Federated Insurance Series 485APOS 4/10/02

485APOS 1 form.htm Federated Insurance Series 485APOS 4/10/02




                                                             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
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    Pre-Effective Amendment No.         ....................
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    Post-Effective Amendment No. 34 ........................        X
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                                        and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940     X
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    Amendment No.   35  ....................................        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)
 X   60 days after filing pursuant to paragraph (a) (i)
   on pursuant to paragraph (a) (i)
    75 days after filing pursuant to paragraph (a)(ii)
    on                pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

    This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.






                                      Copies To:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C.  20037

Federated Investors
World-Class Investment Manager

Federated Kaufmann Fund II

A Portfolio of Federated Insurance Series

PROSPECTUS

April 30, 2002

A mutual fund seeking capital appreciation by investing primarily in common stocks.

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

Fund Shares are available exclusively as a funding vehicle for life insurance companies writing variable life insurance policies and variable annuity contracts. 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.

NOT FDIC INSURED * MAY LOSE VALUE * NO BANK GUARANTEE

Risk/Return Summary 1

What are the Fund's Investment Strategies? 1

What are the Principal Securities in Which the Fund Invests? 2

What are the Specific Risks of Investing in the Fund? 3

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Prior Performance of Related Fund 4

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What Do Shares Cost? 5

How is the Fund Sold? 5

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How to Purchase and Redeem Shares 5

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Account and Share Information 6

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Who Manages the Fund? 6

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Financial Information 6

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?

To achieve its objective, the Fund invests primarily in the stocks of small and medium-sized companies that are traded on national security exchanges, the NASDAQ stock market and on the over-the-counter market. Up to 25% of the Fund's net assets may be invested in foreign 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:

Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's share price may decline suddenly or over a sustained period of time.
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.
Risks Related to Company Size. Because the smaller companies in which the Fund may invest may have unproven track records, a limited product or service base and limited access to capital, they may be more likely to fail than larger companies.
Liquidity Risks. The equity securities in which the Fund invests may be less readily marketable and may be subject to greater fluctuation in price that other securities.
Sector Risks. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments which affect those sectors emphasized by the Fund.
Risks of Foreign Investing. Because the Fund invests in securities issued by foreign companies, the Fund's share price may be more affected by foreign economic and political conditions, taxation policies and accounting and auditing standards than could otherwise be the case.
Currency Risks. Exchange rates for currencies fluctuate daily. Foreign securities are normally denominated and traded in foreign currencies. As a result, the value of the Fund's foreign investments and the value of the shares may be affected favorably or unfavorably by changes in currency exchange rates relative to the U.S. dollar.

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

A performance bar chart and total return information for the Fund will be provided after the Fund has been in operation for a full calendar year.

What are the Fund's Investment Strategies?

In seeking to meet its objective, the Fund invests primarily in the stocks of small and medium-sized companies that are traded on national security exchanges, NASDAQ stock market and on the over-the-counter market. Up to 25% of the Fund's net assets may be invested in foreign securities. When deciding which securities to buy the Fund considers:

the growth prospects of existing products and new product development;
the economic outlook of the industry;
the price of the security and its estimated fundamental value; and
relevant market, economic and political environments.

The Fund's Adviser and Sub-Adviser (collectively, "Adviser") use a bottom-up approach to portfolio management. There is an emphasis on individual stock selection rather than trying to time the highs and lows of the market or concentrating in certain industries or sectors. This hands-on approach means that in addition to sophisticated computer analysis, the Adviser may conduct in-depth meetings with management, industry analysts and consultants. Through this interaction with companies the Adviser seeks to develop a thorough knowledge of the dynamics of the businesses in which the Fund invests.

The Fund assesses individual companies from the perspective of a long-term investor. It buys stocks of companies that it believes:

are profitable and leaders in the industry;
have distinct products and services which address substantial markets;
can grow annual earnings by at least 20% for the next three to five years; and
have superior proven management and solid balance sheets.

Typically, the Fund sells an individual security when the company fails to meet expectations, there is a deterioration of underlying fundamentals or the intermediate and long-term prospects become poor.

The Fund may loan up to 30% of its total assets in the form of its portfolio securities to unaffiliated broker-dealers, banks or other recognized institutional borrowers to generate additional income. The Fund receives cash, U.S. Treasury obligations, and/or other liquid securities as collateral. The Fund also may invest up to 15% of its net assets in illiquid securities.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by investing its assets in cash and shorter-term 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?

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 principal types of equity securities in which the Fund may invest.

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.

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.

ILLIQUID SECURITIES

Illiquid securities are securities for which there is no readily available market or securities with legal or contractual restrictions. These may include private placements, repurchase agreements maturing in more than seven days, and securities eligible for resale under Rule 144A of the Securities Act of 1933.

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.

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.

Treasury Securities

The Fund may receive Treasury securities as collateral on portfolio securities loans and may invest in Treasury securities on a short-term basis. Treasury securities are direct obligations of the federal government of the United States. Treasury securities are generally regarded as having the lowest credit risks.

Special Transactions

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Fund's custodian deems creditworthy. In return, the Fund receives cash, U.S. Treasury obligations or other 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 interest rate risks and credit risks. These transactions may create leverage risks.

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.

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.

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 companies with larger market capitalizations.

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.

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.

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.

Over-the-counter (OTC) derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

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 completely as companies in the United States. Foreign companies may also receive less coverage than U.S. 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. Foreign securities are normally denominated and traded in foreign currencies. As a result, the value of the Fund's foreign investments and the value of the shares may be affected favorably or unfavorably by changes in currency exchange rates relative to the U.S. dollar.

The Adviser attempts to limit 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.

CREDIT RISKS

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.

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.

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the interest rate paid by similar securities. Generally when interest rates rise, prices of fixed income securities fall. However, market factors, such as the demand for particular fixed income securities, may cause the price of certain fixed income securities to fall while the prices of other securities rise or remain unchanged.

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Prior Performance of Related Fund

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Because the Fund and Federated Kaufmann Fund ("FKF") are both managed by the Adviser and Sub-Adviser, have the same investment objective and substantially similar investment strategies, historical performance information for FKF may be of interest to Fund investors, and is presented in the following table.

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Average Annual Total Returns¹ for the periods ended March 31, 2002:

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1 Year		13.32%
5 Years		13.31%
10 Years		15.09%

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1 Performance figures are for the Class K Shares of FKF. FKF is the successor to The Kaufmann Fund, Inc. (Kaufmann Fund) pursuant to a reorganization that took place on April 23, 2001. Prior to that date FKF had no investment operations. Accordingly the performance information for the periods prior to April 23, 2001 is historical information of the Kaufmann Fund. The Kaufmann Fund was managed by Edgemont Asset Management Corp. and had the same investment policies as FKF. Kaufmann Fund shareholders received Class K Shares of the Fund as a result of the reorganization. Class K Shares are sold at NAV, but are subject to a 0.20% redemption fee which is reflected in the total return figures. FKF offers other classes of shares, whose performance will differ, due to differences in charges and expenses.

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With respect to the information contained in this table, please note the following:

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The performance history relates solely to FKF and should not be considered as an indication of the past or future performance of the Fund (or the future performance of FKF);
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The performance history of FKF is not a substitute for the performance history of the Fund;
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Any differences in factors such as the timing and magnitude of cash flows into each fund and the applicable charges and expenses incurred, will contribute to differing performance between the two funds in any given period;
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Unlike the Fund, FKF is not offered to investors through a variable insurance product contract. Thus, its performance does not reflect any charges and expenses that would be imposed under a variable insurance product contract. Had the effect of such charges been included, the performance figures for FKF would be lower; and
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Mutual fund performance changes over time and may vary significantly from what is shown above. Investment return and principal value will fluctuate, so when shares are redeemed they may be worth more or less than the original cost.
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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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund's assets may change on days you cannot purchase or redeem Shares. NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund generally values equity securities according to the last sales price in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

How is the Fund Sold?

The Fund's Distributor, Federated Securities Corp., 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.

