, economic downturns and
financial setbacks may affect their prices more negatively, and their trading
market may be more limited.

RISKS OF FOREIGN INVESTING

Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent the Fund and its Adviser from obtaining information concerning foreign
companies that is as frequent, extensive and reliable as the information
available concerning companies in the United States.

Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

CURRENCY RISKS

Exchange rates for currencies fluctuate daily. The combination of currency risk
and market risks tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

Mark E. Durbiano has been a portfolio manager of the Fund since the Fund
commenced operations. Mr. Durbiano joined Federated Investors, Inc. or its
predecessor in 1982 and has been a Senior Portfolio Manager and a Senior Vice
President of the Fund's investment adviser since 1996. From 1988 through 1995,
Mr. Durbiano was a Portfolio Manager and a Vice President of the Fund's
investment adviser. Mr. Durbiano is a Chartered Financial Analyst and received
his M.B.A. in Finance from the University of Pittsburgh.

Constantine Kartsonas has been a portfolio manager of the Fund since June
1998. Mr. Kartsonaa joined Federated Investors, Inc. or its predecessor in 1994
as an Investment Analyst and has been an Assistant Vice President of the Fund's
investment adviser since January 1997. From 1990 to 1993, he served as an
Operations Analyst at Lehman Brothers. Mr. Kartsonas is a Chartered Financial
Analyst and earned his M.B.A., with a concentration in Finance, from the
University of Pittsburgh in 1994.

More than 4,000 investment professionals make Federated Funds available to their
customers.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.60% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(Financial Highlights to be filed by amendment.)

<PAGE>

FEDERATED HIGH INCOME BOND FUND II

A Portfolio of Federated Insurance Series

INVESTMENT COMPANY ACT FILE NO. 811-8042
CUSIP 313916306

3113009A (2/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED HIGH INCOME BOND FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated High Income Bond Fund II
(Fund), dated April 20, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.

april 20, 1999

CUSIP313916306

3113009B (2/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from Corporate Bond Fund to Federated High Income Bond Fund II on February
26, 1996.

The Fund's investment adviser is Federated Advisers (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

The following describes the additional types of securities in which the Fund
invests.

CORPORATE DEBT SECURITIES. The credit risk of an issuer's debt security may vary
based on its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated) securities.
This means that the issuer might not make payments on subordinated securities
while continuing to make payments on senior securities. In addition, in the
event of bankruptcy, holders of senior securities may receive amounts otherwise
payable to the holders of subordinated securities. Some subordinated securities,
such as trust preferred and capital securities notes, also permit the issuer to
defer payments under certain circumstances. For example, insurance companies
issue securities known as surplus notes that permit the insurance company to
defer any payment that would reduce its capital below regulatory requirements.

ZERO COUPON SECURITIES. There are many forms of zero coupon securities. Some are
issued at a discount and are referred to as zero coupon or capital appreciation
bonds. Others are created from interest bearing bonds by separating the right to
receive the bond's coupon payments from the right to receive the bond's
principal due at maturity, a process known as coupon stripping. Treasury STRIPs,
IOs and POs are the most common forms of stripped zero coupon securities. In
addition, some securities give the issuer the option to deliver additional
securities in place of cash interest payments, thereby increasing the amount
payable at maturity. These are referred to as pay-in-kind or PIK securities.

CONVERTIBLE SECURITIES are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.

The Fund treats convertible securities as fixed income securities for purposes
of its investment policies and limitations.

TREASURY SECURITIES are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest credit
risk.

AGENCY SECURITIES are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). Some GSEs
are supported by the full, faith and credit of the United States. Other GSEs
receive support through federal subsidies, loans or other benefits. A few GSEs
have no explicit financial support, but are regarded as having implied support
because the federal government sponsors their activities. Investors regard
agency securities as having low credit risk, but not as low as Treasury
securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risk, it does not
reduce the market and prepayment risks of these mortgage backed securities.

ASSET BACKED SECURITIES are payable from pools of obligations other than
mortgages. Almost any type of fixed income assets (including other fixed income
securities) may be used to create an asset backed security. However, most asset
backed securities involve consumer or commercial debts with maturities of less
than ten years. Asset backed securities may take the form of commercial paper or
notes, in addition to pass through certificates. Asset backed securities may
also resemble some types of CMOs, such as Floaters, Inverse Floaters, IOs and
POs.

Historically, borrowers are more likely to refinance their mortgage than any
other type of consumer debt or short term commercial debt. In addition, some
asset backed securities use prepayment to buy addition assets, rather than
paying off the securities. Therefore, although asset backed securities may have
some prepayment risks, they generally do not present the same degree of risk as
mortgage backed securities.

COMMERCIAL PAPER is an issuer's draft or note with a maturity of less than nine
months. Companies typically issue commercial paper to Fund current expenditures.
Most issuers constantly reissue their commercial paper and use the proceeds (or
bank loans) to repay maturing paper. Commercial paper may default if the issuer
cannot continue to obtain liquidity in this fashion. The short maturity of
commercial paper reduces both the market and credit risk as compared to other
debt securities of the same issuer.

INTERESTS IN OTHER LIMITED LIABILITY COMPANIES. Corporations typically issue
stocks. Other types of entities may issue securities comparable to common or
preferred stocks. These entities include limited partnerships, limited liability
companies, business trusts and companies organized outside the United States.

REITS are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.

FOREIGN SECURITIES are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and traded outside of the U.S. In
addition to the risks normally associated with U.S. securities of the same type,
Foreign Securities are subject to Country Risk and Currency Risk. The Fund
invests in foreign securities predominantly denominated in U.S. dollars.

SPECIAL TRANSACTIONS

A Fund's custodian or subcustodian is required to take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian will
monitor the value of the underlying security each day to ensure that the value
of the security always equals or exceeds the repurchase price.

Repurchase Agreements are subject to Credit Risk.

REVERSE REPURCHASE AGREEMENTS are repurchase agreements in which a Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse Repurchase Agreements are subject to
Credit Risk. In addition, Reverse Repurchase Agreements create Leverage Risk
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

Securities lending activities are subject to Market Risk and Credit Risk.

ASSET COVERAGE. In order to secure its obligations in connection with futures
contracts, options, foreign exchange agreements, when-issued, and
delayed-delivery transactions, the Fund will "cover" such transactions, as
required under applicable interpretations of the SEC, either by owning the
underlying securities; entering into an offsetting transaction; or segregating,
earmarking, or depositing into an escrow account readily marketable securities
in an amount at all times equal to or exceeding the Fund's commitment with
respect to these instruments or contracts. As a result, use of these instruments
will impede the Fund's ability to freely trade the assets being used to cover
them, which could result in harm to the Fund.

INVESTMENT RISKS

There are many factors which may effect an investment in the Fund. The principal
risks of investing in the high yield bond fund are described in the Fund's
prospectus. Additional risk factors are described below.

STOCK MARKET RISKS

The Fund's investment adviser attempts to manage market risk of investing in
individual securities by limiting the amount the Fund invests in each stock.

LIQUIDITY RISKS

RISKS RELATED TO COMPANY SIZE

SECTOR RISK

VARIABLE ASSET REGULATIONS

STATE INSURANCE REGULATIONS

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

LENDING CASH OR SECURITIES

UNDERWRITING

DIVERSIFICATION OF INVESTMENTS

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of its total assets in illiquid
securities, including repurchase agreements providing for settlement in more
than seven days after notice and certain restricted securities not determined to
be liquid under criteria established by the Trustees.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for all other securities, at fair value as determined in good faith by the
Board.

TRADING IN FOREIGN SECURITIES

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

HOW IS THE FUND SOLD?

<PAGE>

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Life of Virginia,
Richmond, VA owned approximately 5,004,819 shares (25.35%); Aetna Retirement
Services 710294708-0, Hartford, CT owned approximately 4,521,270 shares
(22.90%); Aetna Retirement Services 61286272-0, Hartford, CT owned approximately
2,697,565 shares (13.66%); Lincoln Benefit Life Co., Lincoln, NE owned
approximately 1,662,459 shares (8.42%); and Conseco Variable Insurance Co.,
Carmel, IN owned approximately 1,164,693 shares (5.90%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

NAME
BIRTHDATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITION WITH TRUST PRINCIPAL OCCUPATIONS FROM FROM TRUST AND
FOR PAST 5 YEARS TRUST** FUND COMPLEX

TRUSTEE

Previous Postions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

Director, Depository Trust Corporation.

Center, Prague.

Previous Postions: Professor, United States
Military Academy; Professor, United States

Air Force Academy.

<PAGE>

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

** The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte and Touche LLP is the independent public accountant for the Fund.

<PAGE>

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31,

1998 1997 1996
Advisory Fee Earned $__ $__ $__
Advisory Fee Reduction $__ $__ $__
Brokerage Commissions $__ $__ $__
Administrative Fee $__ $__ $__
12b-1 Fee $__
Shareholder Services Fee $__

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield given for the 30-day period ended December 31, 1998.

30 -DAY PERIOD 1 YEAR SINCE INCEPTION
ON MARCH 1, 1994

Total Return NA __% __%
Yield __% NA NA

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

<PAGE>

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

<PAGE>

LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the high current
yield funds category in advertising and sales literature.

LIPPER HIGH CURRENT YIELD AVERAGE is composed of approximately 141 funds which
invest at least 65% of their assets in investment grade debt issues (rated in
top four grades) with dollar-weighted average maturities of five to ten years.
From time to time, the Fund will compare its total return to the average total
return of the funds comprising the average for the same calculation period.

LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of approximately
5,000 issues which include: non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities, and finance. The
average maturity of these bonds approximates nine years. Tracked by Lehman
Brothers, Inc., the index calculates total returns for one month, three month,
twelve month, and ten year periods and year-to-date.

LEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index measuring both the
capital price changes and income provided by the underlying universe of
securities, comprised of U.S. Treasury obligations, U.S. agency obligations,
foreign obligations, U.S. investment-grade corporate debt and mortgage-backed
obligations.

LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of the same
types of issues as defined above. However, the average maturity of the bonds
included on this index approximates 22 years.

LEHMAN BROTHERS HIGH YIELD INDEX and its sub-indices are based on credit quality
and/or duration. The Lehman Brothers High Yield Index covers the universe of
fixed rate, publicly issued, noninvestment grade debt registered with the SEC.
All bonds included in the Lehman Brothers High Yield Index must be
dollar-denominated and nonconvertible and have at least one year remaining to
maturity and an outstanding par value of at least $100 million. Generally,
securities must be rated Ba1 or lower by Moody's Investors Service, including
defaulted issues. If no Moody's rating is available, bonds must be rated BB+ or
lower by S&P; and if no S&P rating is available, bonds must be rated below
investment grade by Fitch IBCA, Inc. A small number of unrated bonds are
included in the index; to be eligible they must have previously held a high
yield rating or have been associated with a high yield issuer, and must trade
accordingly.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

<PAGE>

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

(Financial Statements to be filed by amendment.)

<PAGE>

INVESTMENT RATINGS

APPENDIX

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

<PAGE>

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

o Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

o Well established access to a range of financial markets and assured sources of
alternate liquidity.

<PAGE>

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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 IBCA, 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 assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

123

ADDRESSES

FEDERATED HIGH INCOME BOND FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED UTILITY FUND II

(A Portfolio of Federated Insurance Series)

A mutual fund seeking to achieve high current income and moderate capital
appreciation by investing in securities of utility companies.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

April 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to achieve high current income and moderate
capital appreciation. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing primarily in equity
securities of companies engaged in providing utility services such as
electricity, gas and telecommunications.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

o the possibility that the utilities sector may underperform other sectors or
the market as a whole; and

o fluctuations in the value of equity securities.

An investment in the Fund involves additional risks such as Stock Market Risk,
Sector Risk, Liquidity Risk, and Risks Related to Investing for Value.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Utility Fund II as of the calendar year-end
for each of 4 years.

The `y' axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 5.00% up to 30.00%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended 1998. The light
gray shaded chart features 4 distinct vertical bars, each shaded in charcoal,
and each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Fund for each calendar year is stated directly at the top of
each respective bar for the calendar years 1995 through 1998. The percentages
noted are: 24.18%, 11.56%, 26.63%, and 13.95%. The bar chart shows the
variability of the Fund's actual total returns on a calendar year-end basis. The
Fund does not impose a sales charge (load). Hence, the total returns displayed
above are based on net asset value. Within the period shown in the Chart, the
Fund's highest quarterly return was 12.96% (quarter ended December 31, 1997).
Its lowest quarterly return was (2.81%) (quarter ended September 30, 1996).

AVERAGE ANNUAL TOTAL RETURN

LIFE OF THE FUND1 1 YEAR

Fund 14.42% 13.95%
S&P 500 __% 28.61%
SPUX __% 14.78%
1 Since inception date of April 14, 1994.

The table shows the Fund's average annual total returns compared to the Standard
and Poor's 500 Index (S&P 500) and the Standard and Poor's Utility Index (SPUX)
for the calendar periods ending December 31, 1998. Past performance does not
necessarily predict future performance. This information provides you with
historical performance so that you can analyze whether the Fund's investment
risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing primarily in equity
securities of companies engaged in providing utility services such as
electricity, gas and telecommunications.

The Adviser seeks stocks which are trading at a low historical valuation
relative to the market and to industry peers, and which do not reflect positive
changes in the companies' outlooks. The Adviser uses a model to attempt to
identify companies which have these attributes, as well as financial and
earnings strength, and the prospect of comparatively low volatility in share
prices. In addition, the Adviser performs traditional fundamental analysis to
select the most promising companies for the Portfolio. To determine the timing
of purchases and sales of portfolio securities, the Adviser looks at recent
stock price performance.

Companies with similar characteristics may be grouped together in broad
categories called sectors. In determining the amount to invest in a security,
the Adviser limits the Fund's exposure to each sector that comprises both the
S&P Utility and S&P Communications Indices. The Fund's allocation to a sector
will be no more than 300% of the Indices' allocation to that sector. The Fund
attempts to manage risk by purchasing securities of companies that tend to
experience lower volatility relative to securities of other companies in their
sector. Under normal market conditions, the Fund will invest at least 65% of its
total assets in securities of utility companies.

INDUSTRY CONCENTRATION

The Fund may invest 25% or more of its assets in the utility industry.

TEMPORARY DEFENSIVE INVESTMENTS

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

EQUITY SECURITIES

Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Fund invests.

COMMON STOCKS

Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.

REAL ESTATE INVESTMENT TRUSTS (REITS)

REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.

DEPOSITARY RECEIPTS

Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are traded in the United States. ADRs provide a way to buy
shares of foreign-based companies in the United States rather than in overseas
markets. ADRs are also traded in U.S. dollars, eliminating the need for foreign
exchange transactions. The foreign securities underlying European Depositary
Receipts (EDRs), Global Depositary Receipts (GDRs), and International Depositary
Receipts (IDRs), are traded globally or outside the United States. Depositary
receipts involve many of the same risks of investing directly in foreign
securities, including currency risks and risks of foreign investing.

CONVERTIBLE SECURITIES

Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.

The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because of
their unique characteristics.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

STOCK MARKET RISKS

The value of equity securities in the Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline.

The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company's equity securities. However, diversification will not
protect the Fund against widespread or prolonged declines in the stock market.

SECTOR RISKS

Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may underperform other sectors or the market as a whole. As the Adviser
allocates more of the Fund's portfolio holdings to a particular sector, the
Fund's performance will be more susceptible to any economic, business or other
developments which generally affect that sector. For example, a global increase
in the cost of natural resources used by utility companies would reduce the
value of utility companies more than companies in other business sectors. This
would cause the Fund to underperform other mutual funds that do not concentrate
in the utility sector.

LIQUIDITY RISKS

Trading opportunities are more limited for equity securities that are not widely
held. This may make it more difficult to sell or buy a security at a favorable
price or time. Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.

RISKS RELATED TO INVESTING FOR VALUE

Due to their relatively low valuations, value stocks are typically less volatile
than growth stocks. For instance, the price of a value stock may experience a
smaller increase on a forecast of higher earnings, a positive fundamental
development, or positive market development. Further, value stocks tend to have
higher dividends than growth stocks. This means they depend less on price
changes for returns and may lag behind growth stocks in an up market.

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

Steven J. Lehman, primary portfolio manager, has been a portfolio manager
of the Fund since August 1997. Mr. Lehman joined the Fund's adviser in May 1997
as a Portfolio Manager and Vice President. He has been a Senior Portfolio
Manager since 1998. From 1986 to May 1997, Mr. Lehman served as a Portfolio
Manager, then Vice President/Senior Portfolio Manager, at First Chicago NBD. Mr.
Lehman is a Chartered Financial Analyst; he received his M.A. from the
University of Chicago.

Linda A. Duessel has been a portfolio manager for the Fund since April
1995. Ms. Duessel joined Federated Investors, Inc. or its predecessor in 1991
and has been a Portfolio Manager and a Vice President of the Fund's investment
adviser since 1995. Ms. Duessel was a Senior Investment Analyst and an Assistant
Vice President of the Fund's investment adviser from 1991 until 1995. Ms.
Duessel is a Chartered Financial Analyst and received her M.S. in Industrial
Administration from Carnegie Mellon University.

Drew J. Collins and Richard J. Lazarchic are the portfolio managers for
foreign securities.

Drew J. Collins has been a portfolio manager of the Fund since July 1997.
Mr. Collins joined Federated Investors, Inc. or its predecessor in 1995 as a
Senior Portfolio Manager and a Senior Vice President of the Fund's investment
adviser. Mr. Collins served as Vice President/Portfolio Manager of international
equity portfolios at Arnhold and Bleichroeder, Inc. from 1994 to 1995. He served
as an Assistant Vice President/Portfolio Manager for international equities at
the College Retirement Equities Fund from 1986 to 1994. Mr. Collins is a
Chartered Financial Analyst and received his M.B.A. in finance from the Wharton
School of the University of Pennsylvania.

Richard J. Lazarchic has been a portfolio manager of the Fund since April
1998. Mr. Lazarchic joined Federated Investors, Inc. or its predecessor in March
1998 as a Vice President of the Fund's investment adviser. From May 1979 through
October 1997, Mr. Lazarchic was employed with American Express Financial Corp.,
initially as an Analyst and then as a Vice President/Senior Portfolio Manager.
Mr. Lazarchic is a Chartered Financial Analyst. He received his M.B.A. from Kent
State University.

More than 4,000 investment professionals make Federated Funds available to their
customers.

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(Financial Highlights to be filed by amendment.)

