FEDERATED INSURANCE SERIES, 497, 1996-04-22

FEDERATED INSURANCE SERIES
497, 1996-04-22

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FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated American Leaders Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment company.
The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for investment
in the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated April 22,
1996, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS FUNDING VEHICLES FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR SUCH
CONTRACTS.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
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FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objectives 2
Investment Policies 2
Investment Limitations 6

NET ASSET VALUE 7
- ------------------------------------------------------

INVESTING IN THE FUND 7
- ------------------------------------------------------

Purchases and Redemptions 7
What Shares Cost 7
Dividends 8

FUND INFORMATION 8
- ------------------------------------------------------

Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 9
Brokerage Transactions 10

SHAREHOLDER INFORMATION 10
- ------------------------------------------------------

Voting Rights 10

TAX INFORMATION 10
- ------------------------------------------------------

Federal Taxes 10
State and Local Taxes 11

PERFORMANCE INFORMATION 11
- ------------------------------------------------------

ADDRESSES 12
- ------------------------------------------------------

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
FINANCIAL HIGHLIGHTS

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.74 $ 10.00
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.20 0.19
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.06 (0.26)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 3.26 (0.07)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.19) (0.19)
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (b) (0.01) --
- ----------------------------------------------------------------------------------------------- --------- -----------
Total distributions from net investment income (0.20) (0.19)
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 12.80 $ 9.74
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (C) 33.71% (0.70%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.85% 0.54%*
- -----------------------------------------------------------------------------------------------
Net investment income 2.03% 2.58%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.36% 25.42%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 48,514 $ 2,400
- -----------------------------------------------------------------------------------------------
Portfolio turnover 43% 32 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.
(a) Reflects operations for the period from February 10, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to January 31, 1994, the Fund had no investment
activity.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Equity Growth and Income Fund to
Federated American Leaders Fund II. The Declaration of Trust permits the Trust
to offer separate series of shares of beneficial interest in separate portfolios
of securities, including the Fund. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Trustees
have not established separate classes of shares.

Shares of the Fund are sold only to insurance companies as funding vehicles for
variable annuity contracts and variable life insurance policies issued by the
insurance companies. Shares of the Fund are sold at net asset value as described
in the section entitled "What Shares Cost." Shares of the Fund are redeemed at
net asset value.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES

The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies described
in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objectives by investing, under normal
circumstances, at least 65% of its total assets in common stock of "blue-chip"
companies. "Blue-chip" companies generally are top-quality, established growth
companies which, in the opinion of the investment adviser, meet one or more of
the following criteria:
.industry leader with proven management capabilities;

.historical and future earnings growth rate of approximately 10%
compounded annually;

.strong balance sheet with pension liabilities funded;

.products with brand recognition and consumer acceptance;

.growing consumer-based demand with limited government sales;

.ability to meet social, political, and environmental problems;

.vigorous research effort with continuing new product flow;

.low external capital requirements; and

.not an import competitive company but possessing international
capabilities.

Unless indicated otherwise, the investment policies of the Fund may be changed
by the Trustees without the approval of shareholders. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of blue-chip companies. Given these long-term investment
horizons, the Fund will attempt to hold its portfolio securities throughout
market cycles.

COMMON STOCKS. The Fund invests primarily in common stocks of blue-chip
companies selected by the Fund's investment adviser based on the criteria set
forth above and traditional research techniques and technical factors, including
assessment of earnings and dividend growth prospects and of the risk and
volatility of the company's industry. Other factors, such as product position or
market share, will also be considered by the Fund's investment adviser.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities and
warrants of the blue-chip companies. Convertible securities are fixed income
securities which may be exchanged or converted into a predetermined number of
the issuer's underlying common stock at the option of the holder during a
specified time period. Convertible securities may take the form of convertible
preferred stock, convertible bonds or debentures, units consisting of "usable"
bonds and warrants or a combination of the features of several of these
securities. The Fund invests in convertible bonds rated "B" or higher by
Standard & Poor's Ratings Group ("S&P") or Moody's Investors Service, Inc.
("Moody's") at the time of investment or, if unrated, of comparable quality. If
a convertible bond is rated below "B" according to the characteristics set forth
hereafter after the Fund has purchased it, the Fund is not required to drop the
convertible bond from the portfolio but will consider appropriate action. The
investment characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different investment
objectives.

Bonds rated "BBB" or lower by S&P or "Baa" or lower by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments than
higher rated bonds.

of income with generally higher yields than common stocks, but lower than
nonconvertible securities of similar quality. The Fund will exchange or convert
the convertible securities held in its portfolio into shares of the underlying
common stock in instances in which, in the investment adviser's opinion, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. Otherwise, the Fund will hold or trade
the convertible securities. In selecting convertible securities for the Fund,
the Fund's adviser evaluates the investment characteristics of the convertible
security as a fixed income instrument and the investment potential of the
underlying equity security for capital appreciation. In evaluating these matters
with respect to a particular convertible security, the Fund's adviser considers
numerous factors, including the economic and political outlook, the value of the
security relative to other investment alternatives, trends in the determinants
of the issuer's profits, and the issuer's management capability and practices.

In general, the market value of a convertible security is at least the higher of
its "investment value" (i.e., its value as a fixed income security) or its
"conversion value" (i.e., its value upon conversion into its underlying common
stock). As a fixed income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying common stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

BANK INSTRUMENTS AND SECURITIES OF OTHER INVESTMENT COMPANIES. Primarily to
manage short-term cash, the Fund may also invest in certificates of deposit,
demand and time deposits, bankers' acceptances, deposit notes, and other
instruments of domestic and foreign banks and other deposit institutions ("Bank
Instruments") and securities of other investment companies.

REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements.
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that, under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are found by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.

issued under Section 4(2) of the Securities Act of 1933. Restricted securities
are any securities in which the Fund may otherwise invest pursuant to its
investment objective and policies but which are subject to restriction on resale
under federal securities law. To the extent restricted securities are deemed to
be illiquid, the Fund will limit their purchase, including non-negotiable time
deposits, repurchase agreements providing for settlement in more than seven days
after notice, over-the-counter options, and certain restricted securities
determined by the Trustees not to be liquid, to 15% of the net assets of the
Fund.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
up to one-third of the value of its total assets to broker/dealers, banks, or
other institutional borrowers of securities. This is a fundamental policy which
may not be changed without the approval of shareholders. The Fund will only
enter into loan arrangements with broker/dealers, banks, or other institutions
which the adviser has determined are creditworthy under guidelines established
by the Trustees, and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the portfolio
securities loaned at all times. There is the risk that when lending portfolio
securities, the securities may not be available to the Fund on a timely basis
and the Fund may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous. Settlement dates may be
a month or more after entering into these transactions, and the market values of
the securities purchased may vary from the purchase prices. Accordingly, the
Fund may pay more/less than the market value of the securities on the settlement
date.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also invest
temporarily in cash and cash items during times of unusual market conditions and
to maintain liquidity. Cash items may include short-term obligations such as:

.commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch Investors Service, Inc.;

.securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies and instrumentalities;
and

.repurchase agreements.

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

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

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

INVESTMENT LIMITATIONS

The Fund will not:

.borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.

The Fund will not:

.invest more than 10% of its total assets in securities of other
investment companies.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable annuity contracts and variable life
insurance policies. The use of Fund shares as investments for both variable
annuity contracts and variable life insurance policies is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

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

Shares of the Fund are purchased or redeemed on behalf of participating
insurance companies at the next computed net asset value after an order is
received on days on which the New York Stock Exchange is open.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; and (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

Purchase orders from separate accounts investing in the Fund which are received
by the insurance companies by 4:00 p.m. (Eastern time), will be computed at the
net asset value of the Fund determined on that day, as long as such purchase
orders are received by the Fund in proper form and in accordance with applicable
procedures by 8:00 a.m. (Eastern time) on the next business day and as long as
federal funds in the amount of such orders are received by the Fund on the next
business day. It is the responsibility of each insurance company which invests
in the Fund to properly transmit purchase orders and federal funds in accordance
with the procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared and paid quarterly.

Shares of the Fund will begin earning dividends if owned on the applicable
record date. Dividends of the Fund are automatically reinvested in additional
shares of the Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of these codes are subject to review by the Trustees, and could
result in severe penalties.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The adviser
may voluntarily choose to waive a portion of its fee or reimburse the Fund
for certain operating expenses. The adviser can terminate this voluntary
waiver and reimbursement of expenses at any time at its sole discretion.

ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated contintues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.

Timothy E. Keefe has been the Fund's portfolio manager since March 1996.
Mr. Keefe joined Federated Investors in 1987 and has been a Vice President
of the Fund's investment adviser since 1995. Mr. Keefe served as an
Assistant Vice President of the Fund's investment adviser between 1993 and
1995, and as an Investment Analyst from 1991 to 1993. Mr. Keefe is a
Chartered Financial Analyst and received his M.B.A. in Business
Administration from the University of Pittsburgh.

Peter R. Anderson has been the Fund's portfolio manager since the Fund
commenced operations. Mr. Anderson joined Federated Investors in 1972 as,
and is presently, a Senior Vice President of the Fund's investment adviser.
Mr. Anderson is a Chartered Financial Analyst and received his M.B.A. in
Finance from the University of Wisconsin.

DISTRIBUTION OF FUND SHARES

Federated Securities Corp. is the principal distributor for shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of March 11, 1996, Aetna Insurance Co. of America, Hartford,
Connecticut, and Aetna Life Insurance & Annuity Co., Hartford, Connecticut,
owned 35% and 53%, respectively, of the voting securities of the Fund, and,
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees in certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.

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

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

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises total return and yield.

The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.