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 up to 0.25% for 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 marketing fees. The Fund has no present intention of paying or accruing the distribution (12b-1) fee during the fiscal year ending December 31, 2002.

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:

orders in proper form by 8:00 a.m. (Eastern time) on the next business day; and
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 Investment Management Company. 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 Adviser may delegate daily management of some Fund assets to the Sub-Adviser, Federated Global Investment Management Corp., who is paid by the Adviser and not by the Fund, based on the portion of foreign securities the Sub-Adviser manages. The Sub-Adviser's address is 175 Water Street, New York, NY 10038-4965.

The Adviser and other subsidiaries of Federated advise approximately 139 mutual funds and separate accounts, which totaled approximately $180 billion in assets as of December 31, 2001. Federated was established in 1955 and is one of the largest mutual fund investment managers in the United States with approximately 1,800 employees. More than 4,000 investment professionals make Federated Funds available to their customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

Lawrence Auriana

Lawrence Auriana has been the Fund's portfolio manager since April 2002. He is Co-Head of Investment Area. Mr. Auriana was the portfolio manager of the Fund's predecessor, the Kaufmann Fund, from 1985 to 2001. From 1984 to 2001, he was the President and Treasurer of Edgemont Asset Management Corp., the adviser to the Kaufmann Fund. Mr.Auriana has been engaged in the securities business since 1965.

Hans P. Utsch

Hans P. Utsch has been the Fund's portfolio manager since April 2002. He is Co-Head of Investment Area. Mr. Utsch was the portfolio manager of the Fund's predecessor, the Kaufmann Fund, from 1985 to 2001. From 1984 to 2001, he was Chairman of the Board and Secretary of Edgemont Asset Management Corp., the adviser to the Kaufmann Fund. Mr. Utsch has been engaged in the securities business since 1962.

Aash M. Shah

Aash M. Shah has been the Fund's Portfolio Manager since April 2002. Mr. Shah joined Federated in 1993 and has been a Portfolio Manager and a Vice President of the Fund's Adviser since January 1997. Mr. Shah was a Portfolio Manager and served as an Assistant Vice President of the Adviser from 1995 through 1996, and as an Investment Analyst from 1993 to 1995. Mr. Shah received his Masters in Industrial Administration from Carnegie Mellon University with a concentration in finance and accounting. Mr. Shah is a Chartered Financial Analyst.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 1.425% 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.

Financial Information

FINANCIAL HIGHLIGHTS

The Fund's fiscal year end is December 31. As this is the Fund's first fiscal year, financial information is not yet available.

A Statement of Additional Information (SAI) dated April 30, 2002, is incorporated by reference into this prospectus. Additional information about the Fund and its investments is contained in the Fund's SAI and 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, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by writing to or visiting the SEC's Public Reference Room in Washington, DC. You may also access Fund information from the EDGAR Database on the SEC's Internet site at http://www.sec.gov. You can purchase copies of this information by contacting the SEC by email at publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for information on the Public Reference Room's operations and copying fees.

Federated
World-Class Investment Manager
Federated Kaufmann Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com
Contact us at 1-800-341-7400 or
www.federatedinvestors.com/contact
Federated Securities Corp., Distributor

Investment Company Act File No. 811-8042

Federated is a registered mark of Federated Investors, Inc. 2002 ©Federated Investors, Inc.

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Cusip 313916827

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27258 (4/02)

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FEDERATED KAUFMANN FUND II

A Portfolio of Federated Insurance Series

Statement of Additional Information
April 30, 2002

This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectus for Federated Kaufmann Fund II (Fund), dated May 1,
2002. Obtain the prospectus without charge by calling 1-800-341-7400.

(4/02)

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.?..........
Investment Ratings.........................
Addresses..................................

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's investment adviser is Federated Investment
Management Company (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 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 may invest.
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.
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.
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.
Warrants
Up to 5% of the Fund's assets may be invested in 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.

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.

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.
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.
The Fund may receive Treasury securities as collateral on portfolio securities
loans and may invest in Treasury securities on a short-term basis. The Fund also may
invest in the following types of fixed income securities.
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
interest rate and prepayment risks of these mortgage backed 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.
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.

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.

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.
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.

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.
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.
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 stock 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:

Options
The Fund may use up to 10% of its net assets to purchase and sell put and call
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 Buy call options on portfolio securities and currencies in anticipation of an
increase in the value of the underlying asset;
o Buy put options on portfolio securities and currencies in anticipation of a
decrease in the value of the underlying asset; and
o Buy or write options to close out existing options positions.
The Fund may also write call options on portfolio securities and currencies 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.

The Fund may also write put options on portfolio securities and currencies 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.

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.

Special Transactions

Inter-Fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that permits
the Fund and all other funds advised by subsidiaries of Federated Investors, Inc.
("Federated funds") to lend and borrow money for certain temporary purposes directly
to and from other Federated funds. Participation in this inter-fund lending program
is voluntary for both borrowing and lending funds, and an inter-fund loan is only
made if it benefits each participating fund. Federated Investors, Inc. (Federated)
administers the program according to procedures approved by the Fund's Board of
Trustees (Board), and the Board monitors the operation of the program. Any inter-fund
loan must comply with certain conditions set out in the exemption, which are designed
to assure fairness and protect all participating funds.
For example, inter-fund lending is permitted only: (a) to meet shareholder
redemption requests; and (b) to meet commitments arising from "failed" trades. All
inter-fund loans must be repaid in seven days or less. The Fund's participation in
this program must be consistent with its investment policies and limitations, and
must meet certain percentage tests. Inter-fund loans may be made only when the rate
of interest to be charged is more attractive to the lending fund than
market-competitive rates on overnight repurchase agreements (the "Repo Rate") and
more attractive to the borrowing fund than the rate of interest that would be charged
by an unaffiliated bank for short-term borrowings (the "Bank Loan Rate"), as
determined by the Board. The interest rate imposed on inter-fund loans is the average
of the Repo Rate and the Bank Loan Rate.

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 interest rate risks for the Fund. Delayed delivery transactions
also involve credit risks in the event of a counterparty default. These transactions
create leverage risks.

Securities Lending
The Fund may lend portfolio securities to borrowers that the Fund's custodian 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 interest rate risks and credit risks.
These transactions may create leverage 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 without 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, including
the securities of affiliated money market funds, as an efficient means of carrying
out its investment policies and managing its uninvested cash.

Illiquid Securities
The Fund may invest up to 15% of its net assets in illiquid securities. Illiquid
securities are securities for which there is no readily available market or
securities with legal or contractual restrictions. These may include private
placements, repurchase agreements maturing in more than seven days, and securities
eligible for resale under Rule 144A of the Securities Act of 1933 ("1933 Act"). Rule
144A allows certain qualified institutional investors to trade privately placed
securities despite the fact that such securities are not registered under the 1933
Act. In deciding whether to purchase such securities, the Fund, acting pursuant to
guidelines approved by the board, will consider the frequency of such trades and
quotes, the number of dealers and potential purchasers, dealer undertakings to make a
market, the nature of the securities and the marketplace trades.

Borrowing for Leverage
The Fund may borrow from banks for temporary or emergency purposes, clearing
transactions or for other investment purposes. Borrowing to purchase securities is a
speculative practice known as leveraging, which increases stock market risk by
magnifying the effect of any change in the market value of the Fund's portfolio.
Interest paid on any borrowed funds may have the effect of lowering the Fund's
return. In addition, the Fund may have to sell the securities when it would normally
keep them in order to make interest payments.

Short Sales
The Fund may make short sales of securities listed on one or more national exchanges
or on the Nasdaq Stock Market. A short sale means selling a security the Fund does
not own to take advantage of an anticipated decline in the stock's price. Once the
Fund sells the security short, it has an obligation to replace the borrowed security.
If it can buy the security back at a lower price, a profit results. In no event will
the Fund engage in short sales transactions if it would cause the market value of all
of the Fund's securities sold short to exceed 25% of its net assets. The value of the
securities of any one issuer that may be shorted by the Fund is limited to the lesser
of 2% of the value of the Fund's net assets or 2% of the securities of any class of
the issuer. The Fund may also "sell short against the box," i.e., the Fund owns
securities identical to those sold short. Short sales against the box are not subject
to the 25% limitation. A capital gain is recognized immediately upon entering into a
short sale against the box with respect to an appreciated security. Short sales are
speculative in nature, and may reduce returns or increase volatility.