<PAGE>

FEDERATED UTILITY FUND II

A Portfolio of Federated Insurance Series

INVESTMENT COMPANY ACT FILE NO. 811-8042
CUSIP 313916108

3113008A (2/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED UTILITY FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Utility Fund II (Fund),
dated April 20, 1999. This SAI incorporates by reference the Fund's Annual
Report. Obtain the prospectus or the Annual Report without charge by calling
1-800-341-7400.

April 20, 1999

CUSIP313916108

3113008B (2/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from Utility Fund to Federated Utility Fund II on February 26, 1996.

The Fund's investment adviser is Federated Advisers (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

EQUITY SECURITIES

PREFERRED STOCKS

Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Fund may also treat
such redeemable preferred stock as a fixed income security.

<PAGE>

WARRANTS

Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full, faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage backed securities.

CORPORATE DEBT SECURITIES

In addition, the credit risk of an issuer's debt security may vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This means
that the issuer might not make payments on subordinated securities while
continuing to make payments on senior securities. In addition, in the event of
bankruptcy, holders of senior securities may receive amounts otherwise payable
to the holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer any
payment that would reduce its capital below regulatory requirements.

COMMERCIAL PAPER

Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default. The short
maturity of commercial paper reduces both the market and credit risks as
compared to other debt securities of the same issuer.

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must repay upon
demand. Other demand instruments require a third party, such as a dealer or
bank, to repurchase the security for its face value upon demand. The Fund treats
demand instruments as short-term securities, even though their stated maturity
may extend beyond one year.

FOREIGN SECURITIES

Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:

it is organized under the laws of, or has a principal office located in,
another country;

the principal trading market for its securities is in another country; or

it (or its subsidiaries) derived in its most current fiscal year at least 50% of
its total assets, capitalization, gross revenue or profit from goods produced,
services performed, or sales made in another country.

Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.

DERIVATIVE CONTRACTS

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.

Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.

The Fund may trade in the following types of derivative contracts.

FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified price,
date, and time. Entering into a contract to buy an underlying asset is commonly
referred to as buying a contract or holding a long position in the asset.
Entering into a contract to sell an underlying asset is commonly referred to as
selling a contract or holding a short position in the asset. Futures contracts
are considered to be commodity contracts. Futures contracts traded OTC are
frequently referred to as forward contracts.

The Fund may buy/sell the following types of futures contracts: financial
futures contracts and options on futures.

OPTIONS

Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option
gives the holder (buyer) the right to buy the underlying asset from the seller
(writer) of the option. A put option gives the holder the right to sell the
underlying asset to the writer of the option. The writer of the option receives
a payment, or premium, from the buyer, which the writer keeps regardless of
whether the buyer uses (or exercises) the option.

The Fund may:

Buy put options on its portfolio securities and financial futures contracts in
anticipation of a decrease in the value of the underlying asset; and

Buy or write options to close out existing options positions.

The Fund may also write call options on all or any portion of its portfolio and
financial futures contracts to generate income from premiums, and in
anticipation of a decrease or only limited increase in the value of the
underlying asset. If a call written by the Fund is exercised, the Fund foregoes
any possible profit from an increase in the market price of the underlying asset
over the exercise price plus the premium received.

When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

The Fund may:

Buy put options on index futures in anticipation of a decrease in the value
of the underlying asset; and

The Fund may also write call options on index futures to generate income from
premiums, and in anticipation of a decrease or only limited increase in the
value of the underlying asset. If a call written by the Fund is exercised, the
Fund foregoes any possible profit from an increase in the market price of the
underlying asset over the exercise price plus the premium received.

Although the Fund reserves the right to write covered call options on its entire
portfolio, it will not write such options on more than 25% of its total assets
unless a higher limit is authorized by its Board.

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.

<PAGE>

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create market
risks for the Fund. Delayed delivery transactions also involve credit risks in
the event of a counterparty default.

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.

Securities lending activities are subject to market risks and credit risks.

<PAGE>

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses.

EQUITY SECURITIES INVESTMENT RISKS

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more volatile
its price. Market capitalization is determined by multiplying the number of its
outstanding shares by the current market price per share.

Companies with smaller market capitalizations also tend to have unproven track
records, a limited product or service base and limited access to capital. These
factors also increase risks and make these companies more likely to fail than
larger, well capitalized companies.

CURRENCY RISKS

Exchange rates for currencies fluctuate daily. The combination of currency risk
and market risk tends to make securities traded in foreign markets more volatile
than securities traded exclusively in the U.S.

The Adviser attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.

EURO RISKS

The Fund may make significant investments in securities denominated in the Euro,
the new single currency of the European Monetary Union (EMU). Therefore, the
exchange rate between the Euro and the U.S. dollar will have a significant
impact on the value of the Fund's investments.

With the advent of the Euro, the participating countries in the EMU can no
longer follow independent monetary policies. This may limit these countries'
ability to respond to economic downturns or political upheavals, and
consequently reduce the value of their foreign government securities.

RISKS OF FOREIGN INVESTING

Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable that those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

Foreign countries may have restrictions on foreign ownership or may impose
exchange controls, capital flow restrictions or repatriation restrictions which
could adversely affect the Fund's investments.

Foreign financial markets may have fewer investor protections than U.S. markets.
For instance, there may be less publicly available information about foreign
companies, and the information that is available may be difficult to obtain or
may not be current. In addition, foreign countries may lack financial controls
and reporting standards, or regulatory requirements, comparable to those
applicable to U.S. companies.

Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

RISKS OF INVESTING IN EMERGING MARKET COUNTRIES

Securities issued or traded in emerging markets generally entail greater risks
than securities issued or traded in developed markets. For example, their prices
may be significantly more volatile than prices in developed countries. Emerging
market economies may also experience more severe downturns (with corresponding
currency devaluations) than developed economies.

Emerging market countries may have relatively unstable governments and may
present the risk of nationalization of businesses, expropriation, confiscatory
taxation or, in certain instances, reversion to closed market, centrally planned
economies.

CREDIT RISKS

FIXED INCOME INVESTMENT RISKS

BOND MARKET RISKS

Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices of
fixed income securities fall.

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money.

CALL RISKS

LIQUIDITY RISKS

Trading opportunities are more limited for fixed income securities that have not
received any credit ratings, have received ratings below investment grade or are
not widely held. Trading opportunities are more limited for CMOs that have
complex terms or that are not widely held. These features may make it more
difficult to sell or buy a security at a favorable price or time. Consequently,
the Fund may have to accept a lower price to sell a security, sell other
securities to raise cash or give up an investment opportunity, any of which
could have a negative effect on the Fund's performance. Infrequent trading of
securities may also lead to an increase in their price volatility.

OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

SECTOR RISKS

A substantial part of the Fund's portfolio may be comprised of securities issued
or credit enhanced by companies in similar businesses, or with other similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political, or other developments which generally affect these issuers.

<PAGE>

CURRENCY RISKS

EURO RISKS

RISKS OF FOREIGN INVESTING

Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

<PAGE>

LEVERAGE RISKS

VARIABLE ASSET REGULATIONS

STATE INSURANCE REGULATIONS

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities. The deposit or payment by the
Fund of initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security on
margin.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of its total assets at the time of borrowing. For
purposes of this limitation, the following are not deemed to be pledges: margin
deposits for the purchase and sale of futures contracts and related options, any
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities, if, as a result of such purchase, 25% or
more of its total assets would be invested in securities of companies engaged
principally in any one industry other than the utilities industry. However, the
Fund may at any time invest 25% or more of its total assets in cash or cash
items and securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell futures
and stock index futures contracts and related options.

INVESTING IN REAL ESTATE

LENDING CASH OR SECURITIES

UNDERWRITING

DIVERSIFICATION OF INVESTMENTS

The above investment limitations cannot be changed unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act. The following limitations, however, may be changed by
the Board without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of its net assets in illiquid securities,
including, among others, repurchase agreements providing for settlement more
than seven days after notice, over-the-counter options, and certain restricted
securities not determined to be liquid under criteria established by the
Trustees.

INVESTING IN PUT OPTIONS

The Fund will not purchase put options on securities, unless the securities are
held in the Fund's portfolio and not more than 5% of the Fund's total assets
would be invested in premiums on open put option positions.

WRITING COVERED CALL OPTIONS

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for all other securities, at fair value as determined in good faith by the
Board.

TRADING IN FOREIGN SECURITIES

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

HOW IS THE FUND SOLD?

<PAGE>

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Life of Virginia,
Richmond, VA, owned approximately 3,111,561 shares (29.10%); Aetna Retirement
Services 710294708-0, Hartford, CT owned approximately 1,975,782 shares
(18.48%); Aetna Retirement Services 61286272-0, Hartford, CT owned approximately
1,733,362 shares (16.21%); Lincoln Benefit Life Co., Lincoln, NE owned
approximately 815,127 shares (7.62%); Provident Mutual Life & Annuity Co. of
America, Valley Forge, PA owned approximately 672,159 shares (6.29%); and Safeco
Mutual Funds, Seattle, WA owned approximately 649,724 shares (6.08%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

NAME
BIRTHDATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITION WITH TRUST PRINCIPAL OCCUPATIONS FROM FROM TRUST AND
FOR PAST 5 YEARS TRUST** FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+ Chief Executive Officer and Director or $0 $0 for the
Birthdate: July 28, 1924 Trustee of the Federated Fund Complex; Trust and
Federated Investors Chairman and Director, Federated Investors, 54 other
Tower Inc.; Chairman and Trustee, Federated investment
1001 Liberty Avenue Advisers, Federated Management, and companies
Pittsburgh, PA Federated Research; Chairman and Director, in the Fund
CHAIRMAN AND TRUSTEE Federated Research Corp., and Federated Complex
Global Research Corp.; Chairman, Passport
Research, Ltd.

TRUSTEE

Previous Postions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

Director, Depository Trust Corporation.

Center, Prague.

Previous Postions: Professor, United States
Military Academy; Professor, United States

Air Force Academy.

<PAGE>

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

** The aggregate compensation is provided for the Trust which is comprised of
eight portfolios.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte and Touche LLP is the independent public accountant for the Fund.

<PAGE>

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31,

1998 1997 1996
Advisory Fee Earned $__ $__ $__
Advisory Fee Reduction $__ $__ $__
Brokerage Commissions $__ $__ $__
Administrative Fee $__ $__ $__
12b-1 Fee $__
Shareholder Services Fee $__

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield given for the 30-day period ended December 31, 1998.

30 -DAY PERIOD 1 YEAR SINCE INCEPTION
ON APRIL 14, 1994

Total Return NA __% __%
Yield __% NA NA

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

<PAGE>

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "utility funds"
category in advertising and sales literature.

LIPPER UTILITY FUND AVERAGE is composed of approximately 87 funds which invest
65% of their equity portfolio in utility stocks. From time to time, the Fund
will compare its total return to the average total return of the funds
comprising the average for the same calculation period.

STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, financial and public utility
companies, can be used to compare to the total returns of funds whose portfolios
are invested primarily in common stocks. In addition, the S&P index assumes
reinvestment of all dividends paid by stocks listed on its index. Taxes due on
any of these distributions are not included, nor are brokerage or other fees
calculated in the S&P figures.

STANDARD & POOR'S UTILITY INDEX is an unmanaged index of common stocks from
forty different utilities. This index indicates daily changes in the price of
the stocks. The index also provides figures for changes in price from the
beginning of the year to date, and for a twelve month period.

DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen utility
stocks that tracks changes in price daily and over a six month period. The index
also provides the highs and lows for each of the past five years.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

(Financial Statements to be filed by amendment.)

<PAGE>

INVESTMENT RATINGS

APPENDIX

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

<PAGE>

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

o Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

o Well established access to a range of financial markets and assured sources of
alternate liquidity.

<PAGE>

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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 IBCA, 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 assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

FEDERATED UTILITY FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED EQUITY INCOME FUND II

[A Portfolio of Federated Insurance Series]

A mutual fund seeking to provide above average income and capital appreciation
by investing in income-producing equity securities.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

April 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide above average income and capital
appreciation. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing primarily in income
producing equity securities and securities that are convertible into common
stocks.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Other risks of investing in the Fund include Sector Risk and Risk of Foreign
Investing.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Federated Equity Income Fund II as of
the calendar year-end for one year. The `y' axis reflects the "% Total Return"
beginning with "-7" and increasing in increments of 5% up to 33%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features one distinct vertical bar, shaded in
charcoal, and visually representing by height the total return percentage for
the calendar year stated directly at its base. The calculated total return
percentage for the Fund for the calendar year is stated directly at the top of
the bar. For the calendar year 1998, the percentage noted is 15.57%. The bar
chart shows the variability of the Fund's Shares total return on a calendar
year-end basis. The Fund's Shares are not sold subject to a sales charge (load).
Hence, the total return displayed above is based upon the net asset value.
Within the period shown in the Chart, the Fund's highest quarterly return was
16.27% (quarter ended December 31, 1998). Its lowest quarterly return was
(8.91)% (quarter ended September 30, 1998).

The following table represents the Fund's Average Annual Total Return
through December 31, 1998.

START OF PERFORMACE1 1 YEAR 5 YEARS 10 YEARS

Fund 18.15% 15.57% N/A N/A
S&P 500 N/A 28.61% N/A N/A
LEIFI N/A 11.78% N/A N/A
1 The Fund's start of performance was January 30, 1997.
The table shows the Fund's average annual total returns compared to the Standard
& Poor's 500 Index (S&P 500) and the Lipper Equity Income Fund Index (LEIFI) for
the calendar period ending December 31, 1998. These indices are broad-based
market indices. While past performance does not necessarily predict future
performance, this information provides you with historical performance so that
you can analyze whether the Fund's investment risks are balanced by its
potential rewards.

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing at least 65% of its
assets in income-producing equity securities.

TEMPORARY DEFENSIVE INVESTMENTS

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

EQUITY SECURITIES

COMMON STOCKS

REAL ESTATE INVESTMENT TRUSTS (REITS)

CONVERTIBLE SECURITIES

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

STOCK MARKET RISKS

The Fund's investment adviser attempts to manage market risk of investing in
individual securities by limiting the amount the Fund invests in each stock.

SECTOR RISK

Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain sector
may perform differently than other sectors or the market as a whole. As the
adviser allocates more of the Fund's portfolio holdings to a particular sector,
the Fund's performance will be more susceptible to any economic, business or
other developments which generally affect that sector.

RISKS RELATED TO INVESTING FOR VALUE

RISK OF FOREIGN INVESTING

Exchange rates for currency fluctuate daily. The combination of currency risk
and market risk tends to make securities traded in foreign markets more volatile
than securities traded exclusively in the U.S.

Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Shares. Because these Shares pay marketing fees
on an ongoing basis, your investment cost may be higher over time than other
shares with different sales charges and marketing fees.

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

<PAGE>

The Fund's portfolio managers are:

Linda A. Duessel has been the Fund's portfolio manager since February 1997.
Ms. Duessel joined Federated Investors in 1991 and has been a Portfolio Manager
and a Vice President of the Fund's investment adviser since 1995. Ms. Duessel
was a Senior Investment Analyst and an Assistant Vice President of the Fund's
investment adviser from 1991 until 1995. Ms. Duessel is a Chartered Financial
Analyst and received her M.S. in Industrial Administration from Carnegie Mellon
University.

Steven J. Lehman has been the Fund's portfolio manager since August 1997.
Mr. Lehman joined the Fund's adviser in May 1997 as a Portfolio Manager and Vice
President. He has been a Senior Portfolio Manager since 1998. From 1986 to May
1997, Mr. Lehman served as a Portfolio Manager, then Vice President/Senior
Portfolio Manager, at First Chicago NBD. Mr. Lehman is a Chartered Financial
Analyst; he received his M.A. from the University of Chicago.

The Adviser and other subsidiaries of Federated advise and/or provide
administrative services to more than 300 mutual funds and private accounts,
which total over $120 billion in assets as of December 31, 1997. Federated was
established in 1955 and is one of the largest mutual fund investment managers in
the United States with more than 2,000 employees. Over 4,000 investment
professionals make Federated Funds available to their customers.

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

FEDERATED EQUITY INCOME FUND II

A Portfolio of (Federated Insurance Series)

A Statement of Additional Information (SAI) dated April 20, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is available in the Fund's annual report to shareholders. The
annual report discusses market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. To
obtain the SAI, the annual report and other information without charge, call
your investment professional or the Fund at 1-800-341-7400.

INVESTMENT COMPANY ACT FILE NO. 811-07461
CUSIP 313916801

G01298-01 (4/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED EQUITY INCOME FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Equity Income Fund II
(Fund), dated April 30, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.

April 30, 1999

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses

CUSIP313916801

G01298-02 (4/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

PREFERRED STOCKS

INTERESTS IN OTHER LIMITED LIABILITY COMPANIES

Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.

REAL ESTATE INVESTMENT TRUSTS (REITS)

REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial real
estate market.

DEPOSITARY RECEIPTS

WARRANTS

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full, faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Agency
securities are generally regarded as having low credit risks, but not as low
as treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does
not reduce the market and prepayment risks of these mortgage backed
securities.

CORPORATE DEBT SECURITIES

In addition, the credit risk of an issuer's debt security may vary based on
its priority for repayment. For example, higher ranking (senior) debt
securities have a higher priority than lower ranking (subordinated)
securities. This means that the issuer might not make payments on
subordinated securities while continuing to make payments on senior
securities. In addition, in the event of bankruptcy, holders of senior
securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer
any payment that would reduce its capital below regulatory requirements.

CONVERTIBLE SECURITIES

Convertible securities are fixed income securities that the Fund has the
option to exchange for equity securities at a specified conversion price.
The option allows the Fund to realize additional returns if the market price
of the equity securities exceeds the conversion price. For example, the Fund
may hold fixed income securities that are convertible into shares of common
stock at a conversion price of $10 per share. If the market value of the
shares of common stock reached $12, the Fund could realize an additional $2
per share by converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity
securities. Thus, convertible securities may provide lower returns than
non-convertible fixed income securities or equity securities depending upon
changes in the price of the underlying equity securities. However,
convertible securities permit the Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing
its initial investment.

The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because
of their unique characteristics.

<PAGE>

FOREIGN SECURITIES

Foreign securities are securities of issuers based outside the United
States. The Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

o it (or its subsidiaries) derived in its most current fiscal year at least
50% of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.

Foreign securities are primarily denominated in foreign currencies. Along
with the risks normally associated with domestic securities of the same
type, foreign securities are subject to currency risks and risks of foreign
investing. Trading in certain foreign markets is also subject to liquidity
risks.