Performance information will not reflect the charges and expenses of a variable
annuity or variable life insurance contract. Because shares of the Fund can only
be purchased by a separate account of an insurance company offering such a
contract, you should review the performance figures of the contract in which you
are invested, which performance figures will accompany any advertisement of the
Fund's performance.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated American Leaders Fund II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
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Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600
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Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
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</TABLE>

FEDERATED AMERICAN
LEADERS FUND II
(FORMERLY, EQUITY GROWTH
AND INCOME FUND)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End, Management
Investment Company

April 22, 1996

[LOGO OF FEDERATED SECURITIES CORP.]
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

[LOGO OF RECYCLED PAPER]
Cusip 458043502
3113010A (4/96)

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus
of Federated American Leaders Fund II (the "Fund") dated April 22, 1996.
This Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVES AND POLICIES 3

Types of Investments 3
When-Issued and Delayed Delivery
Transactions 6
Lending of Portfolio Securities 6
Repurchase Agreements 8
Reverse Repurchase Agreements 8
Restricted and Illiquid Securities 3
Portfolio Turnover 9
INVESTMENT LIMITATIONS 4

FEDERATED INSURANCE SERIES MANAGEMENT 13

Fund Ownership 21
Trustees Compensation 22
Trustee Liability 24
INVESTMENT ADVISORY SERVICES 25

Adviser to the Fund 25
Advisory Fees 25
BROKERAGE TRANSACTIONS 25

OTHER SERVICES 27

Fund Administration 27
Custodian and Portfolio Accountant 13

Transfer Agent 13
Independent AuditorsError! Bookmark not defined.
PURCHASING SHARES 13

DETERMINING NET ASSET VALUE 13

Determining Value of Securities 13
MASSACHUSETTS PARTNERSHIP LAW 13

TAX STATUS 14

The Fund's Tax Status 14
Shareholder's Tax Status 14
TOTAL RETURN 14

YIELD 14

PERFORMANCE COMPARISONS 15

ABOUT FEDERATED INVESTORS 15

Mutual Fund Market 16
Institutional Clients 16
Trust Organizations 16
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 16
FINANCIAL STATEMENTS 16

APPENDIX 17

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from
Equity Growth and Income Fund to Federated American Leaders Fund II. The
Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest in separate portfolios of securities, including the Fund.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have not established separate classes of
shares.

INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests, under normal circumstances, at least 65% of its total assets
in common stock of "blue-chip" companies, as defined in the prospectus. The
Fund may also invest in other securities of these companies, U.S. government
securities, repurchase agreements, and bank instruments. The following
supplements the discussion of acceptable investments in the prospectus.

CONVERTIBLE SECURITIES
As with all fixed-income securities, various market forces influence the
market value of convertible securities, including changes in the level of
interest rates. As interest rates increase, the market value of
convertible securities may decline and, conversely, as interest rates
decline, the market value of convertible securities may increase. The
unique investment characteristics of convertible securities, the right to
be exchanged for the issuer's common stock, causes the market value of
convertible securities to increase when the underlying common stock
increases. However, since securities prices fluctuate, there can be no
assurance of capital appreciation, and most convertible securities will
not reflect as much capital appreciation as their underlying common
stocks. When the underlying common stock is experiencing a decline, the
value of the convertible security tends to decline to a level
approximating the yield-to-maturity basis of straight nonconvertible debt
of similar quality, often called "investment value," and may not
experience the same decline as the underlying common stock.
Many convertible securities sell at a premium over their conversion
values (i.e., the number of shares of common stock to be received upon
conversion multiplied by the current market price of the stock). This
premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of
capital appreciation due to the conversion privilege. If this
appreciation potential is not realized, the premium may not be recovered.
WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common
stock at issuance) valid for a specific period of time. Warrants may have

U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or
guaranteed by the U.S. government agencies or instrumentalities. These
securities are backed by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;

oFederal National Mortgage Association; and

oStudent Loan Marketing Association.
BANK INSTRUMENTS
The Fund only invests in bank instruments (as defined in the prospectus)
either issued by an institution having capital, surplus, and undivided
profits over $100 million or insured by the Bank Insurance Fund ("BIF")
or the Savings Association Insurance Fund ("SAIF"), both of which are
administered by the Federal Deposit Insurance Corporation. Bank
instruments may include Eurodollar Certificates of Deposit, Yankee
Certificates of Deposit, and Eurodollar Time Deposits. Institutions
issuing Eurodollar instruments are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing,
recordkeeping and the public availability of information.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of securities. The

collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker. The Fund does not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.

REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.
In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.

REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.

for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.

For the fiscal year ended December 31, 1995, and for the period from February
10, 1994 (date of initial public investment) to December 31, 1994, the
portfolio turnover rates for the Fund were 43% and 32%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of the value of its total assets at the
time of borrowing.

CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at any time invest 25% or more of its total assets
in cash or cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other
transactions which are permitted by the Fund's investment objectives and
policies or the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objectives, policies, and limitations.

DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the Fund will not
purchase more than 10% of any class of the outstanding voting securities
of any one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class, regardless
of priorities, series, designations, or other differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material changes in these limitations become effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice, and certain restricted
securities not determined by the Trustees to be liquid.

For purposes of its policies and limitations, the Fund considers certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is
the father of J. Christopher Donahue, President of the Trust .

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director or Trustee of the Funds; formerly, Senior Partner,
Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director or Trustee of the Funds; formerly, President, Naples
Property Management, Inc.

William J. Copeland

One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director
or Trustee of the Funds; formerly, Vice Chairman and Director, PNC Bank, N.A.,
and PNC Bank Corp. and Director, Ryan Homes, Inc.

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue
is the son of John F. Donahue, Chairman of the Trust.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director
or Trustee of the Funds; formerly, Counsel, Horizon Financial, F.A., Western
Region.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee of the Funds; formerly, President, State Street Bank and Trust Company
and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of
Pittsburgh; founding Chairman, National Advisory Council for Environmental
Policy and Technology and Federal Emergency Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee

Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated Services
Company; President and Trustee, Federated Shareholder Services; Director,
Federated Securities Corp.; Executive Vice President and Secretary of the
Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated Securities
Corp.; Treasurer of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money

Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 11, 1996, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Transamerica Occidental Life Insurance
Co., Los Angelos, California, 11%, Aetna Insurance Co. of America, Hartford,
Connecticut, 35%, and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, 53%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Trust and

Chairman and Trustee 59 other investment companies in the Fund
Complex
Thomas G. Bigley++ $1,016 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John T. Conroy, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
William J. Copeland $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
J. Christopher Donahue, $0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and

Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are owned by
a trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.
The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1995, and for the period from December
9, 1993 (start of business) to December 31, 1994, the adviser earned advisory
fees of $142,579 and $4,397, respectively, none of which were waived.

BROKERAGE TRANSACTIONS

receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the Adviser
or its affiliates in advising the Fund and other accounts. To the extent that
receipt of these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided. For the fiscal year ended December 31, 1995,
and for the period from December 9, 1993 (start of business) to December 31,
1994, the Fund paid $49,713 and $3,714, respectively, in brokerage commissions
on brokerage transactions.
Although investment decisions for the Fund are made independently from those
of any other accounts managed by the Adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the Adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators". For the
fiscal year ended December 31, 1995, and for the period from December 9, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000
and $73,288, respectively. Dr. Henry J. Gailliot, an officer of Federated
Advisers, the adviser to the Fund, holds approximately 20% of the outstanding
common stock and serves as director of Commercial Data Services, Inc., a
company which provides computer processing services to Federated Services
Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments. The fee paid for this service is based upon the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.

TRANSFER AGENT
Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.

PURCHASING SHARES

Shares of the Fund are sold at their net asset value without a sales charge on
days the New York Stock Exchange is open for business. The procedure for
purchasing shares of the Fund is explained in the prospectus under "Purchases
and Redemptions" and "What Shares Cost."
DETERMINING NET ASSET VALUE

o for unlisted equity securities, the latest mean prices;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
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. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or 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.

TAX STATUS

afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities held
less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDER'S TAX STATUS
The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and this Statement. If the Fund fails to
comply with these regulations, contracts invested in the Fund shall not be
treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the

ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the quarterly reinvestment of all dividends and
distributions. You should review the performance figures for your insurance
contract, which figures reflect the applicable charges and expenses of the
contract. Such performance figures will accompany any advertisement of the
Fund's performance.
YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1995 was
1.81%.

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the
Fund over a thirty-day period by the offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the thirty-
day period is assumed to be generated each month over a twelve month period
and is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not correlate to
the dividends or other distributions paid to shareholders. Also, the yield
does not reflect the charges and expenses of an insurance contract. You should
review the performance figures for your insurance contract, which figures

reflect the applicable charges and expenses of the contract. Such performance
figures will accompany any advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o the relative amount of the Fund's cash flow.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper

ranking in the growth and income funds category in advertising and sales
literature.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA"), is an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.

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

o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and sales literature for the Fund may quote total returns which
are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based
on quarterly reinvestment of dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits and

to money market funds using the Lipper Analytical Services money market
instruments average.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a

variety of applications, 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
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended December 31, 1995,
are incorporated herein by reference to the Annual Report of the Fund dated
December 31, 1995 (File Nos. 33-69268 and 811-8042). A copy of the Report may
be obtained without charge by contacting the Fund.

*Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. 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.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A--Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving

security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA--Bonds considered to be investment grade and of very high 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.
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.
NR--NR indicates that Fitch does not rate the specific issue. Plus or Minus (-
): Plus or minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA category.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER 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 moderated reliance on debt and
ample asset protection.
o Broad margins in earning coverage of fixed financila charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
F-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
F-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

Cusip 458043502
3113010B (4/96)

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated Utility Fund II (the "Fund"), which
is a diversified investment portfolio in the Federated Insurance Series (the
"Trust"), an open-end, diversified management investment company. The Fund
invests in equity and debt securities of utility companies to achieve high
current income and moderate capital appreciation. Shares of the Fund may be sold
only to separate accounts of insurance companies to serve as the investment
medium for variable life insurance policies and variable annuity contracts
issued by insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable annuity contracts and variable life
insurance policies offered by the insurance companies which provide for
investment in the Fund. Keep this prospectus for future reference.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Investment Limitations 7

NET ASSET VALUE 7
- ------------------------------------------------------

INVESTING IN THE FUND 7
- ------------------------------------------------------

Purchases and Redemptions 7
What Shares Cost 8
Dividends 8

FUND INFORMATION 8
- ------------------------------------------------------

Management of the Fund 8
Distribution of Fund Shares 10
Administration of the Fund 10
Brokerage Transactions 10

SHAREHOLDER INFORMATION 10
- ------------------------------------------------------

Voting Rights 10

TAX INFORMATION 11
- ------------------------------------------------------

Federal Taxes 11
State and Local Taxes 11

PERFORMANCE INFORMATION 11
- ------------------------------------------------------

ADDRESSES 13
- ------------------------------------------------------

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.29 $ 9.48
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.45 0.34
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency
transactions 1.74 (0.19)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 2.19 0.15
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.45) (0.34)
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 9.29
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 24.18% 1.12%
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.85% 0.60%*
- -----------------------------------------------------------------------------------------------
Net investment income 4.62% 4.77%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 2.24% 54.83%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $29,679 $974
- -----------------------------------------------------------------------------------------------
Portfolio turnover 62% 73 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 14, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (the start of business) to April 13, 1994, the net investment income
was distributed to the Fund's adviser.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Utility Fund to Federated Utility Fund
II. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest in separate portfolios of securities, including
the Fund. The shares in any one portfolio may be offered in separate classes. As
of the date of this prospectus, the Trustees have not established separate
classes of shares.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to achieve high current income and
moderate capital appreciation. The investment objective cannot be changed
without approval of shareholders. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
policies described in this prospectus.