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.

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
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 of securities may also lead to an increase in their 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 Over-the-counter (OTC) derivative contracts generally carry greater liquidity
risk than exchange-traded contracts.

Risks of Foreign Investing
o 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.
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 U.S. 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.
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.

Currency Risks
o Exchange rates for currencies fluctuate daily. Foreign securities are normally
denominated and traded in foreign currencies. As a result, the value of the Fund's
foreign investments and the value of the shares may be affected favorably or
unfavorably by changes in currency exchange rates relative to the U.S. dollar.
o The Adviser attempts to limit 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.

Leverage Risks

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

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.

Interest Rate Risks
o Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

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

Diversification
With respect to securities comprising 75% of the value of its total assets, the Fund
will not purchase securities of any one issuer (other than cash; cash items;
securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by such
U.S. government securities; and securities of other investment companies) if, as a
result, more than 5% of the value of its total assets would be invested in the
securities of that issuer, or the Fund would own more than 10% of the outstanding
voting securities of that issuer.

Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry. For
purposes of this restriction, the term concentration has the meaning set forth in the
Investment Company Act of 1940 (1940 Act), any rule or order thereunder, or any SEC
staff interpretation thereof. Government securities and municipal securities will not
be deemed to constitute an industry.

Underwriting
The Fund may not underwrite the securities of other issuers, except that the Fund may
engage in transactions involving the acquisition, disposition or resale of its
portfolio securities, under circumstances where it may be considered to be an
underwriter under the Securities Act of 1933.

Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund may
purchase securities of companies that deal in commodities. For purposes of this
restriction, investments in transactions involving futures contracts and options,
forward currency contracts, swap transactions and other financial contracts that
settle by payment of cash are not deemed to be investments in commodities.

Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction does
not prevent the Fund from investing in issuers which invest, deal, or otherwise
engage in transactions in real estate or interests therein, or investing in
securities that are secured by real estate or interests therein. The Fund may
exercise its rights under agreements relating to such securities, including the right
to enforce security interests and to hold real estate acquired by reason of such
enforcement until that real estate can be liquidated in an orderly manner.

Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior securities to the
maximum extent permitted under the 1940 Act, any rule or order thereunder, or any SEC
staff interpretation thereof.

Lending
The Fund may not make loans, provided that this restriction does not prevent the Fund
from purchasing debt obligations, entering into repurchase agreements, lending its
assets to broker/dealers or institutional investors and investing in loans, including
assignments and participation interests.
The above limitations cannot be changed unless authorized by the Board and by the
"vote of a majority of its outstanding voting securities," as defined by the 1940 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.

Illiquid Securities
The Fund will not purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in more than
seven days, if immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Fund's net assets.

Investing in 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. At the present time, the Fund expects that its investments
in other investment companies may include shares of money market funds, including
funds affiliated with the Fund's investment adviser.
The Fund may invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

Purchases on Margin
The Fund will not purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of securities,
and further provided that the Fund may make margin deposits in connection with its
use of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.

Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets, provided that
this shall not apply to the transfer of securities in connection with any permissible
borrowing or to collateral arrangements in connection with permissible activities.

Concentration
In applying the concentration restriction: (a) utility companies will be divided
according to their services (for example, gas, gas transmission, electric and
telephone will be considered a separate industry); (b) financial service companies
will be classified according to the end users of their services (for example,
automobile finance, bank finance and diversified finance will each be considered a
separate industry); and (c) asset-backed securities will be classified according to
the underlying assets securing such securities.
To conform to the current view of the SEC that only domestic bank instruments may
be excluded from industry concentration limitations, as a matter of non-fundamental
policy, the Fund will not exclude foreign bank instruments from industry
concentration limitations so long as the policy of the SEC remains in effect. In
addition, investments in bank instruments, and investments in certain industrial
development bonds funded by activities in a single industry, will be deemed to
constitute investment in an industry, except when held for temporary defensive
purposes. The investment of more than 25% of the value of the Fund's total assets in
any one industry will constitute `concentration.'
For purposes of the above 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 limitation.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
o 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;
o in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;
o futures contracts and options are generally 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 generally 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;
o for fixed income securities, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that fixed income
securities with remaining maturities of less than 60 days at the time of purchase
may be valued at amortized cost; and
o 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 are called "mixed funding." Shares used as investments by separate
accounts of unaffiliated life insurance companies are 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.) offers Shares on a continuous, best- efforts basis.

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 banks, 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. In addition, 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.
The maximum Rule 12b-1 Plan fee that can be paid in any one year may not be
sufficient to cover the marketing-related expenses the Distributor has incurred.
Therefore, it may take the Distributor a number of years to recoup these expenses.
The Fund has no present intention of paying or accruing the distribution (12b-1)
fee during the fiscal year ending December 31, 2002.

SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of 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.
The Fund has no present intention of paying or accruing the shareholder services
fee during the fiscal year ending December 31, 2002.

SUPPLEMENTAL PAYMENTS
Investment professionals (such as broker/dealers or banks) may be paid fees, in
significant amounts, out of the assets of the Distributor and/or Federated
Shareholder Services Company. (These fees do not come 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 and/or shareholder services, such as advertising, providing
incentives to their sales personnel, sponsoring other activities intended to promote
sales, and maintaining shareholder accounts. These payments may be based upon such
factors as the number or value of Shares the investment professional sells or may
sell; the value of client assets invested; and/or 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 1940 Act, 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 accounts.
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 or class, only Shares of that Fund or class 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.

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 income generated by the securities in
the portfolio, whereas tax-basis income includes, in addition, 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 will to qualify
for certain Code provisions that would allow its 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. The following
tables give information about each Board member and the senior officers of the Funds.
Where required, the tables separately list Board members who are "interested persons"
of the Fund (i.e., "Interested" Board members) and those who are not (i.e.,
"Independent" Board members). Unless otherwise noted, the address of each person
listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA. The Trust
comprises 13 portfolios and the Federated Fund Complex consists of 44 investment
companies (comprising 139 portfolios). Unless otherwise noted, each Board member:
oversees all portfolios in the Federated Fund Complex; serves for an indefinite term;
and also serves as a Board member of the following investment company complexes:
Banknorth Funds-six portfolios; CCMI Funds-one portfolio; FirstMerit Funds-two
portfolios; Regions Funds-eight portfolios; Riggs Funds-nine portfolios; and WesMark
Funds-five portfolios.

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

Name rincipal Occupation(s) for Past Aggregate Total
Birth Date ive Years, Other Directorships Compensation Compensation
Address eld and Previous Positions From Fund From Trust and
Positions Held with P (past Federated Fund
Trust F fiscal Complex (past
Date Service Began H year) calendar year)
Principal Occupations: Chief $000.00
John F. Donahue* Executive Officer and Director $0
Birth Date: July or Trustee of the Federated Fund
28, 1924 Complex; Chairman and Director,
CHAIRMAN AND TRUSTEE Federated Investors, Inc.;
Began serving Chairman, Federated Investment
September 1993 Management Company, Federated
Global Investment Management
Corp. and Passport Research, Ltd.

Previous Positions: Trustee,
Federated Investment Management
Company and Chairman and
Director, Federated Investment
Counseling.

Principal Occupations: President $000.00
J. Christopher or Executive Vice President of $0
Donahue* the Federated Fund Complex;
Birth Date: April Director or Trustee of some of
11, 1949 the Funds in the Federated Fund
PRESIDENT AND Complex; President, Chief
TRUSTEE Executive Officer and Director,
Began serving: Federated Investors, Inc.;
September 1993 President, Chief Executive
Officer and Trustee, Federated
Investment Management Company;
Trustee, Federated Investment
Counseling; President, Chief
Executive Officer and Director,
Federated Global Investment
Management Corp.; President and
Chief Executive Officer,
Passport Research, Ltd.;
Trustee, Federated Shareholder
Services Company; Director,
Federated Services Company.