DERIVATIVE CONTRACTS

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.

The Fund may trade in the following types of derivative contracts.

FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts.

The Fund may buy and sell the following type of futures contracts:
financial futures contracts and over-the-counter options.

OPTIONS

Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option.

The Fund may:

Buy call options on financial futures contracts in anticipation of an
increase in the value of the underlying asset.

Buy put options on financial futures contracts in anticipation of a decrease
in the value of the underlying asset.

Buy or write options to close out existing options positions.

Write put options on portfolio securities and index futures to generate
income from premiums, and in anticipation of an increase or only limited
decrease in the value of the underlying asset. In writing puts, there is a
risk that the Fund may be required to take delivery of the underlying asset
when its current market price is lower than the exercise price.

Write call options on portfolio securities and index futures to generate
income from premiums, and in anticipation of a decrease or only limited
increase in the value of the underlying asset. If a call written by the Fund
is exercised, the Fund foregoes any possible profit from an increase in the
market price of the underlying asset over the exercise price plus the
premium received.

When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated to
the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must repurchase
the underlying security at a higher price, regardless of the market value of
the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the
period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value in
determining the price of its shares. Settlement dates may be a month or more
after entering into these transactions so that the market values of the
securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create market risks for the Fund. Delayed delivery
transactions also involve credit risks in the event of a counterparty
default.

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from
the borrower as collateral. The borrower must furnish additional collateral
if the market value of the loaned securities increases. Also, the borrower
must pay the Fund the equivalent of any dividends or interest received on
the loaned securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on
loan, but it will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.

Securities lending activities are subject to market and credit risks.

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts
or special transactions, the Fund will either own the underlying assets,
enter into an offsetting transaction or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations.
Unless the Fund has other readily marketable assets to set aside, it cannot
trade assets used to secure such obligations entering into an offsetting
derivative contract or terminating a special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on
derivative contracts or special transactions.

INVESTMENT RATINGS

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determinate whether a security is investment grade based upon
the credit ratings given by one or more nationally recognized rating services.
For example, Standard and Poor's, a rating service, assigns ratings to
investment grade securities (AAA, AA, A, and BBB) based on their assessment of
the likelihood of the issuer's inability to pay interest or principal (default)
when due on each security. Lower credit ratings correspond to higher credit
risk. If a security has not received a rating, the Fund must rely entirely upon
the Adviser's credit assessment that the security is comparable to investment
grade.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The
Fund's principal risks are described in its prospectus. Additional risk factors
are outlined below.

EQUITY SECURITIES INVESTMENT RISKS

STOCK MARKET RISKS

o The value of equity securities in the Fund's portfolio will rise and
fall. These fluctuations could be a sustained trend or a drastic
movement. The Fund's portfolio will reflect changes in prices of
individual portfolio stocks or general changes in stock valuations.
Consequently, the Fund's share price may decline.

o The Adviser attempts to manage market risk by limiting the amount the
Fund invests in each company's equity securities. However,
diversification will not protect the Fund against widespread or
prolonged declines in the stock market.

LIQUIDITY RISKS

Equity securities that are not widely held may trade less frequently than
more widely held securities. This limits trading opportunity making it more
difficult to sell or buy the securities at a favorable price or time. In
response, the fund may have to lower the price, sell other securities, or
give up an investment opportunity, any of which could have a negative effect
on its performance. Infrequent trading may also lead to greater price
volatility.

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of outstanding shares by the current market price per share.

In addition, investing in small capitalization companies entails greater
risk because these companies may have unproven track records, limited
product or service base, limited access to capital and may be more likely to
fail than larger, more established companies.

FIXED INCOME SECURITIES INVESTMENT RISKS

BOND MARKET RISK

Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.

CREDIT RISK

Credit risk is the possibility that an issuer will default (the issuer fails
to repay interest and principal when due). If an issuer defaults, the Fund will
lose money.

Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services. Fixed income securities
receive different credit ratings depending on the rating service's
assessment of the likelihood of default by the issuer. The lower the credit
rating, the greater the credit risk. In the case of unrated securities, the
Fund must rely entirely upon the Adviser's credit assessment.

Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of the
security and the yield of a U.S. Treasury security with a comparable
maturity (the "spread") measures the additional interest received for taking
risk. Spreads may increase generally in response to adverse economic or
market conditions. A security's spread may also increase if the security's
rating is lowered, or the security is perceived to have an increased credit
risk. An increase in the spread will cause the price of the security to
decline.

Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to
lose the benefit of the transaction or prevent the Fund from selling or
buying other securities to implement its investment strategy.

CALL RISK

Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a "call") at a price below it's current market
price. An increase in the likelihood of a call may reduce the security's
price.

If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.

LIQUIDITY RISKS

Fixed income securities that have noninvestment grade credit ratings, have
not been rated or that are not widely held may trade less frequently than
more widely held securities. This limits trading opportunities, making it
more difficult to sell or buy the security at a favorable price or time. In
response, the Fund may have to lower the price, sell other securities, or
give up an investment opportunity, any of which could have a negative effect
on its performance. Infrequent trading may also lead to greater price
volatility.

Liquidity risk refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.

OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES

Securities rated below investment grade, also known as junk bonds, generally
entail greater risks than investment grade securities. For example, their
prices are more volatile, their values are more negatively impacted by
economic downturns, and their trading market may be more limited.

STOCK MARKET RISKS

SECTOR RISKS

RISKS RELATED TO INVESTING FOR VALUE

Due to their relatively low valuations, value stocks are typically less
volatile than growth stocks. For instance, the price of a value stock may
experience a smaller increase on a forecast of higher earnings, a positive
fundamental development, or positive market development. Further, value
stocks tend to have higher dividends than growth stocks. This means they
depend less on price changes for returns and may lag behind growth stocks in
an up market.

CURRENCY RISKS

o Exchange rates for currencies fluctuate daily. The combination of
currency risk and market risk tends to make securities traded in foreign
markets more volatile than securities traded exclusively in the U.S.

o The Adviser attempts to manage currency risk by limiting the amount the
Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general
increase in the value of the U.S. dollar relative to other currencies.

EURO RISKS

o The Fund [may] make significant investments in securities denominated in
the Euro, the new single currency of the European Monetary Union (EMU).
Therefore, the exchange rate between the Euro and the U.S. dollar will
have a significant impact on the value of the Fund's investments.

o With the advent of the Euro, the participating countries in the EMU can
no longer follow independent monetary policies. This may limit these
countries' ability to respond to economic downturns or political
upheavals, and consequently reduce the value of their foreign government
securities.

RISKS OF FOREIGN INVESTING

o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable that those of the United
States. Securities in foreign markets may also be subject to taxation
policies that reduce returns for U.S. investors.

o Foreign countries may have restrictions on foreign ownership or may
impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the Fund's investments.

o Foreign financial markets may have fewer investor protections than U.S.
markets. For instance, there may be less publicly available information
about foreign companies, and the information that is available may be
difficult to obtain or may not be current. In addition, foreign
countries may lack financial controls and reporting standards, or
regulatory requirements, comparable to those applicable to U.S.
companies.

o Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

LEVERAGE RISKS

Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.

BOND MARKET RISKS

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates
rise, prices of fixed income securities fall.

o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price
sensitivity of a fixed income security to changes in interest rates.

STATE INSURANCE REGULATIONS

The Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies offered by certain insurance companies. The
contracts will seek to be offered in as many jurisdictions as possible. Certain
states have regulations concerning, among other things, the concentration of
investments, sales and purchases of futures contracts, and short sales of
securities. if applicable, the Fund may be limited in its ability to engage in
such investments and to manages its portfolio with desired flexibility. The Fund
will operate in material compliance with the applicable insurance laws and
regulations of each jurisdiction in which contracts will be offered by the
insurance companies which invest in the Fund.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regulations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests of the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the fund
will not be treated as annuity, endowment, or life insurance contracts.

INVESTMENT LIMITATIONS

BUYING ON MARGIN

The Fund will not purchase any securities on margin but may obtain such
short-term credits as are necessary for clearance of transactions. The deposit
or payment by the Fund of initial or variation margin in connection with
financial futures contracts or related options transactions is not considered
the purchase of a security on margin.

SELLING SHORT

The Fund will not sell securities short unless during the time the short
position is open, it owns an equal amount of the securities sold or securities
readily and freely convertible into or exchangeable, without payment of
additional consideration, for securities of the same issue as, and equal in
amount to, the securities sold short; and not more than 10% of the Fund's net
assets (taken at current value) is held as collateral for such sales at any one
time.

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 any borrowings 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 10% 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.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, although it may invest in
securities of issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interest 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.

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 objectives, 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 purchase
or holding of corporate bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, repurchase agreements, or other
transactions which are permitted by the Fund's investment objectives and
policies.

CONCENTRATION OF INVESTMENTS

The Fund will not purchase portfolio instruments if, as a result of such
purchase, 25% or more of the value of its total assets would be invested in any
one industry.

DIVERSIFICATION OF INVESTMENTS

The Fund will not invest more than 5% of the value of its total assets in
securities of one issuer (except cash and cash items, repurchase agreements, and
U.S. government obligations) or acquire more than 10% of any class of voting
securities of any issuer. For these purposes, the Fund takes all common stock
and all preferred stock of an issuer each as a single class, regardless of
priorities, series, designations, or other differences.

The above limitations cannot be changed unless authorized by the "vote of a
majority of its outstanding voting securities," as defined by the Investment
Company Act. The following limitations, however, may be changed by the Board
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.

ARBITRAGE TRANSACTIONS

The Fund will not engage in arbitrage transactions.

ACQUIRING SECURITIES

The Fund will not purchase securities of a company for the purpose of exercising
control or management. However, the Fund may purchase up to 10% of the voting
securities of any one issuer and may exercise its voting powers consistent with
the best interests of the Fund. In addition, the Fund, other companies advised
by the adviser, and other affiliated companies may together buy and hold
substantial amounts of voting stock of a company and may vote together in regard
to such company's affairs. In some cases, the Fund and its affiliates might
collectively be considered to be in control of such company. In some cases,
Trustees and other persons associated with the Fund and its affiliates might
possibly become directors of companies in which the Fund holds stock.

WRITING COVERED CALL OPTIONS AND PURCHASING PUT OPTIONS

The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment. The Fund will not purchase put options on securities
unless the securities are held in the Fund's portfolio. The Fund will not commit
more than 5% of the value of its total assets to premiums on open option
positions.

INVESTING IN WARRANTS

The Fund will not invest more than 5% of its total assets in warrants. No more
than 2% of the Fund's net assets, to be included within the overall 5% limit on
investments in warrants, may be warrants which are not listed on the New York or
American Stock Exchange.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of its net assets in illiquid securities,
including certain restricted securities (except for Section 4(2) commercial
paper and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees), non-negotiable time deposits, and
repurchase agreements providing for settlement in more than seven days after
notice.

The Fund has no present intention to borrow money, invest in reverse repurchase
agreements, pledge securities, or sell securities short in excess of 5% of the
value of its total assets during the current fiscal year.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for all other securities, at fair value as determined in good faith by the
Board.

The Fund values futures contracts and options at their market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are valued according to
the mean between the last bid and the last asked price for the option as
provided by an investment dealer or other financial institution that deals in
the option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value.

TRADING IN FOREIGN SECURITIES

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

HOW IS THE FUND SOLD?

RULE 12B-1 PLAN

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of bank, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Aetna Retirement
Services, Hartford, Connecticut, owned approximately 2,020,180 shares (49.82%)
and Aetna Retirement Services, Hartford Connecticut, owned approximately
1,986,350 shares (48.99%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of 8
funds and the Federated Fund Complex is comprised of nine investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

<PAGE>

NAME TOTAL
BIRTHDATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM TRUST AND
POSITION WITH TRUST FOR PAST 5 YEARS FROM FUND COMPLEX
TRUST**
<S> <C> <C> <C>
JOHN F. DONAHUE*+ Chief Executive Officer and Director or $0 $0 for the
Birthdate: July 28, 1924 Trustee of the Federated Fund Complex; Trust and
Federated Investors Chairman and Director, Federated Investors, 54 other
Tower Inc.; Chairman and Trustee, Federated investment
1001 Liberty Avenue Advisers, Federated Management, and companies in
Pittsburgh, PA Federated Research; Chairman and Director, the Fund
Chairman and Trustee Federated Research Corp., and Federated Complex
Global Research Corp.; Chairman, Passport
Research, Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
Birthdate: February 3, Complex; Director, Member of Executive the
1934 Committee, Children's Hospital of Trust and 54
15 Old Timber Trail Pittsburgh; formerly: Senior Partner, Ernst other
Pittsburgh, PA & Young LLP; Director, MED 3000 Group, investment
TRUSTEE Inc.; Director, Member of Executive companies
Committee, University of Pittsburgh. in the Fund
Complex

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1,750.56 $125,264.48for
Birthdate: June 23, 1937 Complex; President, Investment Properties the
Wood/IPC Commercial Corporation; Senior Vice President, Trust and 54
Dept. John R. Wood and Associates, Inc., other
John R. Wood Realtors; Partner or Trustee in private investment
Associates, Inc. real estate ventures in Southwest Florida; companies
Realtors formerly: President, Naples Property in the Fund
3255 Tamiami Trial Management, Inc. and Northgate Village Complex
North Naples, FL Development Corporation.

TRUSTEE

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $1,591.19 $47,958.02for
Birthdate: September 3, Complex; formerly: Partner, Andersen the
1939 Worldwide SC. Trust and 29
175 Woodshire Drive other
Pittsburgh, PA investment
TRUSTEE companies
in the Fund
Complex

<PAGE>

WILLIAM J. COPELAND Director or Trustee of the Federated Fund $1,750.56 $125,264.48 for
Birthdate: July 4, 1918 Complex; Director and Member of the the
One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; Trust and 54
Pittsburgh, PA formerly: Vice Chairman and Director, PNC other
TRUSTEE Bank, N.A., and PNC Bank Corp.; Director, investment
Ryan Homes, Inc. companies
in the Fund

Previous Positions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

JAMES E. DOWD, ESQ. Director or Trustee of the Federated Fund $1,750.56 $125,264.48for
Birthdate: May 18, 1922 Complex; Attorney-at-law; Director, The the
571 Hayward Mill Road Emerging Germany Fund, Inc. Trust and 54
Concord, MA other
TRUSTEE Previous Positions: President, Boston Stock investment

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
Birthdate: October 11, Complex; Professor of Medicine, University the
1932 of Pittsburgh; Medical Director, University Trust and 54
3471 Fifth Avenue of Pittsburgh Medical Center - Downtown; other
Suite 1111 Hematologist, Oncologist, and Internist, investment
Pittsburgh, PA University of Pittsburgh Medical Center; companies
TRUSTEE Member, National Board of Trustees, in the Fund
Leukemia Society of America. Complex

EDWARD L. FLAHERTY, Director or Trustee of the Federated Fund $1,750.56 $125,264.48 for
JR., ESQ. # Complex; Attorney, of Counsel, Miller, the
Birthdate: June 18, 1924 Ament, Henny & Kochuba; Director Emeritus, Trust and 54
Miller, Ament, Henny & Eat'N Park Restaurants, Inc.; formerly: other
Kochuba Counsel, Horizon Financial, F.A., Western investment
205 Ross Street Region; Partner, Meyer and Flaherty. companies
Pittsburgh, PA in the Fund
TRUSTEE Complex
PETER E. MADDEN Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
Birthdate: March 16, Complex; formerly: Representative, the
1942 Commonwealth of Massachusetts General Trust and 54
One Royal Palm Way Court; President, State Street Bank and other
100 Royal Palm Way Trust Company and State Street Corporation. investment
Palm Beach, FL companies
TRUSTEE Previous Positions: Director, VISA USA and in the Fund
VISA International; Chairman and Director, Complex
Massachusetts Bankers Association;

Director, Depository Trust Corporation.

JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
J.D., S.J.D. Complex; President, Law Professor, Duquesne the
Birthdate: December 20, University; Consulting Partner, Mollica & Trust and 54
1932 Murray. other
President, Duquesne investment
University Previous Positions: Dean and Professor of companies
Pittsburgh, PA Law, University of Pittsburgh School of in the Fund
TRUSTEE Law; Dean and Professor of Law, Villanova Complex
University School of Law.

WESLEY W. POSVAR Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
Birthdate: September Complex; President, World Society of the
14, 1925 Ekistics (metropolitan planning), Athens; Trust and 54
1202 Cathedral of Professor, International Politics; other
Learning Management Consultant; Trustee, Carnegie investment
University of Pittsburgh Endowment for International Peace, RAND companies
Pittsbugh, PA Corporation, Online Computer Library in the Fund
TRUSTEE Center, Inc., National Defense University Complex
and U.S. Space Foundation; President
Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory
Council for Environmental Policy and
Technology, Federal Emergency Management
Advisory Board; Trustee, Czech Management

Center, Prague.

Previous Positions: Professor, United
States Military Academy; Professor, United
States Air Force Academy.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
Birthdate: June 21, 1935 Complex; Public the
4905 Bayard Street Relations/Marketing/Conference Planning. Trust and 54
Pittsburgh, PA other
TRUSTEE Previous Positions: National Spokesperson, investment
Aluminum Company of America; business owner. companies
in the Fund
Complex

JOHN S. WALSH++ Director or Trustee of some of the $0 $0 for the
Birthdate: November 28, Federated Funds; President and Director, Trust and 23
1957 Heat Wagon, Inc.; President and Director, other
2007 Sherwood Drive Manufacturers Products, Inc.; President, investment
Valparaiso, IN Portable Heater Parts, a division of companies in
TRUSTEE Manufacturers Products, Inc.; Director, the Fund Complex
Walsh & Kelly, Inc.; formerly: Vice
President, Walsh & Kelly, Inc.

J. CHRISTOPHER DONAHUE+* President or Executive Vice President of $0 $0 for the
Birthdate: April 11, the Federated Fund Complex; Director or Trust and 16
1949 Trustee of some of the Funds in the other
Federated Investors Federated Fund Complex; President and investment
Tower Director, Federated Investors, Inc.; companies in
1001 Liberty Avenue President and Trustee, Federated Advisers, the Fund Complex
Pittsburgh, PA Federated Management, and Federated
PRESIDENT and TRUSTEE Research; President and Director, Federated
Research Corp. and Federated Global
Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director,
Federated Services Company.