INVESTMENT POLICIES

The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of equity and debt securities of
utility companies. Unless indicated otherwise, the investment policies may be
changed by the Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term, the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of utility companies. The Fund intends to achieve its
investment objective by investing in equity and debt securities of utility
companies that produce, transmit, or distribute gas and electric energy as well
as those companies that provide communications facilities, such as telephone and
telegraph companies. Under normal market conditions, the Fund will invest at
least 65% of its total assets in securities of utility companies. The prices of
fixed income securities fluctuate inversely to the direction of interest rates.

However, other factors, such as product position, market share, or profitability
will also be considered by the Fund's investment adviser.

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts as well as securities
of foreign issuers that trade on foreign stock exchanges. Securities of a
foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities of
-
companies. Convertible securities are fixed income securities which may be
exchanged or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The Fund
invests in convertible bonds rated "B" or higher by Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") at the time of
investment or, if unrated, of comparable quality. If a convertible bond is rated
below "B" according to the characteristics set forth hereafter after the Fund
has purchased it, the Fund is not required to drop the convertible bond from the
portfolio but will consider appropriate action. The investment characteristics
of each convertible security vary widely, which allows convertible securities to
be employed for different investment objectives.

Convertible bonds and convertible preferred stocks are fixed income securities
that generally retain the investment characteristics of fixed income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same company.
The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The Fund
will exchange or convert the convertible securities held in its portfolio into
shares of the underlying common stock in instances in which, in the investment
adviser's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund will hold or trade the convertible

securities. In selecting convertible securities for the Fund, the Fund's adviser
evaluates the investment characteristics of the convertible security as a fixed
income instrument and the investment potential of the underlying equity security
for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the Fund's adviser considers numerous factors,
including the economic and political outlook, the value of the security relative
to other investment alternatives, trends in the determinants of the issuer's
profits, and the issuer's management capability and practices.

OTHER SECURITIES. The Fund may invest in preferred stocks, corporate bonds,
notes, and warrants of these companies and in cash, U.S. government securities,
and money market instruments in proportions determined by its investment
adviser.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 15% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies, but which are subject to
restriction on resale under federal securities law. To the extent restricted
securities are deemed to be illiquid, the Fund will limit their purchase,
including non-negotiable time deposits, repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter options, and
certain restricted securities determined by the Trustees not to be liquid, to
15% of its net assets.

TEMPORARY INVESTMENTS. The Fund may also invest temporarily in cash, cash
items, and short-term instruments, including notes and commercial paper, for
liquidity and during times of unusual market conditions for defensive purposes.
Cash items may include obligations such as:

.certificates of deposit (including those issued by domestic and foreign
branches of FDIC insured banks);

.obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities;

.and repurchase agreements.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental policy
which may not be changed without the approval of shareholders. The Fund will
only

enter into loan arrangements with broker/dealers, banks, or other institutions
which the investment adviser has determined are creditworthy under guidelines
established by the Trustees and will receive collateral equal to at least 100%
of the value of the securities loaned at all times. There is the risk that when
lending portfolio securities, the securities may not be available to the Fund on
a timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

PUT AND CALL OPTIONS. The Fund may purchase put options on its portfolio
securities. These options will be used as a hedge to attempt to protect
securities which the Fund holds against decreases in value. The Fund will only
purchase puts on portfolio securities which are traded on a recognized exchange.

The Fund may also write call options on all or any portion of its portfolio to
generate income for the Fund. The Fund will write call options on securities
either held in its portfolio or for which it has the right to obtain without
payment of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
must be listed on a recognized options exchange. Although the Fund reserves the
right to write covered call options on its entire portfolio, it will not write
such options on more than 25% of its total assets unless a higher limit is
authorized by its Trustees.

FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio of
long-term debt securities against changes in interest rates. Financial futures
contracts call for the delivery of particular debt instruments issued or
guaranteed by the U.S. Treasury or by specified agencies or instrumentalities of
the U.S. government at a certain time in the future. The seller of the contract
agrees to make delivery of the type of instrument called for in the contract and
the buyer agrees to take delivery of the instrument at the specified future
time.

The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as

purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and cash equivalents, equal to the underlying
commodity value of the futures contracts (less any related margin deposits),
will be deposited in a segregated account with the Fund's custodian (or the
broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts is unleveraged.

RISKS. When the Fund uses financial futures and options on financial
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate perfectly
with the prices of the securities in the Fund's portfolio. This may cause
the futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Fund's investment
adviser could be incorrect in its expectations about the direction or
extent of market factors such as interest rate movements. In these events,
the Fund may lose money on the futures contract or option.

It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the investment
adviser will consider liquidity before entering into futures and options
transactions, there is no assurance that a liquid secondary market on an
exchange will exist for any particular futures contract or option at any
particular time. The Fund's ability to establish and close out futures and
options positions depends on this secondary market.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS. The Fund is intended to be a funding vehicle for
variable annuity contracts and variable life insurance policies offered by
certain insurance companies. The contracts

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

INVESTMENT LIMITATIONS

The Fund will not:

.borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
the value of those assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS
Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable annuity contracts and variable life
insurance policies. The use of Fund shares as investments for both variable
annuity contracts and variable life insurance policies is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

The Fund intends to engage in mixed funding and shared funding in the future.
Although the Fund does not currently foresee any disadvantage to contract owners
due to differences in redemption rates, tax treatment, or other considerations
resulting from mixed funding or shared funding, the Trustees 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 conflict which occur. Such action could result in one
or more participating insurance companies withdrawing their investment in the
Fund.

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities such that its net asset value might be
materially affected; (ii) days during which no Shares are tendered for
redemption and no orders to purchase Shares are received; and (iii) the
following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared and paid monthly.

Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional shares of the
Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such

persons owe a fiduciary duty to the Fund's shareholders and must place the
interests of shareholders ahead of the employees' own interest. Among other
things, the codes: require preclearance and periodic reporting of personal
securities transactions; prohibit personal transactions in securities being
purchased or sold, or being considered for purchase or sale, by the Fund;
prohibit purchasing securities in initial public offerings; and prohibit taking
profits on securities held for less than sixty days. Violations of these codes
are subject to review by the Trustees, and could result in severe penalties.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .75 of 1% of the Fund's average daily net assets. The adviser
may voluntarily choose to waive a portion of its fees or reimburse the Fund
for certain operating expenses. The adviser can terminate this voluntary
waiver and reimbursement of expenses at any time at its sole discretion.

Christopher H. Wiles has been the Fund's portfolio manager since the Fund
commenced operations. Mr. Wiles joined Federated Investors in 1990 and has
been a Vice President of the Fund's investment adviser since 1992. Mr.
Wiles served as Assistant Vice President of the Fund's investment adviser
in 1991. Mr. Wiles is a Chartered Financial Analyst and received his M.B.A.
in Finance from Cleveland State University.

Linda A. Duessel has been the Fund's portfolio manager since April 1995.
Ms. Duessel joined Federated Investors in 1991 and has been a Vice
President of the Fund's investment adviser since 1995. Ms. Duessel was an
Assistant Vice President of the Fund's investment adviser from 1991 until
1995. Ms. Duessel is a Chartered Financial Analyst and received her M.S. in

Industrial Administration from Carnegie Mellon University.

DISTRIBUTION OF FUND SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

the voting securities of the Fund, and, therefore, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operations and for the election of Trustees in certain circumstances.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated Utility Fund II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank P.O. Box 8600
and Trust Company Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 22, 1996

[LOGO OF FEDERATED SECURITIES CORP.]
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

[LOGO OF RECYCLED PAPER]

Cusip 458043205
3113008A (4/96)

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus
of Federated Utility Fund II (the "Fund") dated April 22, 1996. This
Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVE AND POLICIES 3

U.S. GOVERNMENT OBLIGATIONS 3
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS 4
LENDING OF PORTFOLIO SECURITIES 4
REPURCHASE AGREEMENTS 5
REVERSE REPURCHASE AGREEMENTS 6
RESTRICTED AND ILLIQUID SECURITIES 6
PORTFOLIO TURNOVER 3
INVESTMENT LIMITATIONS 8

FEDERATED INSURANCE SERIES MANAGEMENT 12

FUND OWNERSHIP 20
TRUSTEES COMPENSATION 21
TRUSTEE LIABILITY 23
INVESTMENT ADVISORY SERVICES 23

ADVISER TO THE FUND 23
ADVISORY FEES 24
BROKERAGE TRANSACTIONS 24

OTHER SERVICES 25

FUND ADMINISTRATION 25
CUSTODIAN AND PORTFOLIO ACCOUNTANT 12
TRANSFER AGENT 12
INDEPENDENT AUDITORSERROR! BOOKMARK NOT DEFINED.

PURCHASING SHARES 12

DETERMINING NET ASSET VALUE 12

DETERMINING VALUE OF SECURITIES 12
MASSACHUSETTS PARTNERSHIP LAW 12

TAX STATUS 13

THE FUND'S TAX STATUS 13
SHAREHOLDER'S TAX STATUS 13
TOTAL RETURN 13

YIELD 13

PERFORMANCE COMPARISONS 13

ABOUT FEDERATED INVESTORS 14

MUTUAL FUND MARKET 15
INSTITUTIONAL CLIENTS 15
TRUST ORGANIZATIONS 15
BROKER/DEALERS AND BANK BROKER/DEALER
SUBSIDIARIES 15
FINANCIAL STATEMENTS 15

APPENDIX 16

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from
Utility Fund to Federated Utility Fund II. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest in
separate portfolios of securities, including the Fund. The shares in any one
portfolio may be offered in separate classes. As of the date of this
prospectus, the Trustees have not established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to achieve high current income and moderate
capital appreciation. The investment objective cannot be changed without
approval of shareholders. The Fund endeavors to achieve its investment
objective by investing primarily in a professionally managed, diversified
portfolio of equity and debt securities of utility companies.
U.S. GOVERNMENT OBLIGATIONS
The Fund may also invest in U.S. government obligations which generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued and/or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:

o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit System, including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;
o Federal Home Loan Banks;
o Federal Home Loan Mortgage Corporation;
o Federal National Mortgage Association; and

o Student Loan Marketing Association.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of securities.

The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker. The Fund does not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
other securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial

institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the

Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.

PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. Any such trading will increase the Fund's portfolio turnover rate
and transaction costs. The adviser to the Fund does not anticipate that
portfolio turnover will result in adverse tax consequences.