Previous Position: President,
Federated Investment Counseling.

Principal Occupations: Director NA
Lawrence D. Ellis, or Trustee of the Federated Fund $117,117.17
M.D.* Complex; Professor of Medicine,
Birth Date: October University of Pittsburgh;
11, 1932 Medical Director, University of
3471 Fifth Avenue Pittsburgh Medical Center
Suite 1111 Downtown; Hematologist,
Pittsburgh, PA Oncologist and Internist,
TRUSTEE University of Pittsburgh Medical
Began serving: Center.
September 1993 Other Directorships Held:
Member, National Board of
Trustees, Leukemia Society of
America.
---------------------------------

Previous Positions: Trustee,
University of Pittsburgh;
Director, University of
Pittsburgh Medical Center.

* Family relationships and reasons for "interested" status: John F. Donahue is the
father of J. Christopher Donahue; both are "interested" due to the positions they
hold with Federated Investors, Inc. and its subsidiaries. Lawrence D. Ellis, M.D.
is "interested" because his son-in-law is employed by the Fund's principal
underwriter, Federated Securities Corp.
---------------------------------------------------------------------------------------

INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION

Name rincipal Occupation(s) for Past Aggregate Total
Birth Date ive Years, Other Directorships Compensation Compensation
Address eld and Previous Positions From Fund From Trust/ and
Positions Held with P (past Federated Fund
Trust F fiscal Complex (past
Date Service Began H year) calendar year)
Principal Occupation: Director NA
Thomas G. Bigley or Trustee of the Federated Fund $128,847.72
Birth Date: Complex.
February 3, 1934 Other Directorships Held:
15 Old Timber Trail Director, Member of Executive
Pittsburgh, PA Committee, Children's Hospital
TRUSTEE of Pittsburgh; Director, Member
Began serving: of Executive Committee,
November 1994 University of Pittsburgh.
Previous Position: Senior
Partner, Ernst & Young LLP.
---------------------------------

Principal Occupations: Director NA
John T. Conroy, Jr. or Trustee of the Federated Fund $128,847.66
Birth Date: June Complex; Chairman of the Board,
23, 1937 Investment Properties
Grubb & Corporation; Partner or Trustee
Ellis/Investment in private real estate ventures
Properties in Southwest Florida.
Corporation
3838 Tamiami Trail Previous Positions: President,
N. Investment Properties
Naples, FL Corporation; Senior Vice
TRUSTEE President, John R. Wood and
Began serving: Associates, Inc., Realtors;
September 1993 President, Naples Property
Management, Inc. and Northgate
Village Development Corporation.

Principal Occupations: Director NA
Nicholas P. or Trustee of the Federated Fund $126,923.53
Constantakis Complex; Partner, Andersen
Birth Date: Worldwide SC (prior to 9/1/97).
September 3, 1939 Other Directorships Held:
175 Woodshire Drive Director and Chairman of the
Pittsburgh, PA Audit Committee, Michael Baker
TRUSTEE Corporation (engineering and
Began serving: energy services worldwide).
February 1998

Principal Occupation: Director NA
John F. Cunningham or Trustee of the Federated Fund $115,368.
Birth Date: March Complex.
5, 1943
353 El Brillo Way Other Directorships Held:
Palm Beach, FL Chairman, President and Chief
TRUSTEE Executive Officer, Cunningham &
Began serving: Co., Inc. (strategic business
January 1999 consulting); Trustee Associate,
Boston College.

Previous Positions: Director,
Redgate Communications and EMC
Corporation (computer storage
systems); Chairman of the Board
and Chief Executive Officer,
Computer Consoles, Inc.;
President and Chief Operating
Officer, Wang Laboratories;
Director, First National Bank of
Boston; Director, Apollo
Computer, Inc.

Principal Occupation: Director NA
Peter E. Madden or Trustee of the Federated Fund $117,117.14
Birth Date: March Complex; Management Consultant.
16, 1942 Previous Positions:
One Royal Palm Way Representative, Commonwealth of
100 Royal Palm Way Massachusetts General Court;
Palm Beach, FL President, State Street Bank and
TRUSTEE Trust Company and State Street
Began serving: Corporation (retired); Director,
September 1993 VISA USA and VISA International;
Chairman and Director,
Massachusetts Bankers
Association; Director,
Depository Trust Corporation;
Director, The Boston Stock
Exchange.
---------------------------------

Principal Occupations: Director NA
Charles F. or Trustee of the Federated Fund $128,847
Mansfield, Jr. Complex; Management Consultant;
Birth Date: April Executive Vice President, DVC
10, 1945 Group, Inc.(marketing,
80 South Road communications and technology)
Westhampton Beach, (prior to 9/1/00).
NY Previous Positions: Chief
TRUSTEE Executive Officer, PBTC
Began serving: International Bank; Partner,
January 1999 Arthur Young & Company (now
Ernst & Young LLP); Chief
Financial Officer of Retail
Banking Sector, Chase Manhattan
Bank;; Senior Vice President,
HSBC Bank USA (formerly, Marine
Midland Bank); Vice President,
Citibank; Assistant Professor of
Banking and Finance, Frank G.
Zarb School of Business, Hofstra
University
---------------------------------

John E. Murray, Principal Occupations: Director NA
Jr., J.D., S.J.D. or Trustee of the Federated Fund $117,117.14
Birth Date: Complex; Chancellor and Law
December 20, 1932 Professor, Duquesne University;
Chancellor, Consulting Partner, Mollica &
Duquesne University Murray.
--------------------
Pittsburgh, PA Other Directorships Held:
TRUSTEE Director, Michael Baker Corp.
Began serving: (engineering, construction,
February 1995 operations and technical
services).

Previous Positions: President,
Duquesne University; Dean and
Professor of Law, University of
Pittsburgh School of Law; Dean
and Professor of Law, Villanova
University School of Law.

Principal Occupations: Director NA
Marjorie P. Smuts or Trustee of the Federated Fund $117,117.17
Birth Date: June Complex; Public
21, 1935 Relations/Marketing
4905 Bayard Street Consultant/Conference
Pittsburgh, PA Coordinator.
TRUSTEE Previous Positions: National
Began serving: Spokesperson, Aluminum Company
September 1993 of America; television producer;
President, Marj Palmer Assoc.;
Owner, Scandia Bord.
---------------------------------

Principal Occupations: Director NA
John S. Walsh or Trustee of the Federated Fund $117,117.
Birth Date: Complex; President and Director,
November 28, 1957 Heat Wagon, Inc. (manufacturer
2604 William Drive of construction temporary
Valparaiso, IN heaters); President and
TRUSTEE Director, Manufacturers
Began serving: Products, Inc. (distributor of
January 1999 portable construction heaters);
President, Portable Heater
Parts, a division of
Manufacturers Products, Inc.

Other Directorships Held:
Director, Walsh & Kelly, Inc.
(heavy highway contractor).

Previous Position: Vice
President, Walsh & Kelly, Inc.

OFFICERS**
---------------------------------------------------------------------------------------

Name rincipal Occupation(s) and Previous Positions
Birth Date
Address
Positions Held with Trust P
Principal Occupations: President, Executive Vice
Edward C. Gonzales President and Treasurer of some of the Funds in the
Birth Date: October 22, 1930 Federated Fund Complex; Vice Chairman, Federated
EXECUTIVE VICE PRESIDENT Investors, Inc.; Trustee, Federated Administrative
Services.

Previous Positions: Trustee or Director of some of
the Funds in the Federated Fund Complex; CEO and
Chairman, Federated Administrative Services; Vice
President, Federated Investment Management Company,
Federated Investment Counseling, Federated Global
Investment Management Corp. and Passport Research,
Ltd.; Director and Executive Vice President,
Federated Securities Corp.; Director, Federated
Services Company; Trustee, Federated Shareholder
Services Company.