<PAGE>

EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birthdate: October 22, the Federated Fund Complex; President, Trust and 1
1930 Executive Vice President and Treasurer of other
Federated Investors some of the Funds in the Federated Fund investment
Tower Complex; Vice Chairman, Federated company in the
1001 Liberty Avenue Investors, Inc.; Vice President, Federated Fund Complex
Pittsburgh, PA Advisers, Federated Management, Federated
EXECUTIVE VICE PRESIDENT Research, Federated Research Corp.,
Federated Global Research Corp. and
Passport Research, Ltd.; Executive Vice
President and Director, Federated
Securities Corp.; Trustee, Federated
Shareholder Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of $0 $0 for the
Birthdate: October 26, the Federated Fund Complex; Executive Vice Trust and 54
1938 President, Secretary, and Director, other
Federated Investors Federated Investors, Inc.; Trustee, investment
Tower Federated Advisers, Federated Management, companies in
1001 Liberty Avenue and Federated Research; Director, Federated the Fund Complex
Pittsburgh, PA Research Corp. and Federated Global
EXECUTIVE VICE Research Corp.; Director, Federated
PRESIDENT and SECRETARY Services Company; Director, Federated
Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; $0 $0 for the
Birthdate: June 17, Vice President - Funds Financial Services Trust and 54
1954 Division, Federated Investors, Inc.; other
Federated Investors Formerly: various management positions investment
Tower within Funds Financial Services Division of companies in
1001 Liberty Avenue Federated Investors, Inc. the Fund Complex
Pittsburgh, PA

TREASURER

RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birthdate: May 17, 1923 Funds in the Federated Fund Complex; Trust and 6
Federated Investors Director or Trustee of some of the Funds in other
Tower the Federated Fund Complex; Executive Vice investment
1001 Liberty Avenue President, Federated Investors, Inc.; companies in
Pittsburgh, PA Chairman and Director, Federated Securities the Fund Complex
VICE PRESIDENT Corp.

HENRY A. FRANTZEN Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: November 28, various other Funds in the Federated Fund Trust and 3
1942 Complex; Executive Vice President, other
Federated Investors Federated Investment Counseling, Federated investment
Tower Global Research Corp., Federated Advisers, companies in
1001 Liberty Avenue Federated Management, Federated Research, the Fund Complex
Pittsburgh, PA and Passport Research, Ltd.; Registered
CHIEF INVESTMENT OFFICER Representative, Federated Securities Corp.;
Vice President, Federated Investors, Inc.;
Formerly: Executive Vice President,
Federated Investment Counseling
Institutional Portfolio Management Services
Division; Chief Investment Officer/Manager,
International Equities, Brown Brothers
Harriman & Co.; Managing Director, BBH
Investment Management Limited.
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: March 3, 1949 various other Funds in the Federated Fund Trust and 41
Federated Investors Complex; Executive Vice President, other
Tower Federated Investment Counseling, Federated investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, companies in
Pittsburgh, PA Federated Management, Federated Research, the Fund Complex
CHIEF INVESTMENT OFFICER and Passport Research, Ltd.; Registered
Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated
Investors, Inc.; Formerly: Executive Vice
President and Senior Vice President,
Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated
Research Corp., Federated Advisers,
Federated Management, Federated Research,
and Passport Research, Ltd.
J. THOMAS MADDEN Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: October 22, various other Funds in the Federated Fund Trust and 12
1945 Complex; Executive Vice President, other
Federated Investors Federated Investment Counseling, Federated investment
Tower Global Research Corp., Federated Advisers, companies in
1001 Liberty Avenue Federated Management, Federated Research, the Fund Complex
Pittsburgh, PA and Passport Research, Ltd.; Vice
CHIEF INVESTMENT OFFICER President, Federated Investors, Inc.;
Formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior Vice
President, Federated Research Corp.,
Federated Advisers, Federated Management,
Federated Research, and Passport Research,
Ltd.

</TABLE>

** The aggregate compensation is provided for the Trust which is comprised of
nine portfolios.

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 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 Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31, 1998 1997* 1996
1998
Advisory Fee Earned $ $96,582 NA
Advisory Fee Reduction $ $43,970 NA
Brokerage Commissions $ $33,449 NA
Administrative Fee $ $113,358 NA
12b-1 Fee 0 NA
Shareholder Services Fee NA NA
* For the period from January 30, 1997 (inception date) to December 31, 1997.

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield is given for the 30-day period ended December 31, 1998.

30 -DAY PERIOD 1 YEAR 5 YEARS 10 YEARS SINCE
INCEPTION

ON JANUARY 30, 1997

Total Return NA NA
Yield NA NA

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

i 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 net asset value over a
specific period of time. From time to time, the Fund will quote its
Lipper ranking in the convertible securities and fixed income funds
categories in advertising and sales literature.

i DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of
selected blue-chip industrial corporations as well as public utility and
transportation companies. The DJIA indicates daily changes in the
average price of stocks in any of its categories. It also reports total
sales for each group of industries. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator
for the stock market as a whole.

i STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500 COMMON
STOCKS is a composite index of common stocks in industry,
transportation, and financial and public utility companies which
compares total returns of funds whose portfolios are invested primarily
in common stocks. In addition, the Standard & Poor's index assumes
reinvestment of all dividends paid by stocks listed on the index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated, in the Standard & Poor's figures.

i MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

The Financial Statements to be filed by Amendment.

<PAGE>

INVESTMENT RATINGS

APPENDIX

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

o Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

o Well established access to a range of financial markets and assured sources of
alternate liquidity.

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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 IBCA, 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 assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

FEDERATED EQUITY INCOME FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

[A Portfolio of Federated Insurance Series]

A mutual fund seeking to provide current income by investing in U.S. government
securities.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

april 20, 1999

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RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The investment objective of the Fund is current income. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its objective by investing primarily in fixed income securities
issued or guaranteed by the U.S. government, or it agencies or
instrumentalities, including mortgage backed securities. The Fund may invest up
to 35% of its assets in privately issued mortgage backed securities. The Fund
limits its investments to those that would enable it to qualify as a permissible
investment for variable annuity contracts and variable life insurance policies
issued by insurance companies.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

o changes in prevailing interest rates and
o increased prepayments of mortgages.

An investment in the Fund also involves credit risk.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Fund for U.S. Government Securities II as of
the calendar year-end for each of four years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 9%.

For the calendar years 1995 through 1998, the percentages noted are: 8.77%,
4.20%, 8.58%, and 7.66%, respectively. The bar chart shows the variability of
the Fund's Shares total returns on a calendar year-end basis. The Fund's Shares
are not sold subject to a sales charge (load). Hence, the total returns
displayed above are based upon the net asset value.

Within the period shown in the Chart, the Fund's highest quarterly return was
3.73% (quarter ended September 30, 1998). Its lowest quarterly return was
(0.72)% (quarter ended March 31, 1996).

The following table represents the Fund's Average Annual Total Return
through December 31, 1998.

START OF PERFORMACE1 1 YEAR 5 YEARS 10 YEARS

Fund 6.66% 7.66% N/A N/A
LB5TB 7.40% 9.60% N/A N/A
LUSMFA 6.62% 6.13% N/A N/A
1 The Fund's start of performance was March 28, 1994.
The table shows the Fund's average annual total returns compared to the Lehman
Brother 5-Year Treasury Bellwether Index (LB5TB) and the Lipper U.S. Mortgage
Funds Average (LUSMFA) for the calendar period ending December 31, 1998. These
indices are broad-based market indices. While past performance does not
necessarily predict future performance, this information provides you with
historical performance so that you can analyze whether the Fund's investment
risks are balanced by its potential rewards.

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WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund pursues its objective by investing at least 65% of the value of its
total assets in securities issued or guaranteed as to payment of principal and
interest by the U.S. government, its agencies, or instrumentalities. The Fund
may invest up to 35% of its assets in privately issued mortgage backed
securities. The Fund limits its investments to those that would enable it to
qualify as a permissible investment for variable annuity contracts and variable
life insurance policies issued by insurance companies.

The adviser manages the portfolio by targeting a dollar weighted average
duration. Duration measures the price sensitivity of a portfolio of fixed income
securities to changes in interest rates. Under ordinary market conditions, the
Fund's duration, as determined by the adviser, will track generally a blend of
the Lehman Brothers Mortgage Index and the Lehman Brothers Government Index. The
adviser adjusts the Fund's duration based upon its interest rate outlook. The
adviser formulates its interest rate outlook by analyzing a variety of factors,
such as:

o current U.S. economic activity and the economic outlook,

o current short-term interest rates,

o the Federal Reserve Board's policies regarding short-term interest
rates, and

o potential effects of foreign economic activity on short-term interest
rates.

The adviser generally shortens the portfolio's average duration when it expects
interest rates to rise and extends the duration when it expects interest rates
to fall.

The adviser selects government securities used to lengthen or shorten the
portfolio's average duration by comparing the returns currently offered by
different investments to their historical and expected returns. In selecting
mortgage backed securities the analysis also focuses on the expected cash flows
from the pool of mortgages supporting the security. The Adviser attempts to
assess the relative returns and risks of these securities by analyzing how the
timing, amount and division of cash flows from the pool might change in response
to changing economic and market conditions.

In addition to buying mortgage backed securities outright, the Fund may acquire
securities on a "to be announced" basis in order to enhance yield. The Fund
engages in dollar roll transactions to increase income. The Fund uses repurchase
agreements or other short-term instruments to secure its obligations in these
transactions.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regulations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests of the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the fund
will not be treated as annuity, endowment, or life insurance contracts.

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WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs (e.g., Government National Mortgage
Association) with its full, faith and credit. Other GSEs receive support
through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support
because the federal government sponsors their activities. Agency securities
are generally regarded as having low credit risk, but not as low as treasury
securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risk, it does
not reduce the market and prepayment risks of these mortgage backed
securities.

MORTGAGE BACKED SECURITIES

Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the
underlying mortgages. As a result, the holders assume all the prepayment
risks of the underlying mortgages.

PRIVATE MORTGAGE BACKED SECURITIES

The Fund may invest in mortgage securities issued by entities that are
not U.S. government agencies ("private mortgage backed securities"). The
entities include originators and investors in mortgage loans, including
savings associations, mortgage bankers, commercial banks, investment
bankers and special purpose entities (collectively, "private lenders').
Mortgage securities issued by private lenders may be supported by pools
of mortgage loans or other mortgage backed securities that are
guaranteed, directly or indirectly, by the U.S. government or one of its
agencies or instrumentalities, or they may be issued without any
governmental guarantee of the underlying mortgage assets but with some
form of non-governmental credit enhancement. For example, the timely
payment of interest and principal on such pools may be supported by
various forms of insurance guarantees, including individual loan, title,
pool and hazard insurance and letters of credit. The pools of mortgages
that underlie the mortgage securities that the Fund's investment adviser
has proposed to purchase for the Fund's portfolio offer a higher rate of
interest than governmental and government-related pools because there
are no direct or indirect government or agency guarantees of payment.

Like other debt securities (including mortgage securities in which the
Fund may presently invest and that are issued by U.S. government
agencies), mortgage securities issued by private lenders generally will
fluctuate in response to market interest rates. The market for mortgage
securities issued by private lenders, while becoming increasingly
liquid, is generally considered to be less liquid than the market for
mortgage securities issued by U.S. government agencies.

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying pass-through
certificate among holders of different classes of mortgage backed
securities. This creates different prepayment and market risks for each CMO
class.

SEQUENTIAL CMOS

In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all principal
payments after the first class is paid off. This process repeats for
each sequential class of CMO. As a result, each class of sequential pay
CMOs reduces the prepayment risks of subsequent classes.

PACS, TACS AND COMPANION CLASSES

More sophisticated CMOs include planned amortization classes (PACs) and
targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and
prepayments at a specified rate. The companion classes receive principal
payments and prepayments in excess of the specified rate. In addition,
PACs will receive the companion classes' share of principal payments, if
necessary, to cover a shortfall in the prepayment rate. This helps PACs
and TACs to control prepayment risks by increasing the risks to their
companion classes.

PRIVATE ISSUE CMO'S

The Fund may also invest in CMOs which are rated AAA by a nationally
recognized statistical rating agency and which are issued by private
entities such as investment banking firms and companies related to the
construction industry. The CMOs in which the Fund may invest may be: (i)
privately issued 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) privately issued securities which are collateralized by
pools of mortgages in which payment of principal and interest are
guaranteed by the issuer and such guarantee is collateralized by U.S.
government securities; and (iii) other privately issued securities in
which the proceeds of the issuance are invested in mortgaged-backed
securities and payment of the principal and interest are supported by
the credit of an agency or instrumentality of the U.S. government.

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the
period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value in
determining the price of its shares. Settlement dates may be a month or more
after entering into these transactions so that the market values of the
securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create market risks for the Fund.

TO BE ANNOUNCED SECURITIES (TBAS)

As with other delayed delivery transactions, a seller agrees to issue a
TBA security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Fund and the seller would agree upon
the issuer, interest rate and terms of the underlying mortgages. The
seller would not identify the specific underlying mortgages until it
issues the security. TBA mortgage backed securities increase market
risks because the underlying mortgages may be less favorable than
anticipated by the Fund.

DOLLAR ROLLS

Dollar rolls are transactions where the Fund sells mortgage-backed
securities with a commitment to buy similar, but not identical,
mortgage-backed securities on a future date at a lower price. Normally,
one or both securities involved are TBA mortgage backed securities.
Dollar rolls are subject to market and credit risks.

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated to
the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from
the borrower as collateral. The borrower must furnish additional collateral
if the market value of the loaned securities increases. Also, the borrower
must pay the Fund the equivalent of any dividends or interest received on
the loaned securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on
loan, but it will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.

Securities lending activities are subject to market and credit risks.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISK

o Credit risk is the possibility that an issuer will default (fails to repay
interest and principal when due). If an issuer defaults, the Fund may lose
money. Money market funds try to minimize this risk by purchasing higher
quality securities.

o Many fixed income securities receive credit ratings from companies such as
Standard & Poor's and Moody's Investor Services. Fixed income securities
receive different credit ratings depending on the rating company's
assessment of the likelihood of default by the issuer. The lower the credit
rating, the greater the credit risk.

MARKET RISKS

o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

O Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.

PREPAYMENT RISKS

o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
Other factors can also lead to increases or decreases in prepayments.
Increases in prepayments of high interest rate mortgage backed securities,
or decreases in prepayments of lower interest rate mortgage backed
securities, may reduce their yield and price. These factors, particularly
the relationship between interest rates and mortgage prepayments, make the
price of mortgage backed securities more volatile than most other types of
fixed income securities with comparable credit risks.

o Mortgage backed securities generally compensate for greater prepayment risk
by paying a higher yield. The difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security is
perceived to have increased prepayment risk or less market demand. An
increase in the spread may cause the price of the security to decline.

o The Fund may have to reinvest the proceeds in other securities with lower
interest rates, higher prepayment risks, or other less favorable
characteristics.

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

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ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

Kathleen M. Foody-Malus has been the Fund's portfolio manager since the
Fund's inception. Ms. Foody-Malus joined Federated Investors in 1983 and has
been a Senior Portfolio Manager since 1996 and a Vice President of the Fund's
investment adviser since 1993. She was a Portfolio Manager and a Vice President
of the Fund's investment adviser from 1993 to 1996. Ms. Foody-Malus received her
M.B.A. in Accounting/Finance from the University of Pittsburgh.

Todd A. Abraham has been the Fund's portfolio manager since April 1997. Mr.
Abraham has been a Vice President of the Fund's investment adviser since July
1997. Mr. Abraham joined Federated Investors in 1993 as an Investment Analyst
and served as Assistant Vice President from 1995 to 1997. Mr. Abraham served as
a Portfolio Analyst at Ryland Mortgage Co. from 1992 to 1993. Mr. Abraham is a
Chartered Financial Analyst and received his M.B.A. in finance from Loyola
College.

ADVISORY FEES

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YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

A Portfolio of (Federated Insurance Series)

INVESTMENT COMPANY ACT FILE NO. 811-8042

CUSIP 313916207

3113007A (4/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Fund for U.S. Government
Securities II (Fund), dated April 20, 1999. This SAI incorporates by reference
the Fund's Annual Report. Obtain the prospectus or the Annual Report without
charge by calling 1-800-341-7400.

april 20, 1999

CUSIP313916207

3113007B (4/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from U.S. Government Bond Fund to Federated Fund for U.S. Government
Securities II on February 26, 1996.

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risk.

MORTGAGE BACKED SECURITIES

<PAGE>

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated to
the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risk. The Fund limits repurchase
agreements to dealers and banks to those rated in the highest rating
category by Standard and Poors, Inc.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risk. In addition, reverse
repurchase agreements create leverage risks because the Fund must repurchase
the underlying security at a higher price, regardless of the market value of
the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment
and delivery of the securities scheduled for a future time. During the
period between purchase and settlement, no payment is made by the Fund to
the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value in
determining the price of its shares. Settlement dates may be a month or more
after entering into these transactions so that the market values of the
securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create market risks for the Fund. Delayed delivery
transactions also involve credit risks in the event of a counterparty
default.

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts
or special transactions, the Fund will either own the underlying assets,
enter into an offsetting transaction or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations.
Unless the Fund has other readily marketable assets to set aside, it cannot
trade assets used to secure such obligations entering into an offsetting
derivative contract or terminating a special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on
derivative contracts or special transactions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The
Fund's principal risks are described in its prospectus. Additional risk factors
are outlined below.

MARKET RISKS

o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

PREPAYMENT RISKS

o The Fund may have to reinvest the proceeds in other securities with lower
interest rates, higher prepayment risks, or other less favorable
characteristics.

CREDIT RISKS

o Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to
lose the benefit of the transaction or prevent the Fund from selling or
buying other securities to implement its investment strategy.

o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

LEVERAGE RISKS

STATE INSURANCE REGULATIONS

The Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies offered by certain insurance companies. The
contracts will seek to be offered in as many jurisdictions as possible. Certain
states have regulations concerning, among other things, the concentration of
investments, sales and purchases of futures contracts, and short sales of
securities. if applicable, the Fund may be limited in its ability to engage in
such investments and to manages its portfolio with desired flexibility. The Fund
will operate in material compliance with the applicable insurance laws and
regulations of each jurisdiction in which contracts will be offered by the
insurance companies which invest in the Fund.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

DIVERSIFICATION OF INVESTMENTS

INVESTING IN REAL ESTATE

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

UNDERWRITING

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 corporate or U.S. government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer, entering
into repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objective and policies or the Trust's
Declaration of Trust.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for all other securities, at fair value as determined in good faith by the
Board.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

HOW IS THE FUND SOLD?