For the fiscal year ended December 31, 1995, and for the period from April 14,
1994 (date of initial public investment) to December 31, 1994, the portfolio
turnover rates for the Fund were 62% and 73%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of the value of its total assets at the
time of borrowing. For purposes of this limitation, the following are not

deemed to be pledges: margin deposits for the purchase and sale of
futures contracts and related options, any segregation or collateral
arrangements made in connection with options activities or the purchase
of securities on a when-issued basis.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities, if, as a result of such purchase,
25% or more of its total assets would be invested in securities of
companies engaged principally in any one industry other than the
utilities industry. However, the Fund may at any time invest 25% or more
of its total assets in cash or cash items and securities issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts except that the Fund may purchase and sell
futures and stock index futures contracts and related options.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other

transactions which are permitted by the Fund's investment objective and
policies or the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the Fund will not
purchase more than 10% of any class of the outstanding voting securities
of any one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class, regardless
of priorities, series, designations, or other differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material changes in these limitations become effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.

INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice, over-the-counter options,
and certain restricted securities not determined by the Trustees to be
liquid.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5% of the
Fund's total assets would be invested in premiums on open put option
positions.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them
in deliverable form without further payment or after segregating cash in
the amount of any further payment.
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 of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is
the father of J. Christopher Donahue, President of the Trust .

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director
or Trustee of the Funds; formerly, Vice Chairman and Director, PNC Bank, N.A.,
and PNC Bank Corp. and Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee

Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee

Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee of the Funds; formerly, President, State Street Bank and Trust Company
and State Street Boston Corporation.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of
Pittsburgh; founding Chairman, National Advisory Council for Environmental
Policy and Technology and Federal Emergency Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the Funds.

Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 11, 1996, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Life of Virginia, Richmond, Virginia, 41%,
Lincoln Benefit Life Co., Lincoln, Nebraska, 8%, Aetna Insurance Co. of

America, Hartford, Connecticut, 17%, and Aetna Life Insurance & Annuity Co.,
Hartford, Connecticut, 29%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 59 other investment companies in the Fund
Complex
Thomas G. Bigley++ $1,016 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John T. Conroy, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
William J. Copeland $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
J. Christopher Donahue,$0 $0 for the Trust and

President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D.$1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr.$1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1995, and for the period from December
9, 1993 (start of business) to December 31, 1994, the adviser earned advisory
fees of $89,752 and $2,077, respectively, all of which were waived.

BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include: 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 provided by brokers and dealers may be used by the Adviser
or its affiliates in advising the Fund and other accounts. To the extent that
receipt of these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided. For the fiscal year ended December 31, 1995,
and for the period from December 9, 1993 (start of business) to December 31,
1994, the Fund paid $59,746 and $476, respectively, in brokerage commissions
on brokerage transactions.

Although investment decisions for the Fund are made independently from those
of any other accounts managed by the Adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the Adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the Adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.

OTHER SERVICES

Advisers, the adviser to the Fund, holds approximately 20% of the outstanding
common stock and serves as director of Commercial Data Services, Inc., a
company which provides computer processing services to Federated Services
Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments. The fee paid for this service is based upon the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.

PURCHASING SHARES

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value
is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
The values of the Fund's portfolio securities are determined as follows:
o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, 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 for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available; otherwise, as determined by
an independent pricing service;
o for unlisted equity securities, the latest mean prices;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
MASSACHUSETTS PARTNERSHIP LAW

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.

TAX STATUS

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must,
among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities held
less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDER'S TAX STATUS
The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and this Statement. If the Fund fails to
comply with these regulations, contracts invested in the Fund shall not be

treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

For the fiscal year ended December 31, 1995, and for the period from April 14,
1994 (date of initial public investment) to December 31, 1995 , the average
annual total returns for the Fund were 24.18% and 1.12%, respectively.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions. You should review the performance figures for your insurance
contract, which figures reflect the applicable charges and expenses of the
contract. Such performance figures will accompany any advertisement of the
Fund's performance.
YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1995 was
3.84%.

The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o the relative amount of the Fund's cash flow.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and total
return.

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the "utility funds" category in advertising and sales
literature.

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

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

o STANDARD & POOR'S RATINGS GROUP ("S&P") DAILY STOCK PRICE INDEX OF 500
COMMON STOCKS, a composite index of common stocks in industry,
transportation, financial, and public utility companies, can be used to

compare the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the S&P index assumes
reinvestment of all dividends paid by stocks listed on its index. Taxes
due on any of these distributions are not included, nor are brokerage or
other fees calculated in S&P figures.
o STANDARD & POOR'S RATINGS GROUP UTILITY INDEX is an unmanaged index of
common stocks from forty different utilities. This index indicates daily
changes in the price of the stocks. The index also provides figures for
changes in price from the beginning of the year to date, and for a twelve
month period.

o DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six month
period. The index also provides the highs and lows for each of the past
five years.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for the Fund may quote total
returns, which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
the Fund based on monthly reinvestment of dividends over a specified period of
time.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs and descriptions compared to federally
insured bank products, including certificates of deposit and time deposits,

and to money market funds using the Lipper Analytical Services money market
average.

ABOUT FEDERATED INVESTORS

*Source: Investment Company Institute

APPENDIX

BB, B--Debt rated "BB" and "B" is regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. "B" indicates the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as high grade Bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in "Aaa" securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great

length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are rate "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.

Cusip 458043205

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated Fund for U.S. Government Securities
II (the "Fund"), which is a diversified investment portfolio in Federated
Insurance Series (the "Trust"), an open-end, diversified management investment
company. The Fund seeks current income by investing in a professionally managed,
diversified portfolio limited to U.S. government securities. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through variable annuity contracts and variable life
insurance policies offered by insurance companies which provide for investment
in the Fund. Keep this prospectus for future reference.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Investment Limitations 5

NET ASSET VALUE 6
- ------------------------------------------------------

INVESTING IN THE FUND 6
- ------------------------------------------------------

Purchases and Redemptions 6
What Shares Cost 6
Dividends 7

FUND INFORMATION 7
- ------------------------------------------------------

Management of the Fund 7
Distribution of Fund Shares 8
Administration of the Fund 8

SHAREHOLDER INFORMATION 9
- ------------------------------------------------------

Voting Rights 9

TAX INFORMATION 9
- ------------------------------------------------------

Federal Taxes 9
State and Local Taxes 10

PERFORMANCE INFORMATION 10
- ------------------------------------------------------

ADDRESSES 11
- ------------------------------------------------------

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 9.99
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.54 0.27
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.30 --
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.84 0.27
- ---------------------------------------------------------------------------------------------- --------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.54) (0.27)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.29 $ 9.99
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 8.77% 2.62%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 0.80% 0.48%*
- ----------------------------------------------------------------------------------------------
Net investment income 6.00% 3.99%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.81% 32.83%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,264 $ 1,244
- ----------------------------------------------------------------------------------------------
Portfolio turnover 65% 0% %
- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from March 29, 1994 (date of initial
public investment), to December 31, 1994. For the period from December 8,
1993 (start of business), to March 28, 1994, net investment income was
distributed to the Fund's adviser.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from U.S. Government Bond Fund to Federated
Fund for U.S. Government Securities II. The Declaration of Trust permits the
Trust to offer separate series of shares of beneficial interest in separate
portfolios of securities, including the Fund. The shares in any one portfolio
may be offered in separate classes. As of the date of this prospectus, the
Trustees have not established separate classes of shares.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

Under normal circumstances, the Fund pursues its investment objective by
investing at least 65% of the value of its total assets in securities issued or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities. For purposes of this 65% statement, the Fund will
consider collateralized mortgage obligations issued by U.S. government agencies
or instrumentalities to be U.S. government securities. Unless indicated
otherwise, the investment policies may be changed by the Trustees without the
approval of the shareholders. Shareholders will be notified before any material
change becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests in securities which are primary or
direct obligations of the U.S. government or its agencies or instrumentalities,
or which are guaranteed by the U.S. government, its agencies or
instrumentalities, and in certain collateralized mortgage obligations ("CMOs"),
described below, and repurchase agreements. The prices of fixed income
securities fluctuate inversely to the direction of interest rates.

The U.S. government securities in which the Fund invests include:

.direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

.notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association;
Export-Import Bank of the United States; Commodity Credit Corporation;
Federal Financing Bank; The Student Loan Marketing Association; National
Credit Union Administration; and Tennessee Valley Authority.

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

.the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

.the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

.the credit of the agency or instrumentality.

The Fund may also invest in CMOs which are rated AAA by a nationally recognized
statistical rating agency and which are issued by private entities such as
investment banking firms and companies related to the construction industry. The
CMOs in which the Fund may invest may be: (i) privately issued securities which
are collateralized by pools of mortgages in which each mortgage is guaranteed as
to payment of principal and interest by an agency or instrumentality of the U.S.
government; (ii) privately issued securities which are collateralized by pools
of mortgages in which payment of principal and interest are guaranteed by the
issuer and such guarantee is collateralized by U.S. government securities; and
(iii) other privately issued securities in which the proceeds of the issuance
are invested in mortgage-backed securities and payment of the principal and
interest are supported by the credit of an agency or instrumentality of the U.S.
government. The mortgage-related securities provide for a periodic payment
consisting of both interest and principal. The interest portion of these
payments will be distributed by the Fund as income, and the capital portion will
be reinvested.

Mortgage-backed securities may be subject to certain prepayment risks because
the underlying mortgage loans may be prepaid without penalty or premium.
Prepayment risks on mortgage-backed securities tend to increase during periods
of declining mortgage interest rates because many borrowers refinance their
mortgages to take advantage of favorable rates. At the time the Fund reinvests
the proceeds, it may receive a rate of interest which is actually lower than the
rate of interest paid on those securities.

REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements.
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial

institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. The Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Funds will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES. As a matter of investment practice, the
Fund may invest up to 15% of its total assets in restricted securities. This
restriction is not applicable to commercial paper issued under Section 4(2) of
the Securities Act of 1933. Restricted securities are any securities in which
the Fund may otherwise invest pursuant to its investment objective and policies
but which are subject to restriction on resale under federal securities law. To
the extent restricted securities are deemed to be illiquid, the Fund will limit
their purchase, including non-negotiable time deposits, repurchase agreements
providing for settlement in more than seven days after notice, over-the-counter
options, and certain restricted securities determined by the Trustees not to be
liquid, to 15% of the net assets of the Fund.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental policy
which may not be changed without shareholder approval. The Fund will only enter
into loan arrangements with broker/dealers, banks, or other institutions which
the investment adviser has determined are creditworthy under guidelines
established by the Trustees and will receive collateral equal to at least 100%
of the value of the securities loaned in the form of cash or U.S. government
securities. There is the risk that when lending portfolio securities, the
securities may not be available to the Fund on a timely basis and the Fund may,
therefore, lose the opportunity to sell the securities at a desirable price. In
addition, in the event that a borrower of securities would file for bankruptcy
or become insolvent, disposition of the securities may be delayed pending court
action.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third

parties at current market values and simultaneously acquire other commitments to
purchase similar securities at later dates. The Fund may realize short-term
profits or losses upon the sale of such commitments.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

INVESTMENT LIMITATIONS
The Fund will not:

.borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
the value of those assets to secure such borrowings.