Principal Occupations: Executive Vice President and
John W. McGonigle Secretary of the Federated Fund Complex; Executive
Birth Date: October 26, 1938 Vice President, Secretary and Director, Federated
EXECUTIVE VICE PRESIDENT AND Investors, Inc.
SECRETARY
Previous Positions: Trustee, Federated Investment
Management Company and Federated Investment
Counseling; Director, Federated Global Investment
Management Corp., Federated Services Company and
Federated Securities Corp.

Principal Occupations: Treasurer of the Federated
Richard J. Thomas Fund Complex; Senior Vice President, Federated
Birth Date: June 17, 1954 Administrative Services.
Federated Investors Tower
1001 Liberty Avenue Previous Positions: Vice President, Federated
Pittsburgh, PA Administrative Services; held various management
TREASURER positions within Funds Financial Services Division of
Federated Investors, Inc.

Principal Occupations: President or Vice President of
Richard B. Fisher some of the Funds in the Federated Fund Complex; Vice
Birth Date: May 17, 1923 Chairman, Federated Investors, Inc.; Chairman,
VICE PRESIDENT Federated Securities Corp.

Previous Positions: Director or Trustee of some of
the Funds in the Federated Fund Complex; Executive
Vice President, Federated Investors, Inc. and
Director and Chief Executive Officer, Federated
Securities Corp.

Principal Occupations: Chief Investment Officer of
William D. Dawson, III this Fund and various other Funds in the Federated
Birth Date: March 3, 1949 Fund Complex; Executive Vice President, Federated
CHIEF INVESTMENT OFFICER Investment Counseling, Federated Global Investment
Management Corp., Federated Investment Management
Company and Passport Research, Ltd.; Director,
Federated Global Investment Management Corp. and
Federated Investment Management Company; Portfolio
Manager, Federated Administrative Services; Vice
President, Federated Investors, Inc.

Previous Positions: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President, Federated
Investment Management Company and Passport Research,
Ltd.

Principal Occupations: Chief Investment Officer of
Henry A. Frantzen this Fund and various other Funds in the Federated
Birth Date: November 28, 1942 Fund Complex; Executive Vice President, Federated
CHIEF INVESTMENT OFFICER Investment Counseling, Federated Global Investment
Management Corp., Federated Investment Management
Company and Passport Research, Ltd.; Director,
Federated Global Investment Management Corp. and
Federated Investment Management Company; Vice
President, Federated Investors, Inc.

Previous Positions: 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.

Principal Occupations: Chief Investment Officer of
J. Thomas Madden this Fund and various other Funds in the Federated
Birth Date: October 22, 1945 Fund Complex; Executive Vice President, Federated
CHIEF INVESTMENT OFFICER Investment Counseling, Federated Global Investment
Management Corp., Federated Investment Management
Company and Passport Research, Ltd.; Director,
Federated Global Investment Management Corp. and
Federated Investment Management Company; Vice
President, Federated Investors, Inc.

** Officers do not receive any compensation from the Fund(s).
---------------------------------------------------------------------------------------

Thomas R. Donahue, Chief Financial Officer, Vice President, Treasurer and Assistant
Secretary of Federated Investors, Inc. and an officer of its various advisory and
underwriting subsidiaries, has served as a Term Member on the Board of Directors of
Duquesne University, Pittsburgh, Pennsylvania, since May 12, 2000. Mr. John E.
Murray, Jr., an Independent [Trustee/Director] of the Fund, served as President of
Duquesne from 1988 until his retirement from that position in 2001, and became
Chancellor of Duquesne on August 15, 2001. It should be noted that Mr. Donahue
abstains on any matter that comes before Duquesne's Board that affects Mr. Murray
personally.

COMMITTEES of the board
ommittee Functions Meetings Held
Board Committee During Last
Committee Members C Fiscal Year
Executive John F. Donahue In between meetings of the full Board, None
John E. the Executive Committee generally may
Murray, Jr. exercise all the powers of the full Board
in the management and direction of the
business and conduct of the affairs of
the Trust in such manner as the Executive
Committee shall deem to be in the best
interests of the Trust. However, the
Executive Committee cannot elect or
remove Board members, increase or
decrease the number of Trustees, elect or
remove any Officer, declare dividends,
issue shares or recommend to shareholders
any action requiring shareholder approval.

Audit Thomas G. The Audit Committee reviews and Four
Bigley recommends to the full Board the
John T. independent auditors to be selected to
Conroy, Jr. audit the Fund`s financial statements;
Nicholas P. meet with the independent auditors
Constantakis periodically to review the results of the
Charles F. audits and report the results to the full
Mansfield, Jr. Board; evaluate the independence of the
auditors, review legal and regulatory
matters that may have a material effect
on the financial statements, related
compliance policies and programs, and the
related reports received from regulators;
review the Fund`s internal audit
function; review compliance with the
Fund`s code of conduct/ethics; review
valuation issues; monitor inter-fund
lending transactions; review custody
services and issues and investigate any
matters brought to the Committee's
attention that are within the scope of
its duties.

Board ownership of shares in the fund and in the federated family of Investment
companies AS OF dECEMBER 31, 2001
---------------------------------------------------------------------------------------
ollar Aggregate
Range of ollar Range of
hares hares Owned in
Owned Federated
D in Fund Family of
Interested D Investment
Board Member Name S S Companies
John F. Donahue None Over $100,000
J. Christopher None Over $100,000
Donahue
Lawrence D. Ellis, None Over $100,000
M.D.

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. None Over $100,000
Constantakis
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. None $50,001 -
Mansfield, Jr. $100,000
John E. Murray, None Over $100,000
Jr., J.D., S.J.D.
Marjorie P. Smuts None Over $100,000
John S. Walsh None Over $100,000

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 Fund 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 Fund.
As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment
advisory contract. The Board's decision to approve the contract reflects the
exercise of its business judgment on whether to continue the existing arrangements.
During its review of the contract, the Board considers many factors, among the most
material of which are: the Fund's investment objectives and long term performance;
the adviser's management philosophy, personnel, and processes; the preferences and
expectations of Fund shareholders and their relative sophistication; the continuing
state of competition in the mutual fund industry; comparable fees in the mutual fund
industry; the range and quality of services provided to the Fund and its shareholders
by the Federated organization in addition to investment advisory services; and the
Fund's relationship to other funds in the Federated fund family.
In assessing the adviser's performance of its obligations, the Board also considers
whether there has occurred a circumstance or event that would constitute a reason for
it to not renew an advisory contract. In this regard, the Board is mindful of the
potential disruptions of the Fund's operations and various risks, uncertainties and
other effects that could occur as a result of a decision to terminate or not renew an
advisory contract. In particular, the Board recognizes that most shareholders have
invested in the Fund on the strength of the adviser's industry standing and
reputation and in the expectation that the adviser will have a continuing role in
providing advisory services to the Fund.
The Board also considers the compensation and benefits received by the adviser. This
includes fees received for services provided to the Fund by other entities in the
Federated organization and research services received by the adviser from brokers
that execute Fund trades, as well as advisory fees. In this regard, the Board is
aware that various courts have interpreted provisions of the 1940 Act and have
indicated in their decisions that the following factors may be relevant to an
adviser's compensation: the nature and quality of the services provided by the
adviser, including the performance of the fund; the adviser's cost of providing the
services; the extent to which the adviser may realize "economies of scale" as the
fund grows larger; any indirect benefits that may accrue to the adviser and its
affiliates as a result of the adviser's relationship with the fund; performance and
expenses of comparable funds; and the extent to which the independent Board members
are fully informed about all facts bearing on the adviser's service and fee. The
Fund's Board is aware of these factors and takes them into account in its review of
the Fund's advisory contract.
The Board considers and weighs these circumstances in light of its substantial
accumulated experience in governing the Fund and working with Federated on matters
relating to its funds, and is assisted in its deliberations by the advice of
independent legal counsel. In this regard, the Board requests and receives a
significant amount of information about the Funds and the Federated organization.
Federated provides much of this information at each regular meeting of the Board, and
furnishes additional reports in connection with the particular meeting at which the
Board's formal review of the advisory contracts occurs. In between regularly
scheduled meetings, the Board may receive information on particular matters as the
need arises. Thus, the Board's evaluation of an advisory contract is informed by
reports covering such matters as: the adviser's investment philosophy, personnel, and
processes; the fund's short- and long-term performance (in absolute terms as well as
in relationship to its particular investment program and certain competitor or "peer
group" funds), and comments on the reasons for performance; the fund's expenses
(including the advisory fee itself and the overall expense structure of the fund,
both in absolute terms and relative to similar and/or competing funds, with due
regard for contractual or voluntary expense limitations); the use and allocation of
brokerage commissions derived from trading the fund's portfolio securities; the
nature and extent of the advisory and other services provided to the fund by the
adviser and its affiliates; compliance and audit reports concerning the Funds and the
Federated companies that service them; and relevant developments in the mutual fund
industry and how the funds and/or Federated are responding to them.
The Board also receives financial information about Federated, including reports on
the compensation and benefits Federated derives from its relationships with the
Funds. These reports cover not only the fees under the advisory contracts, but also
fees received by Federated's subsidiaries for providing other services to the Funds
under separate contracts (e.g., for serving as the Funds' administrator and transfer
agent). The reports also discuss any indirect benefit Federated may derive from its
receipt of research services from brokers who execute fund trades.
The Board bases its decision to approve an advisory contract on the totality of the
circumstances and relevant factors, and with a view to past and future long-term
considerations. Not all of the factors and considerations identified above are
relevant to every fund, nor does the Board consider any one of them to be
determinative. Because the totality of circumstances includes considering the
relationship of each fund to the Federated family of funds, the Board does not
approach consideration of every fund's advisory contract as if that were the only
fund offered by Federated.