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Aetna Retirement
Services, Hartford, Connecticut, owned approximately 599,411 shares (5.82%);
Lincoln Benefit Life Co., Lincoln, Nebraska, owned approximately 681,552 shares
(6.62%); Provident Mutual Life & Annuity Company of America, Valley Forge,
Pennsylvania, owned approximately 832,652 shares (8.08%); Aetna Retirement
Services, Hartford, Connecticut, owned approximately 424,907 shares (13.83%);
Great-West Life & Annuity Insurance Company, Englewood, Colorado, owned
approximately 2,344,463 shares (22.76%); and United of Omaha Life Insurance
Company, Omaha, Nebraska, owned approximately 2,711,223 shares (26.32%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of 8
funds and the Federated Fund Complex is comprised of nine investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

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TRUSTEE

<PAGE>

Previous Positions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

Director, Depository Trust Corporation.

Center, Prague.

Previous Positions: Professor, United
States Military Academy; Professor, United
States Air Force Academy.

<PAGE>

TREASURER

</TABLE>

** The aggregate compensation is provided for the Trust which is comprised of
nine portfolios.

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

<PAGE>

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 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 Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996
1998
Advisory Fee Earned $ $278,790 $141,092
Advisory Fee Reduction $ $211,328 $141,092
Brokerage Commissions $ $0 $0
Administrative Fee $ $125,000 $125,000
Shareholder Services Fee $ N/A N/A

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield is given for the 30-day period ended December 31, 1998.

30-DAY PERIOD 1 YEAR 5 YEARS 10 YEARS SINCE
INCEPTION ON
MARCH 24, 1994

Total Return NA NA
Yield NA NA

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

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 income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the growth and income funds category in advertising and sales
literature.

o LEHMAN BROTHERS MORTGAGE INDEX covers the mortgage-backed pass-through
securities of the Government National Mortgage Association, the Federal
National Mortgage Association, and the Federal Home Loan Mortgage
Corporation.

o LEHMAN BROTHERS GOVERNMENT INDEX includes the Treasury and Agency
Indices. The Treasury component includes public obligations of the U.S.
Treasury that have remaining maturities of more than one year. The
Agency component includes both callable and noncallable agency
securities, quasi-federal corporations, and corporate or foreign debt
guaranteed by the U.S. government.

o LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and
30-year fixed-rate securities backed by mortgage pools of the Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage
Corporation (FHLMC), and Federal National Mortgage Corporation (FNMA).
Graduated payment mortgages (GPMs) and balloons are included in the
index.

o MORNINGSTAR, INC., an independent rating service, is the publisher of
the bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than
1,000 NASDAQ-listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

The Financial Statements to be filed by Amendment.

<PAGE>

ADDRESSES

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED INTERNATIONAL EQUITY FUND II

[A Portfolio of Federated Insurance Series]

A mutual fund seeking to obtain a total return on its assets by investing in
equity securities of foreign issuers located.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

april 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to obtain a total return on its assets. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment strategies and policies described
in this prospectus.

The Fund's total return will consist of two components: (1) changes in the
market value of its portfolio securities (both realized and unrealized
appreciation), and (2) income received from its portfolio securities. The Fund
expects that changes in market value will comprise the largest component of its
total return.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies based outside the U.S. The investment
adviser (Adviser) manages the Fund based on the view that international equity
markets are inefficient at pricing securities and that careful security
selection offers the best potential for superior long-term investment returns.
Selection of industry and country are secondary considerations.

Using its own quantitative process, the Adviser ranks the future performance
potential of companies by evaluating each company's earnings potential and
management quality as well as reviewing the company's financial statements and
earnings forecasts. The Adviser then evaluates the sustainability of the
company's current growth trends and potential catalysts for increased growth.
Considering this fundamental analysis, the Adviser selects the most promising
companies for the Fund's portfolio.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in the Fund. The primary factors that may reduce the Fund's
returns include:

o fluctuations in the value of equity securities in foreign securities
markets, and

o fluctuations in the exchange rate between the U.S. dollar and foreign
currencies.

An investment in the Fund involves additional risks such as risks of foreign
investing, sector and regional risks and Euro risks.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated International Equity Fund II as of the
calendar year-end for each of three years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 30%.

For the calendar years 1996 through 1998, the percentages noted are: 8.32%,
10.08%, and 25.57%, respectively. The bar chart shows the variability of the
Fund's Shares total returns on a calendar year-end basis. The Fund's Shares are
not sold subject to a sales charge (load). Hence, the total returns displayed
above are based upon the net asset value.

Within the period shown in the Chart, the Fund's highest quarterly return was
23.70% (quarter ended March 31, 1998). Its lowest quarterly return was (15.87)%
(quarter ended September 30, 1998).

The following table represents the Fund's Average Annual Total Return
through December 31, 1998.

START OF PERFORMACE1 1 YEAR 5 YEARS 10 YEARS

Fund 12.75% 25.57% N/A N/A
MSCI-EAFE N/A 20.00% N/A N/A
1 The Fund's start of performance was May 8, 1995.

The table shows the Fund's total returns average annual total returns compared
to the Morgan Stanley Capital International Europe, Australia, and Far East
Index (MSCI-EAFE) for the calendar year ending December 31, 1998. This is a
broad-based market index. While past performance does not necessarily predict
future performance, this information provides you with historical performance so
that you can analyze whether the Fund's investment risks are balanced by its
potential rewards.

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies based outside the U.S. The Adviser
manages the Fund based on the view that international equity markets are
inefficient at pricing securities and that careful security selection offers the
best potential for superior long-term investment returns. Selection of industry
and country are secondary considerations.

Using its own quantitative process, the Adviser ranks the future performance
potential of companies. The Adviser evaluates each company's earnings potential
in light of its current valuation to narrow the list of attractive companies.
The Adviser then evaluates management quality and may meet with company
representatives, company suppliers, customers, or competitors The Adviser also
reviews the company's financial statements and forecasts of earnings. Based on
this information, the Adviser evaluates the sustainability of the company's
current growth trends and potential catalysts for increased growth. Using this
type of fundamental analysis, the Adviser selects the most promising companies
for the Fund's portfolio.

With respect to the Fund's investments in developed markets, companies may be
grouped together in broad categories called business sectors. The Adviser may
emphasize certain business sectors in the portfolio that exhibit stronger growth
potential or higher profit margins.

The Fund will not invest more than 20% of its assets in companies located in
emerging markets. In selecting emerging markets countries in which to invest,
the Adviser reviews the country's economic outlook, its interest and inflation
rates, and the political and foreign exchange risk of investing in a particular
country. The Adviser then analyzes companies located in particular emerging
market countries.

PORTFOLIO TURNOVER

The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact the Fund's performance.

TEMPORARY INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

FOREIGN SECURITIES

Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

EQUITY SECURITIES

COMMON STOCKS

PREFERRED STOCKS

Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determinate whether a security is investment grade based upon
the credit ratings given by one or more nationally recognized rating services.
For example, Standard and Poor's, a rating service, assigns ratings to
investment grade securities (AAA, AA, A, and BBB) based on their assessment of
the likelihood of the issuer's inability to pay interest or principal (default)
when due on each security. Lower credit ratings correspond to higher CREDIT
RISK. If a security has not received a rating, the Fund must rely entirely upon
the Adviser's credit assessment that the security is comparable to investment
grade.

<PAGE>

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

The specific risks associated with foreign securities are as follows:

CURRENCY RISKS

o Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risks tends to make securities traded in foreign markets
more volatile than securities traded exclusively in the U.S.

o The Adviser attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.

RISKS OF FOREIGN INVESTING

o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable that those of the United States.
Foreign financial markets may also have fewer investor protections.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.

o Foreign countries may have restrictions on foreign ownership of securities
or may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than United
States companies by market analysts and the financial press. In addition,
foreign countries may lack financial controls and reporting standards, or
regulatory requirements comparable to those applicable to U.S. companies.
These factors may prevent the Fund and its Adviser from obtaining
information concerning foreign companies that is as frequent, extensive and
reliable as the information available concerning companies in the United
States.

EURO RISKS

The Fund makes significant investments in securities denominated in the Euro,
the new single currency of the European Monetary Union (EMU). Therefore, the
exchange rate between the Euro and the U.S. dollar will have a significant
impact on the value of the Fund's investments.

LIQUIDITY RISKS

Trading opportunities are more limited for equity securities issued by companies
located in emerging markets. This may make it more difficult to sell or buy a
security at a favorable price or time. Consequently, the Fund may have to accept
a lower price to sell a security, sell other securities to raise cash or give up
an investment opportunity, any of which could have a negative effect on the
Fund's performance. Infrequent trading may also lead to greater price
volatility.

The specific risks associated with equity securities are as follows:

STOCK MARKET RISKS

o The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The
Fund's portfolio will reflect changes in prices of individual portfolio
stocks or general changes in stock valuations. Consequently, the Fund's
share price may decline and you could lose money.

o The Adviser attempts to manage market risk by limiting the amount the Fund
invests in each company. However, diversification will not protect the Fund
against widespread or prolonged declines in the stock market.

SECTOR AND REGIONAL RISKS

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

The Distributor and its affiliates may pay out of their assets other
amounts (including items of material vallue) to investment professionals for
marketing and servicing Shares. The Distributor is a subsidiary of Federated
Investors, Inc. (Federated).

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares and pays any dividends annually.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

Drew J. Collins has been the Fund's portfolio manager since November 1995.
Mr. Collins joined Federated Investors in 1995 as a Senior Portfolio Manager and
a Senior Vice President of the Fund's investment adviser. Mr. Collins served as
Vice President/Portfolio Manager of international equity portfolios at Arnhold
and Bleichroeder, Inc. from 1994 to 1995. He served as an Assistant Vice
President/Portfolio Manager for international equities at the College Retirement
Equities Fund from 1986 to 1994. Mr. Collins is a Chartered Financial Analyst
and received his M.B.A. in finance from the Wharton School of The University of
Pennsylvania.

Henry A. Frantzen has been the Fund's portfolio manager since November
1995. Mr. Frantzen joined Federated Investors in 1995 as an Executive Vice
President of the Fund's investment adviser. Mr. Frantzen served as Chief
Investment Officer of international equities at Brown Brothers Harriman & Co.
from 1992 until 1995.

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

FEDERATED INTERNATIONAL EQUITY FUND II

A Portfolio of (Federated Insurance Series)

INVESTMENT COMPANY ACT FILE NO. 811-8042

CUSIP 313916603

G01078-01 (4/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED INTERNATIONAL EQUITY FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated International Equity Fund
II (Fund), dated April 20, 1999. This SAI incorporates by reference the Fund's
Annual Report. Obtain the prospectus or the Annual Report without charge by
calling 1-800-341-7400.

april 20, 1999

CUSIP313916603

G01078-02 (4/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from International Stock Fund to Federated International Equity Fund II on
February 26, 1996.

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FOREIGN SECURITIES

Foreign securities are securities of issuers based outside the United States.
The Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

DEPOSITARY RECEIPTS

Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are not traded in the United States. ADRs provide
a way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally or
outside the United States. Depositary Receipts involve many of the same
risks of investing directly in foreign securities, including currency risks
and risks of foreign investing.

FOREIGN EXCHANGE CONTRACTS

In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a foreign
security into U.S. dollars, the Fund may enter into spot currency trades. In
a spot trade, the Fund agrees to exchange one currency for another at the
current exchange rate. The Fund may also enter into derivative contracts in
which a foreign currency is an underlying asset. The exchange rate for
currency derivative contracts may be higher or lower than the spot exchange
rate. Use of these derivative contracts may increase or decrease the Fund's
exposure to currency risks.

FOREIGN GOVERNMENT SECURITIES

Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European Investment Bank and the Inter-American
Development Bank.

Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit.
Further, foreign government securities include mortgage-related securities
issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.

EQUITY SECURITIES

Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Fund cannot predict the income it will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes additional types of equity securities in which the Fund
invests.

COMMON STOCKS

PREFERRED STOCKS

Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock.

INTERESTS IN OTHER LIMITED LIABILITY COMPANIES

Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue
securities comparable to common or preferred stock.

REAL ESTATE INVESTMENT TRUSTS (REITS)

WARRANTS

Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the
expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

<PAGE>

TREASURY SECURITIES

Treasury securities are direct obligations of the government of a foreign
country.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a foreign governmental agency
or other government sponsored entity acting under foreign governmental
authority (a GSE). Foreign governments support some GSEs with its full,
faith and credit. Other GSEs receive support through governmental subsidies,
loans or other benefits. A few GSEs have no explicit financial support, but
are regarded as having implied support because the federal government
sponsors their activities. Investors regard agency securities as having low
credit risks, but not as low as treasury securities.

CORPORATE DEBT SECURITIES

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types
of corporate debt securities. The Fund may also purchase interests in bank
loans to companies. The credit risks of corporate debt securities vary
widely among issuers. The credit risk of an issuer's debt security may also
vary based on its priority for repayment. For example, higher ranking
(senior) debt securities have a higher priority than lower ranking
(subordinated) securities. This means that the issuer might not make
payments on subordinated securities while continuing to make payments on
senior securities. In addition, in the event of bankruptcy, holders of
senior securities may receive amounts otherwise payable to the holders of
subordinated securities. Some subordinated securities, such as trust
preferred and capital securities notes, also permit the issuer to defer
payments under certain circumstances. For example, insurance companies issue
securities known as surplus notes that permit the insurance company to defer
any payment that would reduce its capital below regulatory requirements.

CONVERTIBLE SECURITIES

Convertible securities are fixed income securities that the Fund has the
option to exchange for equity securities at a specified conversion price.
The option allows the Fund to realize additional returns if the market price
of the equity securities exceeds the conversion price. For example, the Fund
may hold fixed income securities that are convertible into shares of common
stock at a conversion price of $10 per share. If the market value of the
shares of common stock reached $12, the Fund could realize an additional $2
per share by converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity
securities. Thus, convertible securities may provide lower returns than
non-convertible fixed income securities or equity securities depending upon
changes in the price of the underlying equity securities. However,
convertible securities permit the Fund to realize some of the potential
appreciation of the underlying equity securities with less risk of losing
its initial investment.

The Fund treats convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because
of their unique characteristics.

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The fixed income securities in which the Fund will invest will possess a
minimum credit rating of A as assigned by Standard & Poor's or A by Moody's
Investors Service, Inc., or, if unrated, judged by the Adviser to be of
comparable quality. The Adviser will determinate whether a security is
investment grade based upon the credit ratings given by one or more
nationally recognized rating services. For example, Standard & Poor's, a
rating service, assigns ratings to investment grade securities (AAA, AA, A,
and BBB) based on their assessment of the likelihood of the issuer's
inability to pay interest or principal (default) when due on each security.
Lower credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the Adviser's credit
assessment that the security is comparable to investment grade.

DERIVATIVE CONTRACTS

The Fund may trade in the following types of derivative contracts.

FUTURES CONTRACTS

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts. The
Fund can buy or sell futures contracts on portfolio securities or indexes
and engage in foreign currency forward contracts.

OPTIONS

Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option.

The Fund may:

o Write call options on portfolio securities and securities which the Fund
has the right to obtain without payment of further consideration or for
which it has segregated cash in the amount of any additional
consideration to generate income from premiums, and in anticipation of a
decrease or only limited increase in the value of the underlying asset.
If a call written by the Fund is exercised, the Fund foregoes any
possible profit from an increase in the market price of the underlying
asset over the exercise price plus the premium received.

o Write put options on all or any portion of its portfolio of
securities(to generate income from premiums, and in anticipation of an
increase or only limited decrease in the value of the underlying asset).
In writing puts, there is a risk that the Fund may be required to take
delivery of the underlying asset when its current market price is lower
than the exercise price.

o Write call option and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value or as a hedge against rising purchase prices
of securities eligible for purchase by the Fund.

o When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts.

SWAPS

Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most
swaps do not involve the delivery of the underlying assets by either party,
and the parties might not own the assets underlying the swap. The payments
are usually made on a net basis so that, on any given day, the Fund would
receive (or pay) only the amount by which its payment under the contract is
less than (or exceeds) the amount of the other party's payment. Swap
agreements are sophisticated instruments that can take many different forms,
and are known by a variety of names including caps, floors, and collars.
Common swap agreements that the Fund may use include:

CURRENCY SWAPS

Currency swap agreements provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amount as
well.

HYBRID INSTRUMENTS

Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of
the interest or principal payable on a hybrid security is determined by
reference to changes in the price of an underlying asset or by reference to
another benchmark (such as interest rates, currency exchange rates or
indices). Hybrid instruments also include convertible securities with
conversion terms related to an underlying asset or benchmark.

The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, and
depend upon the terms of the instrument. Thus, an investment in a hybrid
instrument may entail significant risks in addition to those associated with
traditional fixed income or convertible securities. Hybrid instruments are
also potentially more volatile and carry greater market risks than
traditional instruments.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated to
the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor
the value of the underlying security each day to ensure that the value of
the security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must repurchase
the underlying security at a higher price, regardless of the market value of
the security at the time of repurchase.

WHEN ISSUED TRANSACTIONS

When issued transactions are arrangements in which the Fund buys securities
for a set price, with payment and delivery of the securities scheduled for a
future time. During the period between purchase and settlement, no payment
is made by the Fund to the issuer and no interest accrues to the Fund. The
Fund records the transaction when it agrees to buy the securities and
reflects their value in determining the price of its shares. Settlement
dates may be a month or more after entering into these transactions so that
the market values of the securities bought may vary from the purchase
prices. Therefore, when issued transactions create market risks for the
Fund. When issued transactions also involve credit risks in the event of a
counterparty default.

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from
the borrower as collateral. The borrower must furnish additional collateral
if the market value of the loaned securities increases. Also, the borrower
must pay the Fund the equivalent of any dividends or interest received on
the loaned securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower.
The Fund will not have the right to vote on securities while they are on
loan, but it will terminate a loan in anticipation of any important vote.
The Fund may pay administrative and custodial fees in connection with a loan
and may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker.

Securities lending activities are subject to market and credit risks.

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts
or special transactions, the Fund will either own the underlying assets,
enter into an offsetting transaction or set aside readily marketable
securities with a value that equals or exceeds the Fund's obligations.
Unless the Fund has other readily marketable assets to set aside, it cannot
trade assets used to secure such obligations entering into an offsetting
derivative contract or terminating a special transaction. This may cause the
Fund to miss favorable trading opportunities or to realize losses on
derivative contracts or special transactions.