The Fund will not:

.invest more than 10% of its total assets in securities of other
investment companies.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

WHAT SHARES COST

business day. It is the responsibility of each insurance company which invests
in the Fund to properly transmit purchase orders and federal funds in accordance
with the procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared and paid monthly.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .60 of 1% 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. The adviser can terminate this voluntary waiver
and reimbursement of expenses at any time at its sole discretion.

Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Federated Advisers and other
subsidiaries of Federated Investors serve as investment advisers to a
number of investment companies and private accounts. Certain other
subsidiaries also provide administrative services to a number of investment
companies. With over $80 billion invested across more than 250 funds under
management and/or administration by its subsidiaries, as of December 31,
1995, Federated Investors is one of the largest mutual fund investment
managers in the United States. With more than 1,800 employees, Federated
contintues to be led by the management who founded the company in 1955.
Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.

Kathleen M. Foody-Malus has been the Fund's portfolio manager since the
Fund commenced operations. Ms. Foody-Malus joined Federated Investors in
1983 and has been a Vice President of the Fund's investment adviser since
1993. Ms. Foody-Malus served as an Assistant Vice President of the
investment adviser from 1990 until 1992. Ms. Foody-Malus received her
M.B.A. in Accounting/Finance from the University of Pittsburgh.

James D. Roberge has been the Fund's portfolio manager since March 1995.
Mr. Roberge joined Federated Investors in 1990 and has been a Vice
President of the Fund's investment adviser since 1994. Mr. Roberge served
as an Assistant Vice President of the Fund's investment adviser from 1992
to 1994 and as an investment analyst from 1990 to 1992. Mr. Roberge is a
Chartered Financial Analyst and received his M.B.A. in Finance from The
Wharton School of the University of Pennsylvania.

DISTRIBUTION OF FUND SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of March 11, 1996, Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, owned 32% of the voting securities of the Fund, and, therefore, may
for certain purposes be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

Trustees may be removed by the Trustees or by the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Trustees upon
the written request of shareholders owning at least 10% of the outstanding
shares of all series of the Trust.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated Fund for Federated Investors Tower
U.S. Government Securities II Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

FEDERATED FUND FOR U.S.
GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 22, 1996

[LOGO OF FEDERATED SECURITIES CORP.]
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

[LOGO OF RECYCLED PAPER]

Cusip 458043304
3113007A (4/96)

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus
of Federated Fund for U.S. Government Securities II (the "Fund") dated
April 22, 1996. This Statement is not a prospectus itself. You may request
a copy of a prospectus or a paper copy of this Statement, if you have
received it electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVE AND POLICIES 3

TYPES OF INVESTMENTS 3
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS 5
LENDING OF PORTFOLIO SECURITIES 2
RESTRICTED AND ILLIQUID SECURITIES 6
REPURCHASE AGREEMENTS 7
REVERSE REPURCHASE AGREEMENTS 7
PORTFOLIO TURNOVER 3
INVESTMENT LIMITATIONS 8

FEDERATED INSURANCE SERIES MANAGEMENT 12

FUND OWNERSHIP 19
TRUSTEES COMPENSATION 21
TRUSTEE LIABILITY 23
INVESTMENT ADVISORY SERVICES 23

ADVISER TO THE FUND 23
ADVISORY FEES 24
BROKERAGE TRANSACTIONS 24

OTHER SERVICES 26

FUND ADMINISTRATION 26
CUSTODIAN AND PORTFOLIO ACCOUNTANT 12
TRANSFER AGENT 12

INDEPENDENT AUDITORS 12
PURCHASING SHARES 27

DETERMINING NET ASSET VALUE 27

DETERMINING VALUE OF SECURITIES 27
MASSACHUSETTS PARTNERSHIP LAW 28

TAX STATUS 29

THE FUND'S TAX STATUS 29
SHAREHOLDER'S TAX STATUS 29
TOTAL RETURN 29

YIELD 30

PERFORMANCE COMPARISONS 31

ABOUT FEDERATED INVESTORS 15

MUTUAL FUND MARKET 34
INSTITUTIONAL CLIENTS 34
TRUST ORGANIZATIONS 34
BROKER/DEALERS AND BANK BROKER/DEALER
SUBSIDIARIES 34
FINANCIAL STATEMENTS 35

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from U.S.
Government Bond Fund to Federated Fund for U.S. Government Securities II. The
Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest in separate portfolios of securities, including the Fund.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have not established separate classes of
shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income. The investment
objective cannot be changed without the approval of shareholders. Current
income includes, in general, discount earned on U.S. Treasury bills and agency
discount notes, interest earned on all other U.S. government securities, and
short-term capital gains.
TYPES OF INVESTMENTS
The Fund invests in securities which are primary or direct obligations of the
U.S. government or its agencies or instrumentalities, or which are guaranteed
by the U.S. government, its agencies or instrumentalities and in certain

collateralized mortgage obligations, described below, and repurchase
agreements.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
Privately issued CMOs generally represent an ownership interest in
federal agency mortgage pass-through securities such as those issued by
the Government National Mortgage Association. The terms and
characteristics of the mortgage instruments may vary among pass-through
mortgage loan pools.
The market for such CMOs has expanded considerably since its inception.
The size of the primary issuance market and the active participation in
the secondary market by securities dealers and other investors make
government-related pools highly liquid.
STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may
represent an interest solely in the principal repayments or solely in the
interest payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates fall
below the level at which SMBSs were issued, there may be substantial
prepayment on the underlying mortgages, leading to the relatively early
prepayment of principal-only SMBSs and a reduction in the amount of
payment made to holders of interest-only SMBSs. It is possible that the
Fund might not recover its original investment on interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise
and decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends

to use this characteristic of interest-only SMBSs to reduce the effects
of interest rate changes on the value of the Fund's portfolio, while
continuing to pursue current income.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of securities.
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any interest paid
on such securities. Loans are subject to termination at the option of the Fund
or the borrower. The Fund may pay reasonable administrative and custodial fees
in connection with a loan and may pay a negotiated portion of the interest
earned on the cash or equivalent collateral to the borrower or placing broker.
The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.

RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace trades.

REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
other securities to the Fund and agree at the time of sale to repurchase them
at a mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could
receive less than the repurchase price on any sale of such securities. In the
event that such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy pursuant to guidelines established by the Trustees.

future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to length of time a particular security may have
been held. The Fund's policy of managing its portfolio of U.S. government
securities, including the sale of securities held for a short period of time,
to achieve its investment objective of current income may result in high
portfolio turnover. The Fund will not attempt to set or meet a portfolio
turnover rate as any turnover would be incidental to transactions undertaken
in an attempt to achieve the Fund's investment objective.

For the fiscal year ended December 31, 1995, and for the period from March 29,
1994 (date of initial public investment) to December 31, 1994, the portfolio
turnover rates for the Fund were 65% and 0%, respectively.

INVESTMENT LIMITATIONS

ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amount borrowed or 15% of the value of total assets at the time of
borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at any time invest 25% or more of its total assets
in cash or cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or

instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the Fund will not
purchase more than 10% of any class of the outstanding voting securities
of any one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class, regardless
of priorities, series, designations, or other differences.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of the value of its total assets. This shall not prevent the
Fund from purchasing or holding corporate or U.S. government bonds,
debentures, notes, certificates of indebtedness or other debt securities
of an issuer, entering into repurchase agreements, or engaging in other

transactions which are permitted by the Fund's investment objective and
policies or the Trust's Declaration of Trust.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material changes in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including, among others, repurchase agreements
providing for settlement more than seven days after notice, and certain
restricted securities not determined by the Trustees to be liquid.
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 of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee

Director, Oberg Manufacturing Co.; Chairman of the Board, Children's Hospital
of Pittsburgh; Director or Trustee of the Funds; formerly, Senior Partner,
Ernst & Young LLP.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942

Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee of the Funds; formerly, President, State Street Bank and Trust Company
and State Street Boston Corporation.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh

Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of
Pittsburgh; founding Chairman, National Advisory Council for Environmental
Policy and Technology and Federal Emergency Management Advisory Board.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated Securities Corp.; Trustee,
Federated Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.

Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 11, 1996, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: United of Omaha Life Insurance Co., Omaha,
Nebraska, 20%, Transamerica Occidental Life Insurance Co., Los Angelos,
California, 21%, Lincoln Benefit Life Co., Lincoln, Nebraska, 8%, Aetna
Insurance Co. of America, Hartford, Connecticut, 11%, and Aetna Life Insurance
& Annuity Co., Hartford, Connecticut, 32%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

William J. Copeland $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
J. Christopher Donahue,$0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D.$1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr.$1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and

Trustee 54 other investment companies in the Fund
Complex

anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1995, and for the period from December
8, 1993 (start of business) to December 31, 1994, the adviser earned advisory
fees of $30,456 and $2,605,respectively, all of which were waived.

BROKERAGE TRANSACTIONS

services may supplant 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 brokers who
offer brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. For the fiscal year ended December 31, 1995, and for the period from
December 8, 1993 (start of business) to December 31, 1994, the Fund paid $322
and $0, respectively, in brokerage commissions on brokerage transactions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators". For the
fiscal year ended December 31, 1995, and for the period from December 8, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000
and $63,015, respectively. Dr. Henry J. Gailliot, an officer of Federated
Advisers, the adviser to the Fund, holds approximately 20% of the outstanding
common stock and serves as director of Commercial Data Services, Inc., a
company which provides computer processing services to Federated Services
Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments. The fee paid for this service is based upon the

level of the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.

PURCHASING SHARES

o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available otherwise, as determined by an
independent pricing service;
o for unlisted equity securities, the latest mean prices;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

For the fiscal year ended December 31, 1995, and for the period from March 29,
1994 (date of initial public investment) to December 31, 1995 , the average
annual total returns for the Fund were 8.77% and 2.62%, respectively.