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.

Code of Ethics Restrictions on Personal Trading
As required by SEC rules, the Fund, its Adviser, and its Distributor have adopted
codes of ethics. These codes govern securities trading activities of investment
personnel, Fund Trustees, and certain other employees. Although they do permit these
people to trade in securities, including those that the Fund could buy, they also
contain significant safeguards designed to protect the Fund and its shareholders from
abuses in this area, such as requirements to obtain prior approval for, and to
report, particular transactions.

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.
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
Fee Aggregate Daily
Net Assets of
the Federated
Funds
0.150 of 1% on the first
$250million
0.125 of 1% on the next
$250million
0.100 of 1% on the next
$250million
0.075 of 1% on assets in
excess of
$750million

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
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 Auditors
The independent auditor for the Fund, Deloitte & Touche LLP, conducts its audits in
accordance with accounting principles generally accepted in the United States of
America, which require it to plan and perform its audits to provide reasonable
assurance about whether the Fund's financial statements and financial highlights are
free of material misstatement.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the SEC's 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.
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.

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.
When Shares of a Fund are in existence for less than a year, the Fund may advertise
cumulative total return for that specific period of time, rather than annualizing the
total return.

YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-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
30-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.

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 Fund; 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.
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:
Russell Midcap Growth Index measures the performance of those Russell Midcap
companies with higher price-to-book ratios and higher forecasted growth values. The
stocks are also members of the Russell 1000 Growth index.
Russell 2000 Index measures the performance of the 2,000 smallest companies in the
Russell 3000 Index, which represents approximately 8% of the total market
capitalization of the Russell 3000 Index. As of the latest reconstitution, the
average market capitalization was approximately $580 million; the median market
capitalization was approximately $466 million. The largest company in the index had
an approximate market capitalization of $1.5 billion.
Morningstar, Inc., an independent rating service, is the publisher of the bi-weekly
Mutual Fund Values. Mutual Fund Values, which 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.
Consumer Price Index is a measure of change in consumer prices, as determined by a
monthly survey of the U.S. Bureau of Labor Statistics.
Gross National Product is a measure, based on current market prices, of the total of
all goods and services produced in the United States over a particular period of
time, usually one year, with the amount expressed in dollars.

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, 2001, Federated managed 12 bond funds
with approximately $2.3 billion in assets and 22 money market funds with
approximately $44.8 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 31 years' experience. As of December
31, 2001, Federated managed 40 equity funds totaling approximately $20.7 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, 2001, Federated managed 11 money
market funds and 30 bond funds with assets approximating $62.3 billion and $5.4
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 29 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, 2001, Federated managed 6 mortgage
backed, 5 multi-sector government funds, 3 government/agency and 19 government money
market mutual funds, with assets approximating $3.6 billion, $2.0 billion, $1.2
billion and $55.2 billion, respectively. Federated trades approximately $90.4 billion
in U.S. government and mortgage backed securities daily and places approximately $35
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 $50 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, 2001, Federated managed
$136.4 billion in assets across 54 money market funds, including 19 government, 11
prime, 22 municipal and 1 euro-denominated with assets approximating $55.2 billion,
$62.3 billion, $44.8 billion and $34.6 million, 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
Forty-nine percent of American households are pursuing their financial goals through
mutual funds. These investors, as well as businesses and institutions, have entrusted
over $6.8 trillion to the more than 8,157 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 3,035 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 2,000 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.
.
INVESTMENT RATINGS

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 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.

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 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; and
o Well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Standard and Poor's 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.
ADDRESSES

Federated KAUFMANN 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 Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Sub Adviser

Federated Global Investment Management Corp.
175 Water Street
New York, NY 10038-4965

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 Auditors
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116-5072

PART C. OTHER INFORMATION.

Item 23. Exhibits:
--------

(a) (i) Conformed copy of Amended and Restated Declaration of
Trust of the Registrant (Amendment No. 1 to the
Declaration of Trust); (3)
(ii) Conformed copy of Amendment No. 2 to the Declaration of
Trust; (17)
(iii) Conformed copy of Amendment No. 3 to the Declaration of
Trust; (17)
(iv) Conformed copy of Amendment No. 4 to the Declaration of
Trust; (17)
(v) Conformed copy of Amendment No. 5 to the Declaration of
Trust; (10)
(vi) Conformed copy of Amendment No. 6 to the
Declaration of Trust; (11)
(vii) Conformed copy of Amendment No. 7 to the Declaration of
Trust; (17)
(viii)Conformed copy of Amendment No. 8 to the Declaration of
Trust; (20)
(ix) Conformed copy of Amendment No. 9 to the
Declaration of Trust; (24)
(x) Conformed copy of Amendment No. 10 to the Declaration of Trust; (24)
(xi) Conformed copy of Amendment No. 11 to the Declaration of Trust; (24)
(xii) Conformed copy of Amendment No. 12 to the Declaration of Trust; (25)
(b) (i) Copy of By-Laws of the Registrant; (2)
(ii) Copy of Amendment No. 1 to the By-Laws; (19)
(iii) Copy of Amendment No. 2 to the By-Laws; (19)
(iv) Copy of Amendment No. 3 to the By-Laws;(19)
(c) (i) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated American Leaders Fund II; (15)

------------------------------------------------------------------------
(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).
(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).
(16) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 22 on Form N-1A filed April 20, 1999. (File Nos. 33-69268 and
811-8042).
(20) Response is incorporated by reference to Registrant's Post-Effective Amendment No.
22 on Form N-1A filed April 20, 1999. (File Nos. 33-69268 and 811-8042).
(24) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 30 on Form N-1A filed April 23, 2001. (File Nos. 33-69268 and 811-8042).
(25) Response is incorporated by reference to Registrant's Post-Effective Amendment No.
30 on Form N-1A filed February 25, 2002. (File Nos. 33-69268 and 811-8042).

(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) (i) Conformed copy of Investment Advisory Contract between the
Registrant and Federated Advisers;(3)
(ii) Conformed copy of Exhibit A to the Investment Advisory
Contract; (3)
(iii) Conformed copy of Exhibit B to the Investment Advisory
Contract; (23)
(iv) Conformed copy of Exhibit C to the Investment Advisory
Contract; (3)
(v) Conformed copy of Exhibit D to the Investment Advisory
Contract; (3)
(vi) Conformed copy of Exhibit E to the Investment Advisory
Contract; (3)
(vii) Conformed copy of Exhibit F to the Investment Advisory
Contract; (6)
(viii)Conformed copy of Exhibit G to the Investment Advisory
Contract; (10)
(ix) Conformed copy of Exhibit H to the Investment Advisory
Contract; (12)

--------------------------------------------------------------------------------------------
(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).
(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).
(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).
(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).
(23) Response is incorporated by reference to the Registrant's Post-Effective Amendment
No. 28 on Form N-1A filed April 19, 2000. (File Nos. 33-69268 and 811-8042).