INVESTMENT RATINGS

INVESTMENT RATINGS FOR INVESTMENT GRADE SECURITIES

The Adviser will determinate whether a security is investment grade based
upon the credit ratings given by one or more nationally recognized rating
services. For example, Standard and Poor's, a rating service, assigns
ratings to investment grade securities (AAA, AA, A, and BBB) based on their
assessment of the likelihood of the issuer's inability to pay interest or
principal (default) when due on each security. Lower credit ratings
correspond to higher credit risk. If a security has not received a rating,
the Fund must rely entirely upon the Adviser's credit assessment that the
security is comparable to investment grade.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The
Fund's principal risks are described in its prospectus. Additional risk factors
are outlined below.

CURRENCY RISKS

o The Adviser attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the
value of the U.S. dollar relative to other currencies.

RISKS OF FOREIGN INVESTING

o Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable that those of the United States. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

o Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.

o Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
financial controls and reporting standards, or regulatory requirements
comparable to those applicable to U.S. companies. These factors may prevent the
Fund and its Adviser from obtaining information concerning foreign companies
that is as frequent, extensive and reliable as the information available
concerning companies in the United States.

EURO RISKS

LIQUIDITY RISKS

o Trading opportunities are more limited for equity securities that are not
widely held. This may make it more difficult to sell or buy a security at a
favorable price or time. Consequently, the Fund may have to accept a lower price
to sell a security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund's
performance. Infrequent trading may also lead to greater price volatility.

o Liquidity risk also refers to the possibility that the Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep the
position open, and the Fund could incur losses.

o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

STOCK MARKET RISKS

o The value of equity securities in the Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. The Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline and you could lose money.

SECTOR AND REGIONAL RISKS

RISKS RELATED TO INVESTING FOR GROWTH

Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than value stocks. This
means they depend more on price changes for returns and may be more adversely
affected in a down market compared to value stocks that pay higher dividends.

STATE INSURANCE REGULATIONS

The Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies offered by certain insurance companies. The
contracts will seek to be offered in as many jurisdictions as possible. Certain
states have regulations concerning, among other things, the concentration of
investments, sales and purchases of futures contracts, and short sales of
securities. if applicable, the Fund may be limited in its ability to engage in
such investments and to manages its portfolio with desired flexibility. The Fund
will operate in material compliance with the applicable insurance laws and
regulations of each jurisdiction in which contracts will be offered by the
insurance companies which invest in the Fund.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regulations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests of the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the fund
will not be treated as annuity, endowment, or life insurance contracts.

INVESTMENT LIMITATIONS

DIVERSIFICATION OF INVESTMENTS

With respect to 75% of the value of its total assets, the Fund will not purchase
securities of any one issuer (other than securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities) if as a
result more than 5% of the value of its total assets would be invested in the
securities of that issuer, or if it would own more than 10% of the outstanding
voting securities of any one issuer.

ACQUIRING SECURITIES

The Fund will not acquire more than 10% of the outstanding voting securities of
any one issuer.

CONCENTRATION OF INVESTMENTS

The Fund will not invest 25% or more of its total assets in securities of
issuers having their principal business activities in the same industry.

BORROWING

The Fund will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts up to one-third of the value of
its total assets, including the amount borrowed. This borrowing provision is not
for investment leverage but solely to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of portfolio
securities would be inconvenient or disadvantageous. The Fund will not purchase
securities while outstanding borrowings exceed 5% of the value of its total
assets.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate assets, except when necessary
for permissible borrowings. Neither the deposit of underlying securities or
other assets in escrow in connection with the writing of put or call options or
the purchase of securities on a when-issued basis, nor margin deposits for the
purchase and sale of financial futures contracts and related options are deemed
to be a pledge.

BUYING ON MARGIN

The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions, except that
the Fund may make margin payments in connection with its use of financial
futures contracts or related options and transactions.

ISSUING SENIOR SECURITIES

The Fund will not issue senior securities except in connection with borrowing
money directly or through reverse repurchase agreements or as required by
forward commitments to purchase securities or currencies.

UNDERWRITING

The Fund will not underwrite or participate in the marketing of securities of
other issuers, except as it may be deemed to be an underwriter under federal
securities law in connection with the disposition of its portfolio securities.

INVESTING IN REAL ESTATE

The Fund will not invest in real estate, although it may invest in securities
secured by real estate or interests in real estate or issued by companies,
including real estate investment trusts, which invest in real estate or
interests therein.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities or commodity contracts, except
that the Fund may purchase and sell financial futures contracts and options on
financial futures contracts, provided that the sum of its initial margin
deposits for financial futures contracts held by the Fund, plus premiums paid by
it for open options on financial futures contracts, may not exceed 5% of the
fair market value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts. Further, the Fund may engage
in foreign currency transactions and purchase or sell forward contracts with
respect to foreign currencies and related options.

LENDING CASH OR SECURITIES

The Fund will not lend any assets except portfolio securities. This shall not
prevent the purchase or holding of bonds, debentures, notes, certificates of
indebtedness, or other debt securities of an issuer, repurchase agreements or
other transactions which are permitted by the Fund's investment objective and
policies or its Declaration of Trust.

SELLING SHORT

The Fund will not sell securities short unless (1) it owns, or has a right to
acquire, an equal amount of such securities, or (2) it has segregated an amount
of its other assets equal to the lesser of the market value of the securities
sold short or the amount required to acquire such securities. The segregated
amount will not exceed 10% of the Fund's net assets. While in a short position,
the Fund will retain the securities, rights, or segregated assets.

To comply with registration requirements in certain states, the Fund (1) will
limit short sales of securities of any class of any one issuer to the lesser of
2% of the Fund's net assets or 2% of the securities of that class, (2) will make
short sales only on securities listed on recognized stock exchanges. These
restrictions do not apply to short sales of securities the Fund holds or has a
right to acquire without the payment of any further consideration. (If state
requirements change, these restrictions may be revised without shareholder
notification.)

PURCHASING SECURITIES TO EXERCISE CONTROL

The Fund will not purchase securities of a company for the purpose of exercising
control or management.

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements with maturities longer than
seven days after notice, and certain over-the-counter options and certain
restricted securities not determined to be liquid under criteria established by
the Trustees.

DEALING IN PUTS AND CALLS

The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or the Fund is entitled to them in deliverable form
without further payment or the Fund has segregated cash in the amount of any
further payments. The Fund will not purchase put options on securities unless
the securities or an offsetting call option is held in the Fund's portfolio. The
Fund may also purchase, hold or sell (i) contracts for future delivery of
securities or currencies and (ii) warrants granted by the issuer of the
underlying securities.

The Fund has no present intent to borrow money or pledge securities in excess of
5% of the value of its total assets in the coming fiscal year.

For purposes of their policies and limitations, the Funds consider certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for all other securities, at fair value as determined in good faith by the
Board.

TRADING IN FOREIGN SECURITIES

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

MIXED FUNDING AND SHARED FUNDING

HOW IS THE FUND SOLD?

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: Safeco Mutual Funds,
Seattle, Washington, owned approximately 304,575 shares (8.99%); Aetna
Retirement Services, Hartford, Connecticut, owned approximately 1,129,341 shares
(33.34%); and Aetna Retirement Services, Hartford, Connecticut, owned
approximately 1,781,066 shares (52.59%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

FOREIGN INVESTMENTS

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of nine
funds and the Federated Fund Complex is comprised of [insert number] investment
companies, whose investment advisers are affiliated with the Fund's Adviser.

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

<PAGE>

TRUSTEE

<PAGE>

Previous Positions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

Director, Depository Trust Corporation.

Center, Prague.

Previous Positions: Professor, United
States Military Academy; Professor, United
States Air Force Academy.

<PAGE>

TREASURER

</TABLE>

** The aggregate compensation is provided for the Trust which is comprised of
nine portfolios.

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

<PAGE>

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 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 Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996
1998
Advisory Fee Earned $ $273,830 $106,851
Advisory Fee Reduction $ $273,316 $106,851
Brokerage Commissions $ $291,180 $104,437
Administrative Fee $ $125,002 $125,000
Shareholder Services Fee NA NA

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield is given for the 30-day period ended December 31, 1998.

30 -DAY PERIOD 1 YEAR 5 YEARS 10 YEARS
SINCE
INCEPTION
ON MAY 5, 1995

Total Return NA NA
Yield NA NA

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

LIPPER ANALYTICAL SERVICES, INC., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and income
dividends.

MORGAN STANLEY EUROPE, AUSTRALIA, AND FAR EAST (EAFE) Index is a market
capitalization weighted foreign securities index, which is widely used to
measure the performance of European, Australian, New Zealand and Far Eastern
stock markets. The index covers approximately 1,020 companies drawn from 18
countries in the above regions. The index values its securities daily in
both U.S. dollars and local currency and calculates total returns monthly.
EAFE U.S. dollar total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital International, S.A.,
Geneva, Switzerland.

SALOMON BROTHERS WORLD EQUITY INDEX EX U.S. is a capitalization-weighted
index comprised of equities from 22 countries excluding the United States.

FT ACTUARIES WORLD - EX U.S. index is comprised of 1,740 stocks, excluding
U.S. stocks, jointly compiled by the Financial Times Ltd., Goldman, Sachs & Co.,
and NatWest Securities Ltd. in conjunction with the Institute of Actuaries and
the Faculty of Actuaries.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

The Financial Statements to be filed by Amendment.

<PAGE>

INVESTMENT RATINGS

APPENDIX

STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS

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.

CC--The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.

MOODY'S INVESTORS SERVICE, INC. LONG-TERM BOND RATING DEFINITIONS

CAA--Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

CA--Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

FITCH IBCA, INC. LONG-TERM DEBT RATING DEFINITIONS

CCC--Bonds have certain identifiable characteristics which, if not remedied, may
lead to default. The ability to meet obligations requires an advantageous
business and economic environment.

CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are imminent default in payment of interest or principal.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

o Leading market positions in well established industries.

o High rates of return on funds employed.

o Conservative capitalization structure with moderate reliance on debt and ample
asset protection.

o Broad margins in earning coverage of fixed financial charges and high internal
cash generation.

o Well established access to a range of financial markets and assured sources of
alternate liquidity.

STANDARD AND POOR'S COMMERCIAL PAPER RATINGS

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 IBCA, 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 assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

<PAGE>

ADDRESSES

FEDERATED INTERNATIONAL EQUITY FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Global Investment Management Corp.
Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PROSPECTUS

FEDERATED PRIME MONEY FUND II

[A Portfolio of Federated Insurance Series]

A money market mutual fund seeking to provide current income consistent with
stability of principal and liquidity.

CONTENTS

Risk/Return Summary

What are the Fund's Investment
Strategies? What are the Principal
Securities in Which the Fund
Invests? What are the Specific Risks
of Investing in the Fund?

What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

April 20, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund is a money market fund which seeks to maintain a stable net asset
value of $1.00. The Fund's investment objective is to provide current income
consistent with the stability of principal and liquidity.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests in a portfolio of high quality fixed income securities maturing
in 397 days or less. The average maturity of the Fund's portfolio will be 90
days or less.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Although the Fund seeks to maintain a stable net asset value, it is possible to
lose money investing in the Fund.

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 or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Prime Money Fund II as of the calendar
year-end for each of four years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 6%.

For the calendar years 1995 through 1998, the percentages noted are: 5.20%,
4.75%, 4.93%, and 4.92%, respectively.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's total returns on a
calendar year-end basis. The Fund's Shares are not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.
Within the period shown in the Chart, the Fund's highest quarterly return was
1.33% (quarter ended June 30, 1995). Its lowest quarterly return was 1.14%
(quarter ended June 30, 1996). The Fund's Seven-Day Net Yield as of December 31,
1998, was 4.52%. Investors may call the Fund at 1-800-341-7400 to acquire the
current Seven-Day Net Yield.

The following table represents the Fund's Average Annual Total Return through
December 31, 1998.

START OF PERFORMANCE1 1 YEAR 5 YEARS 10 YEARS 4.94% 4.92% N/A N/A 1 The Fund's
start of performance date was November 21, 1994.

While past performance does not necessarily predict future performance, this
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests in a portfolio of high quality fixed income securities maturing
in 397 days or less. The average maturity of the Fund's portfolio will be 90
days or less. The Fund invests in securities that are either rated in the two
highest short term rating categories by one or more nationally recognized
statistical rating organizations or of comparable quality to securities having
such ratings. The Fund invests only in instruments denominated and payable in
U.S. dollars.

In order to select individual investments, the Fund's Adviser performs a
fundamental credit analysis to develop an approved list of issuers and
securities that meet the Adviser's minimum credit standards. The Adviser
assesses likely movements in interest rates based upon general economic and
market conditions. Considering this assessment, the Adviser targets an average
portfolio maturity range. The Adviser generally shortens the portfolio's average
maturity when it expects interest rates to rise and extends the maturity when it
expects interest rates to fall. In adjusting the portfolio's average maturity,
the Adviser selects among investments with different maturities comparing their
relative returns.

INDUSTRY CONCENTRATION

The Fund may invest 25% or more of its assets in commercial paper issued by
finance companies.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

FIXED INCOME SECURITIES

CORPORATE DEBT SECURITIES

Corporate debt securities are issued by businesses. Short-term notes, variable
rate demand notes, and commercial paper are the most prevalent types of
corporate debt securities that the Fund purchases.

COMMERCIAL PAPER

Commercial paper is an issuer's draft or note with a maturity of less
than or equal to nine months. Companies typically issue commercial paper
to Fund current expenditures. Most issuers constantly reissue their
commercial paper and use the proceeds (or bank loans) to repay maturing
paper. Commercial paper may default if the issuer cannot continue to
obtain liquidity in this fashion.

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must
repay upon demand. Other demand instruments require a third party, such
as a dealer or bank, to repurchase the security for its face value upon
demand. The Fund treats demand instruments as short-term securities,
even though their stated maturity may extend beyond one year.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.

ASSET BACKED SECURITIES

Asset Backed Securities are payable from pools of debt obligations. Almost any
type of fixed income assets (including other fixed income securities) may be
used to create an asset backed security. However, most asset backed securities
involve consumer or commercial debts with maturities of less than ten years.
Asset backed securities may take the form of commercial paper or notes, in
addition to simple ownership interests in the underlying debt obligations.

CREDIT ENHANCEMENT

Credit enhancement consists of an arrangement in which one company agrees to pay
amounts due on a fixed income security after the issuer defaults. In some cases
the other company makes all payments directly to the security holders and
receives reimbursement from the issuer. Normally, the company providing such
credit enhancement has greater financial resources and liquidity than the
issuer. This may lead the Adviser to evaluate the credit risk of a fixed income
security based solely upon its credit enhancement. The Adviser purchases fixed
income securities that have been credit enhanced.

REPURCHASE AGREEMENTS

Repurchase Agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return for the transaction.

INVESTMENT RATINGS

The Fund invests in high-quality money market instruments that are either rated
in one of the two highest short-term rating categories by one or more nationally
recognized rating services or of comparable quality to securities having such
ratings.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

Although there are many factors which may effect an investment in the Fund, the
principal risks of investing in a corporate money market fund are described
below.

SECTOR RISKS

BOND MARKET RISK

o Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices
of fixed income securities fall.

o Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this
risk by purchasing short-term securities.

CREDIT RISK

<PAGE>

WHAT DO SHARES COST?

HOW IS THE FUND SOLD?

HOW TO PURCHASE AND REDEEM SHARES

Shares are not sold directly to the general public.

o orders in proper form by 8:00 a.m. (Eastern time) on the next business day;
and

o federal funds on the business day following the day the Fund received the
order.

Participating insurance companies are responsible for properly transmitting
purchase orders and federal funds to the Fund.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

The Fund declares dividends daily and pays them monthly.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares.

TAX INFORMATION

Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.

WHO MANAGES THE FUND?

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

FEDERATED PRIME MONEY FUND II

A Portfolio of (Federated Insurance Series)

INVESTMENT COMPANY ACT FILE NO. 811-8042

CUSIP 313916504

3113011A (4/99)

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED PRIME MONEY FUND II

A Portfolio of Federated Insurance Series

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Prime Money Fund II (Fund),
dated April 20, 1999. This SAI incorporates by reference the Fund's Annual
Report. Obtain the prospectus or the Annual Report without charge by calling
1-800-341-7400.

april 20, 1999

CUSIP313916504

3113011B (4/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Insurance Series (Trust). The
Trust is an open-end, management investment company that was established under
the laws of the Commonwealth of Massachusetts on September 15, 1993. The Trust
may offer separate series of shares representing interests in separate
portfolios of securities. The Trust changed its name from Insurance Management
Series to Federated Insurance Series on November 14, 1995. The Fund changed its
name from Prime Money Fund to Federated Prime Money Fund II on February 26,
1996.

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest credit
risk.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). Some
GSEs are supported by the full, faith and credit of the United States. Other
GSEs receive support through federal subsidies, loans or other benefits. A
few GSEs have no explicit financial support, but are regarded as having
implied support because the federal government sponsors their activities.
Investors regard agency securities as having low credit risk, but not as low
as Treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risk, it does
not reduce the market and prepayment risks of these mortgage backed
securities.

CORPORATE DEBT SECURITIES

COMMERCIAL PAPER

DEMAND INSTRUMENTS

Demand instruments are corporate debt securities that the issuer must
repay upon demand. Other demand instruments require a third party, such
as a dealer or bank, to repurchase the security for its face value upon
demand. The Fund treats demand instruments as short-term securities,
even though their stated maturity may extend beyond one year. Insurance
contracts include guaranteed investment contracts, funding agreements
and annuities.

ASSET BACKED SECURITIES

Asset Backed Securities are payable from pools of obligations other than
mortgages. Almost any type of fixed income assets (including other fixed
income securities) may be used to create an asset backed security. However,
most asset backed securities involve consumer or commercial debts with
maturities of less than ten years. Asset backed securities may also take the
form of commercial paper or notes.

Historically, borrowers are more likely to refinance their mortgage than any
other type of consumer debt or short term commercial debt. In addition, some
asset backed securities use prepayment to buy addition assets, rather than
paying off the securities. Therefore, although asset backed securities may
have some prepayment risks, they generally do not present the same degree of
risk as mortgage backed securities.

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final
maturity. Most debt securities provide periodic payments of interest
(referred to as a "coupon payment"). In contrast, investors buy zero coupon
securities at a price below the amount payable at maturity. The difference
between the price and the amount paid at maturity represents interest on the
zero coupon security. This increases the market and credit risks of a zero
coupon security, because an investor must wait until maturity before
realizing any return on the investment.