The Fund's 30-day yield for the thirty day period ended December 31, 1995 was
5.89%.

and is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not correlate to
the dividends or other distributions paid to shareholders. Also, the yield
does not reflect the charges and expenses of an insurance contract. You should
review the performance figures for your insurance contract, which figures
reflect the applicable charges and expenses of the contract. Such performance
figures will accompany any advertisement of the Fund's performance.
PERFORMANCE COMPARISONS

o LEHMAN BROTHERS MORTGAGE-BAKED SECURITIES INDEX includes 15- and 30-year
fixed-rate securities backed by mortgage pools of the Government National
Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation
(FHLMC), and Federal National Mortgage Corporation (FNMA). Graduated
payment mortgages (GPMs) and balloons are included in the index.

returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
also represent the historic change in the value of an investment in the Fund
based on quarterly reinvestment of dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits,
and to money market funds using the Lipper Analytical Services money market
instruments average.

ABOUT FEDERATED INVESTORS

management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, 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
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.

FINANCIAL STATEMENTS

*Source: Investment Company Institute
Cusip 458043304

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated High Income Bond Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment company.
The Fund invests in a professionally managed, diversified portfolio limited
primarily to fixed income securities which seek to achieve high current income.
Shares of the Fund may be sold only to separate accounts of insurance companies
to serve as the investment medium for variable life insurance policies and
variable annuity contracts issued by insurance companies.

The Fund's portfolio consists primarily of lower-rated corporate debt
obligations, which are commonly referred to as "junk bonds." These lower-rated
bonds may be more susceptible to real or perceived adverse economic conditions
than investment grade bonds. These lower-rated bonds are regarded as
predominantly speculative with regard to each issuer's continuing ability to
make principal and interest payments. In addition, the secondary trading market
for lower-rated bonds may be less liquid than the market for investment grade
bonds. The Fund's investment adviser will endeavor to limit these risks through
diversifying the portfolio and through careful credit analysis of individual
issuers. Purchasers should carefully assess the risks associated with an
investment in this Fund. (See the sections in this prospectus entitled
"Investment Risks" and "Reducing Risks of Lower-Rated Securities.")

The Fund has also filed a Statement of Additional Information dated April 22,
1996, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Investment Risks 5

Investment Limitations 7

NET ASSET VALUE 7
- ------------------------------------------------------

INVESTING IN THE FUND 7
- ------------------------------------------------------
Purchases and Redemptions 7
What Shares Cost 8
Dividends 8

FUND INFORMATION 8
- ------------------------------------------------------
Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 10

SHAREHOLDER INFORMATION 10
- ------------------------------------------------------

Voting Rights 10

TAX INFORMATION 11
- ------------------------------------------------------

Federal Taxes 11
State and Local Taxes 11

PERFORMANCE INFORMATION 11
- ------------------------------------------------------

APPENDIX 12
- ------------------------------------------------------

ADDRESSES 16
- ------------------------------------------------------

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.87 $ 10.00
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.85 0.75
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.89 (1.12)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.74 (0.37)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.82) (0.75)
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (d) -- (0.01)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total distributions (0.82) (0.76)
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 8.87
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 20.38% (3.73%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.80% 0.41%*
- -----------------------------------------------------------------------------------------------
Net investment income 9.27% 9.11%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.40% 10.01%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $20,165 $ 1,457
- -----------------------------------------------------------------------------------------------
Portfolio turnover 48% 18 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.
(a) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (the start of business) to February 1, 1994, the Fund had no public
investment.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Corporate Bond Fund to Federated High
Income Bond Fund II. The Declaration of Trust permits the Trust to offer
separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to seek high current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

Unless stated otherwise, the Trustees can change the investment policies without
the approval of shareholders. Shareholders will be notified before any material
change becomes effective. The Fund endeavors to achieve its objective by
investing primarily in a professionally managed, diversified portfolio of fixed
income securities. The fixed income securities in which the Fund intends to
invest are lower-rated corporate debt obligations, which are commonly referred
to as "junk bonds." Some of these fixed income securities may involve equity
features. Capital growth will be considered, but only when consistent with the
investment objective of high current income.

ACCEPTABLE INVESTMENTS. The Fund invests at least 65% of its assets in
lower-rated fixed income bonds. Under normal circumstances, the Fund will not
invest more than 10% of the value of its total assets in equity securities. The
prices of fixed income securities fluctuate inversely to the direction of
interest rates. The fixed income securities in which the Fund invests include,
but are not limited to:

preferred stocks;

bonds;

debentures;

notes;

equipment lease certificates; and

equipment trust certificates.

The securities in which the Fund may invest are generally rated BBB or lower by
Standard & Poor's Ratings Group ("S&P") or Fitch Investors Service ("Fitch") or
Baa or lower by Moody's Investors Service, Inc. ("Moody's"), or are not rated
but are determined by the Fund's investment adviser to be of comparable quality.
Securities which are rated BBB or lower by S&P or Fitch or Baa or lower by
Moody's have speculative characteristics. Changes in economic conditions or
other circumstances are more likely to lead to weakened capacity to make
principal and interest payments than highly rated bonds. A description of the
rating categories is contained in the Appendix to this prospectus. There is no
lower limit with respect to rating categories for securities in which the Fund
may invest. See "Investment Risks."

FOREIGN SECURITIES. The Fund may invest in foreign securities, including
-
foreign securities not publicly traded in the United States, which may include
any of the types of securities described above (see "Acceptable Investments").
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investments in domestic issuers. These considerations include the possibility of
expropriation, the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards,
less liquidity and more volatility in foreign securities markets, the impact of
political, social, or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.

TEMPORARY INVESTMENTS. The Fund may invest temporarily in cash and short-term
obligations for defensive purposes during times of unusual market conditions.
Short-term obligations may include:

certificates of deposit;

commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch and variable rate demand master notes;

short-term notes;

obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities; and

repurchase agreements.

In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that, under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
up to one-third of the value of its total assets, to broker/dealers, banks, or
other institutional borrowers of securities. This is a fundamental policy which
may not be changed without shareholder approval. The Fund will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned at all times. There is the risk that when lending portfolio securities,
the securities may not be available to the Fund on a timely basis and the Fund
may, therefore, lose the opportunity to sell the securities at a desirable
price. In addition, in the event that a borrower of securities would file for
bankruptcy or become insolvent, disposition of the securities may be delayed
pending court action.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize shortterm profits or losses upon the sale of such
commitments.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

INVESTMENT RISKS

The corporate debt obligations in which the Fund invests are usually not in the
three highest rating categories of the nationally recognized statistical rating
organizations (AAA, AA, or A for S&P or Fitch, and Aaa, Aa or A for Moody's) but
are in the lower rating categories or are unrated but are of comparable quality
and have speculative characteristics. Lower-rated or unrated bonds are commonly
referred to as "junk bonds." There is no minimal acceptable rating for a
security to be purchased or held in the Fund's portfolio, and the Fund may, from
to time, purchase or hold securities rated in the lowest rating category. A
description of the rating categories is contained in the Appendix to this
prospectus.

Lower-rated securities will usually offer higher yields than higher-rated
securities. However, there is more risk associated with these investments. This
is because of reduced creditworthiness and increased risk of default.
Lower-rated securities generally tend to reflect short-term corporate and market
developments to a greater extent than higher-rated securities which react
primarily to fluctuations in the general level of interest rates. Short-term
corporate and market developments affecting the prices or liquidity of
lower-rated securities could include adverse news affecting major issuers,
underwriters, or dealers in lower-rated securities. In addition, since there are
fewer investors in lower-rated securities, it may be harder to sell the
securities at an optimum time. As a result of these factors, lower-rated
securities tend to have more price volatility and carry more risk to principal
and income than higher-rated securities.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in
cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased.

In the event of a restructuring, the Fund may bear additional legal or
administrative expenses in order to maximize recovery from an issuer.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. In 1989, legislation was
enacted that requires federally insured savings associations to divest their
holdings of lower-rated bonds by 1994. The reduction of the number of
institutions empowered to purchase and hold lower-rated bonds could have an
adverse impact on the overall liquidity of the market. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may also
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

The Fund may, from time to time, own zero coupon bonds or pay-in-kind
securities. A zero coupon bond makes no periodic interest payments and the
entire obligation becomes due only upon maturity. Pay-in-kind securities make
periodic payments in the form of additional securities (as opposed to cash). The
price of zero coupon bonds and pay-in-kind securities are generally more
sensitive to fluctuations in interest rates than are conventional bonds.
Additionally, federal tax law requires that interest on zero coupon bonds and
pay-in-kind securities be reported as income to the Fund even though the Fund
received no cash interest until the maturity or payment date of such securities.

Many corporate debt obligations, including many lower-rated bonds, permit the
issuers to call the security and thereby redeem their obligations earlier than
the stated maturity dates. Issuers are more likely to call bonds during periods
of declining interest rates. In these cases, if the Fund owns a bond which is
called, the Fund will receive its return of principal earlier than expected and
would likely be required to reinvest the proceeds at lower interest rates, thus
reducing income to the Fund.

REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser
believes that the risks of investing in lower-rated securities can be reduced.
The professional portfolio management techniques used by the Fund to attempt to
reduce these risks include:

CREDIT RESEARCH. The Fund's investment adviser will perform its own credit
analysis in addition to using recognized rating agencies and other sources,
including discussions with the
issuer's management, the judgment of other investment analysts, and its own
informed judgment. The adviser's credit analysis will consider the issuer's
financial soundness, its responsiveness to changes in interest rates and
business conditions, and its anticipated cash flow, interest, or dividend
coverage and earnings. In evaluating an issuer, the adviser places special
emphasis on the estimated current value of the issuer's assets rather than
historical cost.
DIVERSIFICATION. The Fund invests in securities of many different issuers,
industries, and economic sectors to reduce portfolio risk.

ECONOMIC ANALYSIS. The Fund's adviser will analyze current developments
and trends in the economy and in the financial markets. When investing in
lower-rated securities, timing and selection are critical, and analysis of
the business cycle can be important.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
the value of those assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value per share of the Fund fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets of the
Fund, less liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund
reserves the right to reject any purchase request. The Fund's shares are used
solely as the investment vehicle for separate accounts of insurance companies
offering variable annuity contracts and variable life insurance policies. The
use of Fund shares as investments for both variable annuity contracts and
variable life insurance policies is referred to as "mixed funding." The use of
Fund shares as investments by separate accounts of unaffiliated life insurance
companies is referred to as "shared funding."

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

WHAT SHARES COST
The net asset value of shares is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of a
Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; or (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

DIVIDENDS

Dividends on shares of the Fund are declared and paid monthly.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the business affairs of the Trust and for
exercising all of the Trust's powers except those reserved for the shareholders.
An Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.