(x) Conformed copy of Exhibit I to the Investment Advisory
Contract; (20)
(xi) Conformed copy of Exhibit J to the Investment Advisory
Contract; (22)
(xii) Conformed copy of Exhibit K to the Investment Advisory Contract; (22)
(x) Conformed copy of Exhibit L to the Investment Advisory Contract; (24)
(xi) Conformed Copy of Amendment to the Investment Advisory Contract; (25)
(xv) Conformed copy of Investment Advisory
Contract between the Registrant and Federated Global
Research Corp. with respect to Federated International
Equity Fund II; (10)
(xvi) Conformed copy of Exhibit A to Investment Advisory Contract; (10)
(xvii)Conformed copy of Exhibit B to Investment Advisory Contract; (26)
(xviii)Conformed copy of Sub-Advisory Agreement between
Federated Advisers and Federated Global Research Corp.
with respect to Federated Utility Fund II; (17)
(xix) Conformed copy of Exhibit A to Sub-Advisory Contract; (10)
(xx) Conformed copy of Sub-Advisory Agreement between Federated
Investment Management Company and Federated Global Investment
Management Corp. with respect to Federated Strategic Income Fund
II; (22)
(xxi) Conformed copy of Exhibit A to Sub-Advisory Contract; (10)
(e) (i) Conformed copy of Distributor's Contract of the
Registrant; (3)
(ii) Conformed copy of Exhibit A to Distributor's Contract;
(3)
(iii) Conformed copy of Exhibit B to Distributor's Contract;
(3)
(iv) Conformed copy of Exhibit C to Distributor's Contract;
(3)
(v) Conformed copy of Exhibit D to Distributor's Contract;
(3)

--------------------------------------------------------------------------------------------
(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).
(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).
(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).
(20) Response is incorporated by reference to Registrant's Post-Effective Amendment No.
22 on Form N-1A filed April 20, 1999. (File Nos. 33-69268 and 811-8042).
(22) Response is incorporated by reference to Registrant's Post-Effective Amendment No.
25 on Form N-1A filed February 17, 2000. (File Nos. 33-69268 and 811-8042).
(23) Response is incorporated by reference to the Registrant's Post-Effective Amendment
No. 28 on Form N-1A filed April 19, 2000. (File Nos. 33-69268 and 811-8042).
(24) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 30 on Form N-1A filed April 23, 2001. (File Nos. 33-69268 and 811-8042).
(24) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 30 on Form N-1A filed February 25, 2002. (File Nos. 33-69268 and 811-8042).
(25) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 31 on Form N-1A filed February 28, 2002. (File Nos. 33-69268 and 811-8042).

(vi) Conformed copy of Exhibit E to Distributor's Contract;
(23)
(vii) Conformed copy of Exhibit F to Distributor's Contract;
(23)
(viii)Conformed copy of Exhibit G to Distributor's Contract;
(10)
(ix) Conformed copy of Exhibit H to Distributor's Contract;
(12)
(x) Conformed copy of Exhibit I to Distributor's Contract;
(20)
(xi) Conformed copy of Exhibit J to Distributor's Contract;
(22)
(xii) Conformed copy of Exhibit K to Distributor's Contract;
(22)
(xiii)Conformed copy of Exhibit L to Distributor's Contract;
(23)
(xiv) Conformed copy of Exhibit M to Distributor's Contract;
(23)
(x) Conformed copy of Exhibit N to Distributor's Contract; (24)
(xi) Conformed copy of Amendment to the Distributor's Contract; (25)
(f) Not Applicable;
(g) (i) Conformed copy of Custodian Contract of the Registrant;
(7)
(ii) Conformed copy of Domestic Custody Fee Schedule; (17)
(h) (i) Conformed copy of Amended and Restated Agreement for
Fund Accounting Services, Administrative Services,
Transfer Agency Services, and Custody Services
Procurement; (19)
(ii) The Registrant hereby incorporates the conformed copy of the
Second Amended and Restated Services Agreement from Item
(h)(v) of the Investment Series Funds, Inc. Registration
Statement on Form N-1A, filed with the Commission on January
23, 2002. (File Nos. 33-48847 and 811-07021);

--------------------------------------------------------------------------------------------
(7) Response is incorporated by reference to Registrant's Post-Effective Amendment No. 6
on Form N-1A filed April 21, 1994. (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).
(19) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed February 18, 1999. (File Nos. 33- 69268 and
811-8042).
(20) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 22 on Form N-1A filed April 20, 1999. (File Nos. 33-69268 and 811-8042).
(22) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 25 on Form N-1A filed February 17, 2000. (File Nos. 33- 69268 and 811-8042).
(23) Response is incorporated by reference to the Registrant's Post-Effective Amendment
No. 28 on Form N-1A filed April 19, 2000. (File Nos. 33-69268 and 811-8042).
(24) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 30 on Form N-1A filed April 23, 2001. (File Nos. 33-69268 and 811-8042).
(25) Response is incorporated by reference to Registrant's Post-Effective Amendment No.
30 on Form N-1A filed February 25, 2002. (File Nos. 33-69268 and 811-8042).

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; (24)
(k) Not Applicable;
(l) Conformed copy of Initial Capital Understanding;(2)
(m) (i) Conformed Copy of Distribution Plan of the Registrant; (12)
(ii) Conformed copy of Exhibit B to the
Distribution Plan; (20)
(iii) Conformed copy of Exhibit C to the
Distribution Plan; (22)
(iv) Conformed copy of Exhibit D to the
Distribution Plan; (22)
(v) Conformed copy of Exhibit E to the Distribution Plan; (23)
(vi) Conformed copy of Exhibit F to the Distribution Plan; (23)
(vii) Conformed copy of Exhibit G to the Distribution Plan; (24)
(n) Not applicable;
(o) (i) Conformed copy of Power of Attorney; (24)
(ii) Conformed copy of Chief Investment Officer; (24)
(p) The Registrant hereby incorporates the conformed copy of the
Code of Ethics for Access Persons from Item 23(p) of the
Federated Managed Allocation Portfolios Registration
Statement on Form N-1A filed with the Commission on January
25, 2001. (File Nos. 33-51247 and 811-7129).

Item 24. Persons Controlled by or Under Common Control with Registrant:
-------------------------------------------------------------

None

Item 25. Indemnification: (1)
---------------

--------------------------------------------------------------------------------------------

(1) Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 10, 1993. (File Nos.
33-69268 and 811-8042).
(2) Response is incorporated by reference to Registrant's Post-Effective Amendment No. 1
on Form N-1A filed April 29, 1994. (File Nos. 33-69268 and 811-8042).
(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).
(20) Response is incorporated by reference to Registrant's Post-Effective Amendment No.
22 on Form N-1A filed April 20, 1999. (File Nos. 33-69268 and 811-8042).
(22) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 25 on Form N-1A filed February 17, 2000. (File Nos. 33- 69268 and 811-8042).
(23) Response is incorporated by reference to the Registrant's Post-Effective Amendment
No. 28 on Form N-1A filed April 19, 2000. (File Nos. 33-69268 and 811-8042).
(24) Response is incorporated by reference to Registrant's Post-Effective Amendment
No. 30 on Form N-1A filed April 23, 2001. (File Nos. 33-69268 and 811-8042).

Item 26. Business and Other Connections of Investment Adviser:
-----------------------------------------------------

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
Trustees of the investment adviser and, in parentheses, their principal
occupations are: Thomas R. Donahue, (Chief Financial Officer, Federated
Investors, Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and Mark
D. Olson (a principal of the firm Mark D. Olson & Company, L.L.C. and
Partner, Wilson, Halbrook & Bayard, P.A.), Suite 301 Little Falls Center
Two, 2751 Centerville Road, Wilmington, DE 19808.