There are many forms of zero coupon securities. Some securities are
originally issued at a discount and are referred to as "zero coupon" or
"capital appreciation" bonds. Others are created by separating the right to
receive coupon payments from the principal due at maturity, a process known
as "coupon stripping." Treasury STRIPs, IOs and POs are the most common
forms of "stripped" zero coupon securities. In addition, some securities
give the issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These
are referred to as "pay-in-kind" or "PIK" securities.

BANK INSTRUMENTS

Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances. Instruments denominated in U.S. dollars and issued by
Non-U.S. branches of U.S. or foreign banks are commonly referred to as
Eurodollar instruments. Instruments denominated in U.S. dollars and issued by
U.S. branches of foreign banks are referred to as Yankee instruments.

CREDIT ENHANCEMENT

Credit enhancement consists of an arrangement in which one company agrees to
pay amounts due on a fixed income security after the issuer defaults. In
some cases the other company makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the company
providing such credit enhancement has greater financial resources and
liquidity than the issuer. This may lead the Adviser to evaluate the credit
risk of a fixed income security based solely upon its credit enhancement.

Common types of credit enhancement include guarantees, letters of credit,
bond insurance and surety bonds. Credit enhancement also includes
arrangements where securities or other liquid assets secure payment of a
fixed income security. Following a default, these assets may be sold and the
proceeds paid to security's holders. Either form of credit enhancement
reduces credit risk by providing another source of payment for a fixed
income security.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which a Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price, reflecting
an agreed upon interest rate effective for the period the Fund owns the
security subject to repurchase. The agreed upon interest rate is unrelated
to the interest rate on the underlying security. The Funds will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Adviser to be
creditworthy

Repurchase agreements are subject to credit risk.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which a Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risk. In addition, Reverse
repurchase agreements create leverage risk because the Fund must repurchase
the underlying security at a higher price, regardless of the market value of
the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund purchases securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to purchase the securities and reflects their
value in determining the price of its shares. Settlement dates may be a
month or more after entering into these transactions so that the market
values of the securities purchased may vary from the purchase prices.
Therefore, delayed delivery transactions create market risk for the Fund.
Delayed delivery transactions also involve credit risk in the event of a
counterparty default.

SECURITIES LENDING

A Fund may lend portfolio securities to firms that the Adviser has
determined are creditworthy. In return, it will receive either cash or
liquid securities as collateral from the borrower. A Fund will reinvest cash
collateral in securities that qualify as an otherwise acceptable investment
for the Fund. However, the Fund must pay interest to the borrower for the
use of any cash collateral. If the market value of the loaned securities
increases, the borrower must furnish additional collateral. While portfolio
securities are on loan, the borrower pays the Fund the equivalent of any
dividends or interest received on them. Loans are subject to termination at
the option of the Fund or the borrower. The Fund will not have the right to
vote on securities while they are being lent, but it will terminate a loan
in anticipation of any important vote. 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 collateral to a
securities lending agent or broker.

Securities lending activities are subject to market risk and credit risk.

ASSET COVERAGE

In order to secure its obligations in connection with when-issued, and
delayed-delivery transactions, the Fund will "cover" such transactions, as
required under applicable interpretations of the SEC, either by owning the
underlying securities; entering into an offsetting transaction; or
segregating, earmarking, or depositing into an escrow account readily
marketable securities in an amount at all times equal to or exceeding the
Fund's commitment with respect to these instruments or contracts. As a
result, use of these instruments will impede the Fund's ability to freely
trade the assets being used to cover them, which could result in harm to the
Fund.

INVESTMENT RATINGS

A nationally recognized rating service's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated A-1+, A-1 or A-2 by Standard & Poor's ("S&P"), Prime-1 or
Prime-2 by Moody's Investors Service, Inc. ("Moody's"), or F-1(+ or -) or F-2 (+
or -) by Fitch IBCA, Inc. ("Fitch") are all considered rated in one of the two
highest short-term rating categories. The Fund will limit its investments in
securities rated in the second highest short-term rating category (e.g., A-2 by
S&P, Prime-2 by Moody's or F-2 (+ or -) by Fitch) to not more than 5% of its
total assets, with not more than 1% invested in the securities of any one
issuer. The Fund will follow applicable regulations in determining whether a
security rated by more than one rating service can be treated as being in one of
the two highest short-term rating categories; currently, such securities must be
rated by two rating services in one of their two highest rating categories. See
"Regulatory Compliance."

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

CONCENTRATION OF INVESTMENTS

The Fund may invest 25% or more of its total assets in commercial paper issued
by finance companies. The finance companies in which the Fund intends to invest
can be divided into two categories, commercial finance companies and consumer
finance companies. Commercial finance companies are principally engaged in
lending to corporations or other businesses. Consumer finance companies are
primarily engaged in lending to individuals. Captive finance companies or
finance subsidiaries which exist to facilitate the marketing and financial
activities of their parent will, for purposes of industry concentration, be
classified by the Fund in the industry of its parent corporation.

In addition, the Fund may invest more than 25% of the value of its total assets
in cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The
Fund's principal risks are described in its prospectus. Additional risk factors
are outlined below.

PREPAYMENT RISKS

Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate mortgages
when mortgage rates fall. This results in the prepayment of mortgage backed
securities with higher interest rates. Conversely, prepayments due to
refinancings decrease when mortgage rates increase. This extends the life of
mortgage backed securities with lower interest rates. As a result, increases in
prepayments of high interest rate mortgage backed securities, or decreases in
prepayments of lower interest rate mortgage backed securities, may reduce their
yield and price. This relationship between interest rates and mortgage
prepayments makes the price of mortgage backed securities more volatile than
most other types of fixed income securities with comparable credit risks.

LEVERAGE RISKS

STATE INSURANCE REGULATIONS

The Fund is intended to be a funding vehicle for variable annuity contracts and
variable life insurance policies offered by certain insurance companies. The
contracts will seek to be offered in as many jurisdictions as possible. Certain
states have regulations concerning, among other things, the concentration of
investments, sales and purchases of futures contracts, and short sales of
securities. if applicable, the Fund may be limited in its ability to engage in
such investments and to manages its portfolio with desired flexibility. The Fund
will operate in material compliance with the applicable insurance laws and
regulations of each jurisdiction in which contracts will be offered by the
insurance companies which invest in the Fund.

VARIABLE ASSET REGULATIONS

The Fund is also subject to variable contract asset regulations prescribed by
the U.S. Treasury Department under Section 817(h) of the Internal Revenue Code.
After a one year start-up period, the regulations generally require that, as of
the end of each calendar quarter or within 30 days thereafter, no more than 55%
of the total assets of the Fund may be represented by any one investment, no
more than 70% of the total assets of the Fund may be represented by any two
investments, no more than 80% of the total assets of the Fund may be represented
by any three investments, and no more than 90% of the total assets of the Fund
may be represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests of the same real
property project, and all interests in the same commodity are each treated as a
single investment. In the case of government securities, each government agency
or instrumentality shall be treated as a separate issuer. If the Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the fund
will not be treated as annuity, endowment, or life insurance contracts.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

ISSUING SENIOR SECURITIES AND BORROWING MONEY

PLEDGING ASSETS

CONCENTRATION OF INVESTMENTS

The Fund will not purchase securities if, as a result of such purchase, 25% or
more of its total assets would be invested in securities of companies engaged
principally in any one industry other than finance companies. However, the Fund
may at any time invest 25% or more of its total assets in cash or cash items and
securities issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent the Fund from purchasing
or holding money market instruments, corporate or U.S. government bonds,
debentures, notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other transactions
which are permitted by the Fund's investment objective and policies or the
Trust's Declaration of Trust.

UNDERWRITING

DIVERSIFICATION OF INVESTMENTS

INVESTING IN RESTRICTED AND ILLIQUID SECURITIES

The Fund will not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements, providing for settlement more than seven days
after notice and certain restricted securities not determined to be liquid under
criteria established by the Trustees.

The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

REGULATORY COMPLIANCE

The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in its
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, which regulates money market mutual
funds. The Fund will determine the effective maturity of its investments, as
well as its ability to consider a security as having received the requisite
short-term ratings by nationally recognized ratings services, according to Rule
2a-7. The Fund may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

for all other securities, at fair value as determined in good faith by the
Board.

TRADING IN FOREIGN SECURITIES

MIXED FUNDING AND SHARED FUNDING

HOW IS THE FUND SOLD?

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS

SUBACCOUNTING SERVICES

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

As of February 3, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: People's Benefit Life
Ins. Co., Cedar Rapids, Iowa, owned approximately 6,952,330 shares (6.05%);
Aetna Retirement Services, Hartford, Connecticut, owned approximately 7,744,138
shares (6.74%); Kansas City Life Insurance Co., Kansas City, Missouri, owned
approximately 7,867,863 shares (6.85%); Glenbrook Life and Annuity Company,
Palatine, Illinois, owned approximately 8,364,365 shares (7.58%); Valley Forge
Life Insurance Co., Wethersfield, Connecticut, owned approximately 14,613,081
shares (12.72%); First Variable Life Cash Management, Kansas City, Missouri,
owned approximately 15,845,681 shares (13.79%); and United of Omaha Life
Insurance Co., Omaha, Nebraska, owned approximately 36,963,847 shares (32.17%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of nine
funds and the Federated Fund Complex is comprised of [insert number] investment
companies, whose investment advisers are affiliated with the Fund's Adviser.

As of February 3, 1999, the Fund's Board and Officers as a group owned less than
1% of the Fund's outstanding Shares.

TRUSTEE

<PAGE>

Previous Positions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

Director, Depository Trust Corporation.

WESLEY W. POSVAR Director or Trustee of the Federated Fund $1,591.19 $113,860.22 for
Birthdate: September Complex; President, World Society of the
14, 1925 Ekistics (metropolitan planning), Athens; Trust and 54
1202 Cathedral of Professor, International Politics; other
Learning Management Consultant; Trustee, Carnegie investment
University of Pittsburgh Endowment for International Peace, RAND companies
Pittsburgh, PA Corporation, Online Computer Library in the Fund
TRUSTEE Center, Inc., National Defense University Complex
and U.S. Space Foundation; President
Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory
Council for Environmental Policy and
Technology, Federal Emergency Management
Advisory Board; Trustee, Czech Management

Center, Prague.

Previous Positions: Professor, United
States Military Academy; Professor, United
States Air Force Academy.

<PAGE>

TREASURER

</TABLE>

** The aggregate compensation is provided for the Trust which is comprised of
nine portfolios.

+ Mr. Donahue is the father of J. Christopher Donahue, President and Trustee
of the Trust.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

OTHER RELATED SERVICES

BROKERAGE TRANSACTIONS

RESEARCH SERVICES

ADMINISTRATOR

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 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 Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED DECEMBER 31, 1998 1997 1996
1998
Advisory Fee Earned $ $306,771 $154,455
Advisory Fee Reduction $ $123,674 $154,455
Brokerage Commissions $ $0 $0
Administrative Fee $ $125,002 $125,000
Shareholder Services Fee $ NA NA

HOW DOES THE FUND MEASURE PERFORMANCE?

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year and since inception periods ended December
31, 1998.

Yield and Effective Yield are given for the seven-day period ended December 31,
1998.

SINCE INCEPTION ON
NOVEMBER SEVEN -DAY PERIOD 1 YEAR 5 YEARS 10 YEARS
18, 1994

Total Return NA NA
Yield NA NA
Effective Yield NA NA

<PAGE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

YIELD

The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated by: determining
the net change in the value of a hypothetical account with a balance of one
Share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional Shares purchased with
dividends earned from the original one Share and all dividends declared on the
original and any purchased Shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7. The effective yield is calculated by compounding the unannualized
base-period return by: adding 1 to the base-period return, raising the sum to
the 365/7th power; and subtracting 1 from the result.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

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 income dividends and capital gains distributions if any.
Form time to time, the Fund will quote its Lipper ranking in the "money
market instruments funds" category in advertising and sales literature.

o BANK RATE MONITOR NATIONAL INDEX, MIAMI BEACH, FLORIDA, is a financial
reporting service which publishes weekly average rates of 50 leading bank
and thrift institution money market deposit accounts. The rates published in
the index are an average of the personal account rates offered on the
Wednesday prior to the date of publication by ten of the largest banks and
thrifts in each of the five largest Standard Metropolitan Statistical Areas.
Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest rate
is used. Rates are subject to change at any time specified by the
institution.

o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective)
yield. From time to time, the Fund will quote its Money ranking in
advertising and sales literature.

WHO IS FEDERATED INVESTORS, INC.?

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

EQUITY FUNDS

CORPORATE BOND FUNDS

GOVERNMENT FUNDS

MONEY MARKET FUNDS

advisory companies.

MUTUAL FUND MARKET

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

FINANCIAL INFORMATION

The Financial Statements to be filed by Amendment.

<PAGE>

ADDRESSES

FEDERATED PRIME MONEY FUND II

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PART C. OTHER INFORMATION.

Item 23. EXHIBITS:

(a) Conformed copy of Amended and Restated Declaration of Trust of the
Registrant (Amendment #1 to the Declaration of Trust); (3)
(i) Conformed copy of Amendment #2 to the Declaration of Trust; (17)
(ii) Conformed copy of Amendment #3 to the Declaration of Trust; (17)
(iii) Conformed copy of Amendment #4 to the Declaration of Trust; (17)
(iv) Conformed copy of Amendment #5 to the Declaration of Trust; (10)
(v) Conformed copy of Amendment #6 to the Declaration of Trust; (11)
(vi) Conformed copy of Amendment #7 to the Declaration of Trust; (17)
(b) Copy of By-Laws; (2)

(i) Copy of Amendment No. 1 to the By-Laws; +
(ii) Copy of Amendment No. 2 to the By-Laws; +
(iii) Copy of Amendment No. 3 to the By-Laws; +

(c) (i) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated American Leaders Fund II; (15)
(ii) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated Utility Fund II; (15)
(iii) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated Fund for U.S. Government Securities II; (15)
(iv) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated High Income Bond Fund II; (15)
(v) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated Prime Money Fund II; (15)
(vi) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated International Equity Fund II; (4)
(vii) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated Growth Strategies Fund II; (15)
(viii) Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated Equity Income Fund II; (15)
(d) Conformed copy of Investment Advisory Contract between
the Registrant and Federated Advisers;(3)

+ All exhibits have been filed electronically.

(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 29, 1994. (File Nos. 33-69268 and
811-8042).

(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed August 23, 1994. (File Nos. 33-69268 and
811-8042).

(4) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed January 19, 1995. (File Nos. 33-69268
and 811-8042).

(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed February 16, 1996. (File Nos. 33-69268
and 811-8042).

(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed March 28, 1996. (File Nos. 33-69268 and
811-8042).

(15) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed July 31, 1997. (File Nos. 33-69268 and
811-8042).

(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed April 22, 1998. (File Nos. 33-69268 and
811-8042).

<PAGE>

(i) Conformed copy of Exhibit A to Investment Advisory Contract; (3)
(ii) Conformed copy of Exhibit B to Investment Advisory Contract; (3)
(iii) Conformed copy of Exhibit C to Investment Advisory Contract; (3)
(iv) Conformed copy of Exhibit D to Investment Adivsory Contract; (3)
(v) Conformed copy of Exhibit E to Investment Adivsory Contract; (3)
(vi) Conformed copy of Exhibit F to Investment Advisory Contract; (6)
(vii) Conformed copy of Exhibit G to the Trust's
present investment advisory contract to add
Federated Growth Strategies Fund II
(formerly, Growth Stock Fund); (10)

(viii)Conformed copy of Exhibit H to the Trust's
present investment advisory contract to add Federated Equity
Income Fund II; (12) (d1) Conformed copy of Investment
Advisory

Contract between the Registrant and Federated Global Research Corp. with
respect to Federated International Equity Fund II; (10)

(d2) Conformed copy of Sub-Advisory
Agreement between Federated Advisers and Federated
Global Research Corp. with respect to Federated
Utilty Fund II; (17)

(i) Conformed copy of Exhibit A to Investment
Advisory Contract; (10)

(e) Conformed copy of Distributor's Contract; (3)

(i) Conformed copy of Exhibit A to Distributor's
Contract; (3) (ii) Conformed copy of Exhibit B to
Distributor's Contract; (3) (iii) Conformed copy of
Exhibit C to Distributor's Contract; (3) (iv)
Conformed copy of Exhibit D to Distributor's
Contract; (3) (v) Conformed copy of Exhibit E to
Distributor's Contract; (3) (vi) Conformed copy of
Exhibit F to Distributor's Contract; (7) (vii)
Conformed copy of Exhibit G to Distributor's
Contract; (10) (viii)Conformed copy of Exhibit H to
Distributor's Contract; (12)

(f) Not Applicable;

(g) Conformed copy of Custodian Contract; (7)

(i) Conformed copy of Domestic Custody Fee Schedule; (17)

+ All exhibits have been filed electronically.

(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed August 23, 1994. (File Nos. 33-69268 and
811-8042).

(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 3, 1995. (File Nos. 33-69268 and
811-8042).

(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed April 21, 1995. (File Nos. 33-69268 and
811-8042).

(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed February 16, 1996. (File Nos. 33-69268
and 811-8042).

(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed February 10, 1997. (File Nos. 33-69268
and 811-8042).

(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed April 22, 1998. (File Nos. 33-69268 and
811-8042).

<PAGE>

(h) (i) Conformed copy of Amended and Restated
Agreement for Fund Accounting Services,
Aministrative Services, Transfer Agency
Services, and Custody Services
Procurement; +

(ii) Conformed copy of Amended and Restated
Shareholder Services Agreement; (16) (i) Conformed copy of
Opinion and Consent of Counsel as to legality of shares
being registered; (2)

(j)Consent of Independent Auditors; (17)
(k)Not Applicable;

(l) Conformed copy of Initial Capital Understanding;(2)

(m) Conformed Copy of Distribution Plan of the
Registrant; (12)
(n) Copy of Financial Data Schedules; (to be filed by
amendment)
(o) Not applicable
(p) Conformed copy of Power of Attorney; (18)

+ All exhibits have been filed electronically.

(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 29, 1994. (File Nos. 33-69268 and
811-8042).

(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed February 10, 1997. (File Nos. 33-69268
and 811-8042).

(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed March 9, 1998. (File Nos. 33-69268 and
811-8042).