Both the Fund and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to .60 of 1% of the Fund's average daily net assets. The adviser
may voluntarily choose to waive a portion of its fee or reimburse the Fund
for certain operating expenses. The adviser can terminate this voluntary
waiver and reimbursement of expenses at any time at its sole discretion.
ADVISER'S BACKGROUND. Federated Advisers, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.

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

DISTRIBUTION OF FUND SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of March 11, 1996, Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, owned 54.19% of the voting securities of the Fund, and, therefore,
may for certain purposes be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

TAX INFORMATION

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

FEDERAL TAXES

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

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises total return and yield.

Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Fund is calculated
by dividing the net investment income per share (as defined by the Securities
and Exchange Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This number
is then annualized using semi-annual compounding.

The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders. Performance information will not reflect the charges and expenses
of a variable annuity or variable life insurance contract. Because shares of the
Fund can only be purchased by a separate account of an insurance company
offering such a contract, you should review the performance figures of the
contract in which you are invested, which performance figures will accompany any
advertisement of the Fund's performance.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

APPENDIX
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STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. 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.

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 B or B- rating.

C--The rating C is reserved for income bonds on which no interest is being paid.

D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

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

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

A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

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

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

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

Ca--Bonds which are rated 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 INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high 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+.

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.

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 in imminent default in payment of interest or principal.

DDD, DD, AND D--Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and should be valued on the basis of their
ultimate recovery value in liquidation or reorganization of the obligor. DDD
represents the highest potential for recovery on these bonds, and D represents
the lowest potential for recovery.

NR--NR indicates that Fitch does not rate the specific issue. Plus + or Minus :
Plus or minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category.

STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

Leading market positions in well established industries.

High rates of return on funds employed.

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

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

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

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

FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

F-1--(Highest Grade) Commercial paper assigned this rating is regarded as having
the strongest degree of assurance for timely payment.

F-2--(Very Good Grade) Issues assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated High Income Federated Investors Tower
Bond Fund II Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
- -----------------------------------------------------------------------------------------------------------------------

Independent Public Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
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</TABLE>

FEDERATED HIGH INCOME
BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 22, 1996

[LOGO]
FEDERATED SECURITIES CORP.
- --------------------------
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

Cusip 458043403
3113009A (4/96)
FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of Federated High Income Bond Fund II (the "Fund") dated April 22, 1996.
This Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated April 22, 1996
FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVE AND POLICIES 3

TYPES OF INVESTMENTS 3
CURRENCY RISK 5
INVESTING IN FOREIGN CURRENCIES 6
REPURCHASE AGREEMENTS 9
REVERSE REPURCHASE AGREEMENTS 9
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS 10
LENDING OF PORTFOLIO SECURITIES 10
RESTRICTED AND ILLIQUID SECURITIES 11
PORTFOLIO TURNOVER 12
INVESTMENT LIMITATIONS 12

FEDERATED INSURANCE SERIES MANAGEMENT 16

FUND OWNERSHIP 24
TRUSTEES COMPENSATION 25
TRUSTEE LIABILITY 27
INVESTMENT ADVISORY SERVICES 27

ADVISER TO THE FUND 27
ADVISORY FEES 27
BROKERAGE TRANSACTIONS 28

OTHER SERVICES 29

FUND ADMINISTRATION 29
CUSTODIAN AND PORTFOLIO ACCOUNTANT 30

TRANSFER AGENT 14
INDEPENDENT PUBLIC AUDITORS 30
PURCHASING SHARES 30

DETERMINING NET ASSET VALUE 30

DETERMINING VALUE OF SECURITIES 30
MASSACHUSETTS PARTNERSHIP LAW 31

TAX STATUS 32

THE FUND'S TAX STATUS 32
SHAREHOLDER'S TAX STATUS 32
TOTAL RETURN 33

YIELD 33

PERFORMANCE COMPARISONS 34

ABOUT FEDERATED INVESTORS 36

FINANCIAL STATEMENTS 38

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from
Corporate Bond Fund to Federated High Income Bond Fund II. The Declaration of
Trust permits the Trust to offer separate series of shares of beneficial
interest in separate portfolios of securities, including the Fund. The shares
in any one portfolio may be offered in separate classes. As of the date of
this Statement, the Trustees have not established separate classes of shares.
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to seek high current income. The investment
objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund endeavors to achieve its objective by investing primarily in a
professionally managed, diversified portfolio of fixed income securities.
Some of these fixed income securities may involve equity features. Capital
growth will be considered, but only when consistent with the investment
objective of high current income.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common

stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered
as a unit).
Equipment lease or trust certificates are secured obligations issued in
serial form, usually sold by transportation companies such as railroads
or airlines, to finance equipment purchases. The certificate holders own
a share of the equipment, which can be resold if the issuer of the
certificate defaults. The Fund does not currently intend to invest more
than 5% of its assets in equipment lease certificates.
EQUITY SECURITIES
Generally, less than 10% of the value of the Fund's total assets will be
invested in equity securities, including common stocks, warrants, or
rights. The Fund's investment adviser may choose to exceed this 10%
limitation if unusual market conditions suggest such investments
represent a better opportunity to reach the Fund's investment objective.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments for defensive purposes
during times of unusual market conditions.
CERTIFICATES OF DEPOSIT
The Fund may invest in certificates of deposit of domestic and foreign
banks and savings and loans if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund ("BIF") or the Savings
Association Insurance Fund ("SAIF"), both of which are administered by
the Federal Deposit Insurance Corporation. These instruments may include
Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks, Eurodollar Time Deposits which are U.S. dollar-denominated

CURRENCY RISK
To the extent that debt securities purchased by the Fund are denominated
in currencies other than the U.S. dollar, changes in foreign currency
exchange rates will affect the Fund's net asset value, the value of
interest earned, gains and losses realized on the sale of securities, and
net investment income and capital gains, if any, to be distributed to
shareholders by the Fund. If the value of a foreign currency rises
against the U.S. dollar, the value of the Fund assets denominated in that
currency will increase; correspondingly, if the value of a foreign
currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the
Fund values its assets daily in U.S. dollars, the Fund may not convert
its holdings of foreign currencies to U.S. dollars daily. When the Fund
converts its holdings to another currency, it may incur conversion costs.
Foreign exchange dealers may realize a profit on the difference between
the price at which they buy and sell currencies.

The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund will
conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through forward contracts to purchase or sell foreign
currencies.
INVESTING IN FOREIGN CURRENCIES
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign currency
involved in an underlying transaction. However, forward foreign currency
exchange contracts may limit potential gains which could result from a
positive change in such currency relationships. The Fund's investment
adviser believes that it is important to have the flexibility to enter
into forward foreign currency exchange contracts whenever it determines
that it is in the Fund's best interest to do so. The Fund will not
speculate in foreign currency exchange.
There is no limitation as to the percentage of the Fund's assets that may
be committed to such contracts.
The Fund does not enter into forward foreign currency exchange contracts
or maintain a net exposure in such contracts when the Fund would be
obligated to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency or
currencies that the Fund's adviser believes will tend to be closely
correlated with the currency with regard to price movements. Generally,

the Fund does not enter into a forward foreign currency exchange contract
with a term longer than one year.
FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option
has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation to sell
the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally falls in value if the underlying currency depreciates
in value. Although purchasing a foreign currency option can protect the
Fund against an adverse movement in the value of a foreign currency, the
option will not limit the movement in the value of such currency. For
example, if the Fund were holding securities denominated in a foreign
currency that was appreciating and had purchased a foreign currency put
to hedge against a decline in the value of the currency, the Fund would
not have to exercise its put option. Likewise, if the Fund were to enter
into a contract to purchase a security denominated in foreign currency
and, in conjunction with that purchase, were to purchase a foreign
currency call option to hedge against a rise in value of the currency,
and if the value of the currency instead depreciated between the date of
purchase and the settlement date, the Fund would not have to exercise its

call. Instead, the Fund could acquire in the spot market the amount of
foreign currency needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally.
In addition, there are certain additional risks associated with foreign
currency options. The markets in foreign currency options are relatively
new, and the Fund's ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
Although the Fund will not purchase or write such options unless and
until, in the opinion of the Fund's adviser, the market for them has
developed sufficiently to ensure that the risks in connection with such
options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will
exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or
both currencies and may have no relationship to the investment merits of
a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that
may be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying
foreign currencies at prices that are less favorable than for round lots.

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e. less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. option markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying
markets that cannot be reflected in the options markets until they
reopen.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy, pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, the Fund

transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.

portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or cash equivalent collateral to the
borrower or placing broker. The Fund does not have the right to vote
securities on loan, but would terminate the loan and regain the right to vote
if that were considered important with respect to the investment.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the

Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objective, without regard to the length of time a particular security may have
been held. Any such trading will increase the Fund's portfolio turnover rate
and transaction costs. The adviser to the Fund does not anticipate that
portfolio turnover will result in adverse tax consequences.
For the fiscal year ended December 31, 1995, and for the period from February
2, 1994 (date of initial public investment) to December 31, 1994, the
portfolio turnover rates of the Fund were 48% and 18%, respectively.

INVESTMENT LIMITATIONS

ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional investments
are made. The Fund will not borrow money or engage in reverse repurchase
agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of the value of its total assets at the
time of borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at any time invest 25% or more of its total assets
in cash or cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts.

INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other
transactions which are permitted by the Fund's investment objective and
policies or the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer. Also, the Fund will not
purchase more than 10% of any class of the outstanding voting securities
of any one issuer. For these purposes, the Fund considers common stock

and all preferred stock of an issuer each as a single class, regardless
of priorities, series, designations, or other differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material changes in these limitations become effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice and certain restricted
securities not determined by the Trustees to be liquid.
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 of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers certificates
of deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items."

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

J. Christopher Donahue *
Federated Investors Tower

Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company, and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds. Mr. Donahue
is the son of John F. Donahue, Chairman and Trustee of the Trust.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee

Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of
Pittsburgh; founding Chairman, National Advisory Council for Environmental
Policy and Technology and Federal Emergency Management Advisory Board.

Federated Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the Funds.