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Stephen F. Auth
Joseph M. Balestrino
David A. Briggs
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Linda A. Duessel
Mark E. Durbiano
James E. Grefenstette
Robert M. Kowit
Jeffrey A. Kozemchak
Richard J. Lazarchic
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Bernard J. Picchi
Frank Semack
Richard Tito
Peter Vutz

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Randall S. Bauer
Nancy J.Belz
G. Andrew Bonnewell
Robert E. Cauley
Ross M. Cohen
Fred B. Crutchfield
Lee R. Cunningham, II
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
Kathleen M. Foody-Malus
Thomas M. Franks
David P. Gilmore
Marc Halperin
John W. Harris
Patricia L. Heagy
Susan R. Hill
Nikola A. Ivanov
William R. Jamison
Constantine J. Kartsonas
Nathan H. Kehm
John C. Kerber
Steven J. Lehman
Marian R. Marinack
Vice Presidents cont: Natalie F. Metz
Joseph M. Natoli
John L. Nichol
Jeffrey A. Petro
John P. Quartarolo
Keith J. Sabol
Ihab L. Salib
Roberto Sanchez-Dahl, Sr.
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Timothy G. Trebilcock
Leonardo A. Vila
Paige M. Wilhelm
Richard M. Winkowski, Jr.
Lori A. Wolff
George B. Wright

Assistant Vice Presidents: Catherine A. Arendas
Angela A. Auchey
David Burns
Hanan Callas
Regina Chi
David W. Cook
James R. Crea, Jr.
Karol M. Crummie
David Dao
John T. Gentry
Kathryn P. Heagy
Carol Kayworth
J. Andrew Kirschler
Ram Kolluri
Ted T. Lietz, Sr.
Monica Lugani
Theresa Miller
Thomas Mitchell
Bob Nolte
Mary Kay Pavuk
Rae Ann Rice
James W. Schaub
Jennifer G. Setzenfand
John Sidawi
Diane R. Startari
Kyle D. Stewart
Michael R. Tucker
Steven J. Wagner

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: C. Grant Anderson
Leslie K. Ross

Assistant Treasurer: Denis McAuley, III

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.

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:

Cash Trust Series II; Cash Trust Series, Inc.; CCMI Funds; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Limited Duration Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core Trust;
Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated Fixed Income
Securities, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; 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 International Series, Inc.; Federated Investment Series Funds, Inc.;
Federated Managed Allocation Portfolios; Federated Municipal Opportunities Fund,
Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal Securities
Income Trust; Federated Short-Term Municipal Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock 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 Total Return Government Bond
Fund; Federated Utility Fund, Inc.; Federated World Investment Series, Inc.;
FirstMerit Funds; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; Marshall Funds; Money Market Obligations Trust; Regions Morgan
Keegan Select Funds; RIGGS Funds; SouthTrust Funds; Wachovia Variable Insurance
Funds; The Wachovia Funds; The Wachovia Municipal Funds; and Vision Group of Funds,
Inc.

(b)

(1) (2) (3)
Positions and Offices Positions and Offices
With Distributor Name With Registrant
--------------------- ------------------ ---------------------

Chairman: Richard B. Fisher Vice President

Director: Arthur L. Cherry

President-Institutional
Sales and Director: John B. Fisher

Director, Executive Vice
Vice President and Assistant
Secretary: Thomas R. Donahue

President-Broker/Dealer
And Director: James F. Getz

Senior Vice Presidents:
Mark W. Bloss
Richard W. Boyd
Laura M. Deger
Peter W. Eisenbrandt
Theodore Fadool, Jr.
Christopher T. Fives
James S. Hamilton
James M. Heaton
Keith Nixon
Solon A. Person, IV
Ronald M. Petnuch
Timothy C. Pillion
Thomas E. Territ

(1) (2) (3)
Positions and Offices Positions and Offices
With Distributor Name With Registrant
--------------------- ------------------ ---------------------

Vice Presidents: Ernest G. Anderson
Teresa M. Antoszyk
John B. Bohnet
Jane E. Broeren-Lambesis
David J. Callahan
Mark Carroll
Scott Charlton
Steven R. Cohen
Mary J. Combs
R. Edmond Connell, Jr.
Kevin J. Crenny
Daniel T. Culbertson
G. Michael Cullen
Marc C. Danile
Robert J. Deuberry
William C. Doyle
Timothy Franklin
Joseph D. Gibbons
John K. Goettlicher
G. Tad Gullickson
Scott Gundersen
Dayna C. Haferkamp
Raymond J. Hanley
Vincent L. Harper, Jr.
Bruce E. Hastings
Charlene H. Jennings
H. Joseph Kennedy
Michael W. Koenig
Ed Koontz
Christopher A. Layton
Michael H. Liss
Michael R. Manning
Martin J. McCaffrey
Maurice W. McKinley
Amy Michalisyn
Mark J. Miehl
Richard C. Mihm
Vincent T. Morrow
Alec H. Neilly
Thomas A. Peter III
Raleigh Peters
Robert F. Phillips
Richard A. Recker
Eugene B. Reed
John Rogers
Brian S. Ronayne
Thomas S. Schinabeck
Edward J. Segura
Edward L. Smith
David W. Spears
John A. Staley
Colin B. Starks
Jeffrey A. Stewart
William C. Tustin
Paul A. Uhlman
Richard B. Watts
G. Walter Whalen
Edward J. Wojnarowski
Michael P. Wolff
Scott F. Wright

(1) (2) (3)
Positions and Offices Positions and Offices
With Distributor Name With Registrant
--------------------- ------------------ ---------------------

Assistant Vice Presidents: Robert W. Bauman
Edward R. Bozek
Charles L. Davis, Jr.
Beth C. Dell
Donald C. Edwards
Jennifer Fetteroff
John T. Glickson
Ernest L. Linane
Renee L. Martin
Lynn Sherwood-Long

Secretary: Kirk A. Montgomery

Treasurer: Denis McAuley, III

Assistant Secretaries: Thomas R. Donahue
Timothy S. Johnson
Victor R. Siclari

The business address of each of the Officers of Federated Securities Corp. is
Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779.

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
(Notices should be sent to the
Agent for Service at above address)

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

Federated Shareholder P.O. Box 8600
Services Company Boston, MA 02266-8600
("Transfer Agent and
Dividend Disbursing Agent")

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Federated Investment Federated Investors Tower
Management Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779

Federated Global Investment 175 Water Street
Management Corp. New York, NY 10038-4965
("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.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, FEDERATED INSURANCE SERIES, has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 10th day of April, 2002.

FEDERATED INSURANCE SERIES

BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
April 10, 2002

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/ C. Grant Anderson
C. Grant Anderson Attorney In Fact April 10, 2002
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

John F. Cunningham* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

Charles F. Mansfield, Jr. Trustee

John E. Murray, Jr.* Trustee

Marjorie P. Smuts* Trustee

John S. Walsh* Trustee

* By Power of Attorney

Federated Kaufmann Fund II

PROSPECTUS

CONTENTS

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Risk/Return Bar Chart and Table

What are the Fund's Investment Strategies?

TEMPORARY DEFENSIVE INVESTMENTS

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Common Stocks

Foreign Securities

ILLIQUID SECURITIES

FIXED INCOME SECURITIES

Treasury Securities

Special Transactions

SECURITIES LENDING

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

RISKS RELATED TO INVESTING FOR GROWTH

RISKS RELATED TO COMPANY SIZE

SECTOR RISKS

LIQUIDITY RISKS

RISKS OF FOREIGN INVESTING

CURRENCY RISKS

CREDIT RISKS

LEVERAGE RISKS

INTEREST RATE RISKS

Prior Performance of Related Fund

What Do Shares Cost?

How is the Fund Sold?

RULE 12B-1 PLAN

How to Purchase and Redeem Shares

Account and Share Information

DIVIDENDS

TAX INFORMATION

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

Lawrence Auriana

Hans P. Utsch

Aash M. Shah

ADVISORY FEES

Financial Information

FINANCIAL HIGHLIGHTS