(17) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 on Form N-1A filed April 22, 1998. (File Nos. 33-69268 and
811-8042).

(18) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed February 5, 1999. (File Nos. 33-69268
and 811-8042).

<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:

None

Item 25. INDEMNIFICATION: (1)

Item 26. Business and Other Connections of Investment Adviser:

(a) For a description of the other business of the investment adviser, see
the section entitled "Who Manages the Fund" in Part A. The affiliations
with the Registrant of four of the Trustees and one of the Officers of
the investment adviser are included in Part B of this Registration
Statement under "Who Manages and Provides Services to the Fund." 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, Halbrook & Bayard), 107 W. Market
Street, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are:

Executive Vice Presidents:
William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents:
Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents:
Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen

- ---------------------------------------------
(1) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 10, 1993. (File Nos.

33-69268 and 811-8042).

Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Marc Halperin

Assistant Vice Presidents:
Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II

B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Gary Farwell

Secretary: Stephen A. Keen

Treasurer: Thomas R. Donahue

Assistant Secretaries:
Thomas R. Donahue
Richard B. Fisher
Christine I. Newcamp

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment adviser is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania
15222-3779. These individuals are also officers of a majority of the investment
advisers to the investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.

<PAGE>

ITEM 27. PRINCIPAL UNDERWRITERS:

(a) Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end
investment companies, including the Registrant:

Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal FundsTrust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief

1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.

Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President

1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.

Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

Item 28. 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

1001 Liberty Avenue
Pittsburgh, PA 15222-3779

FEDERATED SHAREHOLDER P.O. Box 8600

SERVICES COMPANY Boston, MA 02266-8600

Transfer Agent, Dividend
Disbursing Agent and
Portfolio Recordkeeper

FEDERATED SERVICES Federated Investors Tower
COMPANY 1001 Liberty Avenue
Administrator Pittsburgh, PA 15222-3779

FEDERATED ADVISERS Federated Investors Tower

Investment Adviser 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

FEDERATED GLOBAL RESEARCH 175 Water Street
CORP. New York, NY 10038-4965
Investment Adviser

STATE STREET BANK AND P.O. Box 8600
---------------------
TRUST COMPANY Boston, MA 02266-8600

Custodian

Item 29. MANAGEMENT SERVICES: Not applicable.

Item 30. UNDERTAKINGS:

Registrant hereby undertakes to comply with the provisions of Section
16(c) of the 1940 Act with respect to the removal of Trustees and the
calling of special shareholder meetings by shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INSURANCE SERIES,
certifies that it has duly caused this Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 18th day of
February, 1999.

FEDERATED INSURANCE SERIES

BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue

February 18, 1999

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/ Matthew S. Hardin

Matthew S. Hardin Attorney In Fact February 18, 1999
ASSISTANT SECRETARY For the Persons

Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

J. Christopher Donahue* President and Trustee

Richard J. Thomas* Treasurer
(Principal Financial and
Accounting Officer)

Henry A. Frantzen* Chief Investment Officer

William D. Dawson, III* Chief Investment Officer

J. Thomas Madden* Chief Investment Officer

Thomas G. Bigley* Trustee

Nicholas P. Constantakis* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

John E. Murray, Jr.* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

John S. Walsh* Trustee

* By Power of Attorney

Exhibit (b)(i) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES

AMENDMENT #1
TO THE BY-LAWS

(EFFECTIVE FEBRUARY 23, 1998)

Delete Sections 1, 2 and 3 of Article I, OFFICERS AND THEIR ELECTION, and
replace with:

Section 1. OFFICERS. The Officers of the Trust shall be a President, one
or more Vice Presidents, a Treasurer, and a Secretary. The Board of
Trustees, in its discretion, may also elect or appoint a Chairman of the
Board of Trustees (who must be a Trustee) and other Officers or agents,
including one or more Assistant Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers. A Vice President, the
Secretary or the Treasurer may appoint an Assistant Vice President, an
Assistant Secretary or an Assistant Treasurer, respectively, to serve
until the next election of Officers. Two or more offices may be held by
a single person except the offices of President and Vice President may
not be held by the same person concurrently. It shall not be necessary
for any Trustee or any Officer to be a holder of shares in any Series or
Class of the Trust.

Section 2. ELECTION OF OFFICERS. The Officers shall be elected annually
by the Trustees. Each Officer shall hold office for one year and until
the election and qualification of his successor, or until earlier
resignation or removal. The Chairman of the Board of Trustees, if there
is one, shall be elected annually by and from the Trustees, and serve
until a successor is so elected and qualified, or until earlier
resignation or removal.

Section 3. RESIGNATIONS AND REMOVALS AND VACANCIES. Any Officer of the
Trust may resign at any time by filing a written resignation with the
Board of Trustees (or Chairman of the Trustees, if there is one), with
the President, or with the Secretary. Any such resignation shall take
effect at the time specified therein or, if no time is specified, at the
time of receipt. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective. Any
Officer elected by the Board of Trustees or whose appointment has been
ratified by the Board of Trustees may be removed with or without cause
at any time by a majority vote of all of the Trustees. Any other
employee of the Trust may be removed or dismissed at any time by the
President. Any vacancy in any of the offices, whether by resignation,
removal or otherwise, may be filled for the unexpired portion of the
term by the President. A vacancy in the office of Assistant Vice
President may be filled by a Vice President; in the office of Assistant
Secretary by the Secretary; or in the office of Assistant Treasurer by
the Treasurer. Any appointment to fill any vacancy shall serve subject
to ratification by the Board of Trustees at its next regular meeting.

Exhibit (b)(ii) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES

AMENDMENT #2
TO THE BY-LAWS

(EFFECTIVE FEBRUARY 27, 1998)

Delete Section 5 PROXIES of Article IV SHAREHOLDERS' MEETINGS, and replace with
the following:

Section 5. PROXIES. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic
means including facsimile, or by proxy, but no proxy which is dated more
than six months before the meeting named therein shall be accepted
unless otherwise provided in the proxy. Every proxy shall be in writing,
subscribed by the shareholder or his duly authorized agent or be in such
other form as may be permitted by law, including documents conveyed by
electronic transmission. Every proxy shall be dated, but need not be
sealed, witnessed or acknowledged. The placing of a shareholder's name
on a proxy or authorizing another to act as the shareholder's agent,
pursuant to telephone or electronically transmitted instructions
obtained in accordance with procedures reasonably designed to verify
that such instructions have been authorized by such shareholder, shall
constitute execution of a proxy by or on behalf of such shareholder.
Where Shares are held of record by more than one person, any co-owner or
co-fiduciary may execute the proxy or give authority to an agent, unless
the Secretary of the Trust is notified in writing by any co-owner or
co-fiduciary that the joinder of more than one is to be required. All
proxies shall be filed with and verified by the Secretary or an
Assistant Secretary of the Trust, or the person acting as Secretary of
the Meeting. Unless otherwise specifically limited by their term, all
proxies shall entitle the holders thereof to vote at any adjournment of
such meeting but shall not be valid after the final adjournment of such
meeting.

Exhibit (b)(iii) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES

AMENDMENT #3
TO THE BY-LAWS

(EFFECTIVE MAY 12, 1998)

Strike Section 3 - Place of Meeting of Article IV - Shareholders' Meetings and
replace it with the following:

Section 3. PLACE OF MEETING. Meetings of the shareholders of the Trust
or a particular Series or Class shall be held at such place within or
without The Commonwealth of Massachusetts as may be fixed from time to
time by resolution of the Trustees.

Strike Section 6 - Place of Meeting of Article V - Trustees' Meetings and
replace it with the following:

Section 6. PLACE OF MEETING. Meetings of the Trustees shall be held at
such place within or without The Commonwealth of Massachusetts as fixed
from time to time by resolution of the Trustees, or as the person or
persons requesting said meeting to be called may designate, but any
meeting may adjourn to any other place.

Exhibit (h)(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

AMENDED & RESTATED

AGREEMENT

FOR

FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES

AND

CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of March 1, 1996, and amended and restated as of September
1, 1997, 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 5800 Corporate Drive, Pittsburgh, PA 15237-7000 (the "Investment Company"),
on behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Investment Company, and FEDERATED SERVICES
COMPANY, a Pennsylvania corporation, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on
behalf of itself and its subsidiaries (the "Company").

WHEREAS, the Investment Company 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");

WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
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 desires to accept such appointment;

WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined), if
so indicated on Exhibit, and the Company desires to accept such appointment;

WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined) 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 Investment Company 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

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 Investment Company 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 Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, 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 realized 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 Investment Company, 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 Investment
Company are the property of the Investment Company and further agrees
to surrender promptly to the Investment Company such records upon the
Investment Company's request;

G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and

H. Such other similar services as may be reasonably requested by the
Investment Company.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."

ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.

A. The Funds will compensate the Company for Fund Accounting Services 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.
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; 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 Investment Company; independent auditors
expenses; legal and audit department expenses billed to the Company for
work performed related to the Investment Company, the Funds, or the
Classes; law firm expenses; organizational 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 attributable to the Fund
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 Investment Company 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 Fund Accounting Services. Such person or persons may be
affiliates of the Company, third-party service providers, or they may
be officers and employees who are employed by both the Company and the
Investment Company; provided, however, that the Company shall be as
fully responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The compensation
of such person or persons shall be paid by the Company and no
obligation shall be incurred on behalf of the Investment Company, the
Funds, or the Classes in such respect.

SECTION TWO: ADMINISTRATIVE SERVICES.

ARTICLE 4. APPOINTMENT.

The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth in
Article 5 of this Agreement in return for the compensation set forth in Article
9 of this Agreement.

ARTICLE 5. THE COMPANY'S DUTIES.

As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its portfolios:

A. prepare, file, and maintain the Investment Company's governing documents
and any amendments thereto, including the Charter (which has already been
prepared and filed), the By-laws and minutes of meetings of the Board and
Shareholders;

B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements for the
Investment Company and the Investment Company's 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
Investment Company to make a continuous offering of its shares;

C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's investment
advisers and distributors, subject to any applicable restrictions of the Board
or the 1940 Act;

D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;

E. prepare and file the Investment Company's tax returns;

F. coordinate the layout and printing of publicly disseminated prospectuses
and reports;

G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;

H. assist with the design, development, and operation of the Investment
Company and the Funds;

I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who will be
responsible for the management of certain of the Investment Company's affairs as
determined by the Investment Company's Board; and

J. consult with the Investment Company and its Board on matters concerning
the Investment Company and its affairs.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."

ARTICLE 6. RECORDS.

The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Investment Company. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company's
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.

ARTICLE 7. DUTIES OF THE FUND.

The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.

ARTICLE 8. EXPENSES.

The Company 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 Investment Company, including the compensation of
the Company employees who serve as trustees or directors or officers of the
Investment Company. The Investment Company shall be responsible for all other
expenses incurred by the Company on behalf of the Investment Company, including
without limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, or other professional services, organizational expenses,
insurance premiums, fees payable to persons who are not the Company's employees,
trade association dues, and other expenses properly payable by the Funds and/or
the Classes.

ARTICLE 9. COMPENSATION.

For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
Fund, as specified below.

The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and 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 the
Fund.

MAX. ADMIN. 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
(Average Daily Net Asset break-points are on a complex-wide basis)

However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in this
Article 9 may increase annually upon each March 1 anniversary of this Agreement
over the minimum fee during the prior 12 months, as calculated under this
agreement, in an amount equal to the increase in Pennsylvania Consumer Price
Index (not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.

ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.

A. The Company shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Investment Company 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. The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) 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, director, trustee,
partner, employee or agent of the Company, who may be or become an officer,
director, trustee, partner, employee or agent of the Investment Company, shall
be deemed, when rendering services to the Investment Company or acting on any
business of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering such
services to or acting solely for the Investment Company and not as an officer,
director, trustee, partner, employee or agent or one under the control or
direction of the Company even though paid by the Company.

B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in performing the
Administrative Services in accordance with the above standards. In order that
the indemnification provisions contained in this Article 10 shall apply,
however, it is understood that if in any case the Investment Company may be
asked to indemnify or hold the Company harmless, the Investment Company shall be
fully and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the Investment Company. The Investment Company
shall have the option to defend the Company against any claim which may be the
subject of this indemnification. In the event that the Investment Company so
elects, it will so notify the Company and thereupon the Investment Company shall
take over complete defense of the claim, and the Company shall in such situation
initiate no further legal or other expenses for which it shall seek
indemnification under this Article. The Company shall in no case confess any
claim or make any compromise in any case in which the Investment Company will be
asked to indemnify the Company except with the Investment Company's written
consent.

SECTION THREE: TRANSFER AGENCY SERVICES.

ARTICLE 11. TERMS OF APPOINTMENT.

Subject to the terms and conditions set forth in this Agreement, the
Investment Company 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.

ARTICLE 12. 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 Investment Company 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) 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; and

(2) The Company shall maintain records of account for each Fund and Class
and advise the Investment Company, 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
Investment Company 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;

(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 faclities and procedures for
safekeeping of check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such forms and
devices.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."

ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.

A. Compliance

The Investment Company 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. Distributions

The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.

ARTICLE 14. COMPENSATION AND EXPENSES.

A. Annual Fee

For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company 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 Investment Company 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 Investment
Company 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 Investment Company 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.

SECTION FOUR: CUSTODY SERVICES PROCUREMENT.

ARTICLE 15. APPOINTMENT.

The Investment Company 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 16. THE COMPANY AND ITS DUTIES.

Subject to the review, supervision and control of the Board, the Company
shall:

A. evaluate and obtain custody services from a financial institution
that meets the criteria established in Section 17(f) of the 1940 Act
and has been approved by the Board as being eligible for selection by
the Company as an Eligible Custodian;

B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;

C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;

D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;

E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature and
amount of disbursements made on account of the each Fund 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;

F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian; and

The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter be
referred to as "Custody Services Procurement."

ARTICLE 17. FEES AND EXPENSES.

A. Annual Fee

For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with the
fees agreed upon from time to time.

B. Reimbursements

In addition to the fee paid under Section 11A above, the Investment
Company 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 Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.

C. Payment

ARTICLE 18. 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 Four of
this Agreement.

SECTION FIVE: GENERAL PROVISIONS.

ARTICLE 19. PROPER INSTRUCTIONS.

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 Investment
Company, 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
Investment Company, 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 20. ASSIGNMENT.

Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement 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. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract for
the performance of Transfer Agency Services with

(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, 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

(2) such other provider of services duly registered as a transfer agent
under Section 17A(c)(1) as Company shall select.

The Company shall be as fully responsible to the Investment Company for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.

C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent
on the part of the Investment Company subcontract for the performance
of such services with Federated Administrative Services, a wholly-owned
subsidiary of the Company.

D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with
an Agent selected by the Investment Company, other than as described in
B. and C. above; provided, however, that the Company shall in no way be
responsible to the Investment Company for the acts and omissions of the
Agent.

ARTICLE 21. DOCUMENTS.

A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following documents:

(1) A copy of the Charter and By-Laws of the Investment Company and all
amendments thereto;

(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;

(3) Printed documentation from the recordkeeping system representing
outstanding Share certificates of the Investment Company or the Funds;

(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 Investment Company 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 Investment Company;

(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) Such other certifications, documents or opinions which the Company may,
in its discretion, deem necessary or appropriate in the proper performance of
its duties; and

(6) Revisions to the Prospectus of each Fund.

ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company

The Company represents and warrants to the Fund that:

(1) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;

(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and in the
Commonwealth of Pennsylvania;

(3) it is empowered under applicable laws and by its Articles of
Incorporation 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 an administrator and fund accountant; and

B. Representations and Warranties of the Investment Company

The Investment Company 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 Investment Company 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 23. STANDARD OF CARE AND INDEMNIFICATION.

A. Standard of Care

With regard to Sections One, Three and Four, 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 Investment Company) 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 Investment Company

The Company shall not be responsible for and the Investment Company 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 Investment Company 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
Investment Company 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 Investment Company.

(3) The reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Investment Company 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 23.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to
meet the standard of care set forth in 23.A. above.

C. Reliance

At any time the Company may apply to any officer of the Investment
Company 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 Investment Company 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 Investment Company 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
23 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 24. TERM AND TERMINATION OF AGREEMENT.

This Agreement shall be effective from September 1, 1997, and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue for 18
month terms. The Agreement can be terminated by either party upon 18 months
notice to be effective as of the end of such 18 month period. In the event,
however, of willful misfeasance, bad faith, negligence or reckless disregard of
its duties by the Company, the Investment Company has the right to terminate the
Agreement upon 60 days written notice, if Company has not cured such willful
misfeasance, bad faith, negligence or reckless disregard of its duties within 60
days. The termination date for all original or after-added Investment companies
which are, or become, a party to this Agreement. shall be coterminous.
Investment Companies that merge or dissolve during the Term, shall cease to be a
party on the effective date of such merger or dissolution.

Should the Investment Company exercise its rights to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination.

The provisions of Articles 10 and 23 shall survive the termination of this
Agreement.

ARTICLE 25. AMENDMENT.

This Agreement may be amended or modified by a written agreement executed by
both parties.

ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.

In connection with the operation of this Agreement, the Company and the
Investment Company 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 27. 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 28. NOTICES.

Except as otherwise specifically provided herein, Notices and other writings
delivered or mailed postage prepaid to the Investment Company at , , or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to such other address as the Investment Company or the Company may hereafter
specify, shall be deemed to have been properly delivered or given hereunder to
the respective address.

ARTICLE 29. COUNTERPARTS.

This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original. ARTICLE 30.
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 appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.

ARTICLE 31. 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 32. SUCCESSOR AGENT.

If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company 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 33. 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 34. 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 all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.

ARTICLE 35. SEVERABILITY.

In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.

ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
INVESTMENT COMPANY.

The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment 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 Investment Company, but bind only the
property of the Fund, or Class, as provided in the Declaration of Trust.

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.

INVESTMENT COMPANIES

(LISTED ON EXHIBIT 1)

By: /S/ S. ELLIOTT COHAN

Name: S. Elliott Cohan
Title: Assistant Secretary

FEDERATED SERVICES COMPANY

By: /S/ THOMAS J. WARD

Name: Thomas J. Ward
Title: Secretary

<PAGE>

EXHIBIT 1

Federated Insurance Series

Federated American Leaders Fund II
Federated Utility Fund II

Federated Fund for U.S. Government Securities II
Federated High Income Bond Fund II

Federated Prime Money Fund II
Federated International Equity Fund II

Federated Growth Strategies Fund II
Federated Equity Income Fund II