David M. Taylor

Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer
Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated Securities
Corp.; Treasurer of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated

Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of March 11, 1996 , the following shareholders of record owned 5% or more
of the outstanding shares of the Fund: Lincoln Benefit Life Co., Lincoln,
Nebraska, 12.41%, Life of Virginia, Richmond, Virginia, 13.09%, Aetna
Insurance Co. of America, Hartford, Connecticut, 15.65% and Aetna Life
Insurance & Annuity Co., Hartford, Connecticut, 54.19%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

Lawrence D. Ellis, M.D. $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

++Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was
appointed a Trustee on 15 additional Federated Funds.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are owned by
a trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.
The adviser shall not be liable to the Fund, the Trust, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.
For the fiscal year ended December 31, 1995, and for the period from December
9, 1993 (start of business) to December 31, 1994, the adviser earned advisory
fees of $46,425 and $7,966, respectively, all of which were waived.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Trustees. The adviser may
select brokers and dealers who offer brokerage and research services. These
services may be furnished directly to the Fund or to the adviser and may
include: 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
provided by brokers and dealers may be used by the adviser or by affiliates in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The adviser and
its affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. During the fiscal year ended December 31, 1995, and for the period
from December 9, 1993 (start of business) to December 31, 1994, the Fund paid
total brokerage commissions of $0 and $0, respectively.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or

more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators." For the
fiscal year ended December 31, 1995, and for the period from December 9, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000
and $52,398, respectively. Dr. Henry J. Gailliot, an officer of Federated
Advisers, the adviser to the Fund, holds approximately 20% of the outstanding
common stock and serves as director of Commercial Data Services, Inc., a
company which provides computer processing services to Federated Services
Company.

CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments. The fee paid for this service is based upon the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASING SHARES

The net asset value of the Fund generally changes each day. The days on which
net asset value is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
The values of the Fund's portfolio securities are determined as follows:

as a shareholder will occur only if the Trust itself cannot meet its
obligations to indemnify shareholders and pay judgments against them.
TAX STATUS

TOTAL RETURN

For the fiscal year ended December 31, 1995, and for the period from February
2, 1994 (date of initial public investment) to December 31, 1995, the average
annual total returns for the Fund were 20.38% and 8.45%, respectively.
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions. You should review the performance figures for your insurance
contract, which figures reflect the applicable charges and expenses of the
contract. Such performance figures will accompany any advertisement of the
Fund's performance.
YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1995 was
9.15%.
The Fund's yield is determined by dividing the net investment income per share
(as defined by the SEC) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This value
is then annualized using semi-annual compounding. This means that the amount
of income generated during the thirty-day period is assumed to be generated
each month over a twelve month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by the Fund because
of certain adjustments required by the SEC and, therefore, may not correlate

to the dividends or other distributions paid to shareholders. Also the yield
does not reflect the charges and expenses of an insurance contract. You should
review the performance figures for your insurance contract, which figures
reflect the applicable charges and expenses of the contract. Such performance
figures will accompany any advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Fund will quote its Lipper
ranking in the high current yield funds category in advertising and sales
literature.
o LIPPER HIGH CURRENT YIELD AVERAGE is composed of approximately 141 funds
which invest at least 65% of their assets in investment grade debt issues
(rated in top four grades) with dollar-weighted average maturities of
five to ten years. From time to time, the Fund will compare its total
return to the average total return of the funds comprising the average
for the same calculation period.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi federal corporations; and publicly
issued, fixed-rate, non-convertible domestic bonds of companies in
industry, public utilities, and finance. The average maturity of these
bonds approximates nine years. Tracked by Lehman Brothers, Inc., the
index calculates total returns for one month, three month, twelve month,
and ten year periods and year-to-date.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of the
same types of issues as defined above. However, the average maturity of
the bonds included on this index approximates 22 years.
o LEHMAN BROTHERS CORPORATE B INDEX is an index composed of all bonds
covered by Lehman Brothers High Yield Index rated "B" by Moody's
Investors Service. Bonds have a minimum amount outstanding of $100
million and at least one year to maturity. Total return comprises price

appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk adjusted
returns. The maximum rating is five stars and ratings are effective for
two weeks.
Advertisements and sales literature for the Fund may quote total returns which
are calculated on nonstandardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based
on monthly reinvestment of dividends over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits,
and to money market funds using the Lipper Analytical Services money market
instrument average.

ABOUT FEDERATED INVESTORS

decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, 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
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

*Source: Investment Company Institute

Cusip 458043403
3113009B (4/96)

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated Prime Money Fund II (the "Fund"),
which is a diversified investment portfolio in Federated Insurance Series (the
"Trust"), an open-end management investment company. The Fund invests in money
market instruments maturing in thirteen months or less to achieve current income
consistent with stability of principal and liquidity. Shares of the Fund may
only be sold to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Investment Risks 6
Investment Limitations 6

NET ASSET VALUE 7
- ------------------------------------------------------

INVESTING IN THE FUND 7
- ------------------------------------------------------

Purchases and Redemptions 7
What Shares Cost 7
Dividends 8

FUND INFORMATION 8
- ------------------------------------------------------

Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 9

SHAREHOLDER INFORMATION 9
- ------------------------------------------------------

Voting Rights 9
TAX INFORMATION 10
- ------------------------------------------------------

Federal Taxes 10
State and Local Taxes 10

PERFORMANCE INFORMATION 11
- ------------------------------------------------------

ADDRESSES 12
- ------------------------------------------------------

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

* Computed on an annualized basis.

(a) Reflects operations for the period from November 18, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 10,
1993 (start of business) to
November 17, 1994, the Fund had no public investment.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Prime Money Fund to Federated Prime
Money Fund II. The Declaration of Trust permits the Trust to offer separate
series of shares of beneficial interest in separate portfolios of securities,
including the Fund. The shares in any one portfolio may be offered in separate
classes. As of the date of this prospectus, the Trustees have not established
separate classes of shares.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by complying
with the various requirements of Rule 2a-7 under the Investment Company Act of
1940 which regulates money market mutual funds and by following the investment
policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less. The average
maturity of the money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies of the Fund may be changed by Trustees without the approval
of shareholders. Shareholders will be notified before any material change in
these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests in high-quality money market
instruments that are either rated in one of the two highest short-term rating
categories by one or more nationally recognized statistical rating organizations
("NRSROs") or of comparable quality to securities having such ratings. Examples
of these instruments include, but are not limited to:

.domestic issues of corporate debt obligations, including variable rate
demand notes;

.commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);

.certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");

.short-term credit facilities, such as demand notes;

.asset-backed securities;

.obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities");

.repurchase agreements; and

.other money market instruments.

The Fund invests only in instruments denominated and payable in U.S. dollars.

VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term corporate
debt instruments that have variable or floating interest rates and provide the
Fund with the right to tender the security for repurchase at its stated
principal amount plus accrued interest. Such securities typically bear interest
at a rate that is intended to cause the securities to trade at par. The interest
rate may float or be adjusted at regular intervals (ranging from daily to
annually), and is normally based on a published interest rate or interest rate
index. Most variable rate demand notes allow the Fund to demand the repurchase
of the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest rate
adjustment or at other fixed intervals. See "Demand Features." The Fund treats
variable rate demand notes as maturing on the later of the date of the next
interest adjustment or the date on which the Fund may next tender the security
for repurchase.

BANK INSTRUMENTS. The Fund only invests in bank instruments either issued by an
institution having capital, surplus and undivided profits over $100 million or
insured by the Bank Insurance Fund ("BIF") or the Savings Association Insurance
Fund ("SAIF"). Bank instruments may include Eurodollar Certificates of Deposit
("ECDs"), Yankee Certificates of Deposit ("Yankee CDs") and Eurodollar Time
Deposits ("ETDs"). The Fund will treat securities credit enhanced by a bank as
bank instruments.

SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Fund) payable upon demand by either party. The notice period for demand
typically ranges from one to seven days, and the party may demand full or
partial payment. The Fund may also enter into, or acquire participations in,
short-term revolving credit facilities with corporate borrowers. Demand notes
and other short-term credit arrangements usually provide for floating or
variable rates of interest.

ASSET-BACKED SECURITIES. Asset-backed securities are securities issued by
special purpose entities whose primary assets consist of a pool of loans or
accounts receivable. The securities may take the form of beneficial interest in
a special purpose trust, limited partnership interests or commercial paper or
other debt securities issued by a special purpose corporation. Although the
securities often have some form of credit or liquidity enhancement, payments on
the securities depend predominately upon collections of the loans and
receivables held by the issuer.

REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other

securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have been
credit enhanced by a guaranty, letter of credit or insurance. Any bankruptcy
receivership or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.

DEMAND FEATURES. The Fund may acquire securities that are subject to puts and
standby commitments ("demand features") to purchase the securities at their
principal amount (usually with accrued interest) within a fixed period (usually
seven days) following a demand by the Fund. The demand feature may be issued by
the issuer of the underlying securities, a dealer in the securities or by
another third party, and may not be transferred separately from the underlying
security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest up to 10% of its total
assets in restricted securities. This restriction is not applicable to
commercial paper issued under Section 4(2) of the Securities Act of 1933.
Restricted securities are any securities in which the Fund may otherwise invest
pursuant to its investment objective and policies, but which are subject to
restriction on resale under federal securities law. To the extent restricted
securities are deemed to be illiquid, the Fund will limit their purchase,
including non-negotiable time deposits, repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter options, and
certain restricted securities determined by the Trustees not to be liquid, to
10% of its net assets.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. This is a fundamental policy
which may not be changed without shareholder approval. The Fund will only enter
into loan arrangements with broker/dealers, banks, or other institutions which
the adviser has determined are creditworthy under guidelines established by the
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the

securities loaned at all times. There is the risk that when lending portfolio
securities, the securities may not be available to the Fund on a timely basis
and the Fund may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.

CONCENTRATION OF INVESTMENTS. The Fund may invest 25% or more of its total
assets in commercial paper issued by finance companies. The finance companies in
which the Fund intends to invest can be divided into two categories, commercial
finance companies and consumer finance companies. Commercial finance companies
are principally engaged in lending to corporations or other businesses. Consumer
finance companies are primarily engaged in lending to individuals. Captive
finance companies or finance subsidiaries which exist to facilitate the
marketing and financial activities of their parent will, for purposes of
industry concentration, be classified by the Fund in the industry of its parent
corporation.

In addition, the Fund may invest more than 25% of the value of its total assets
in cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies, or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

Service, the contracts invested in the Fund will not be treated as annuity,
endowment, or life insurance contracts.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

INVESTMENT RISKS

ECDs, ETDs, Yankee CDs, CCPs, and Europaper are subject to somewhat different
risks than domestic obligations of domestic banks. Examples of these risks
include international, economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact of
interruptions in the flow of international currency transactions. Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing
these instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping, and the public availability of information. These factors
will be carefully considered by the Fund's adviser in selecting investments for
the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

.borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
the value of those assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share of the Fund is determined by subtracting total liabilities from
total assets and dividing by the number of shares outstanding.

The Fund cannot guarantee that its net asset value will always remain at $1.00
per share.

INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

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

WHAT SHARES COST

properly transmit purchase orders and federal funds in accordance with the
procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared daily and paid monthly.

Shares of the Fund begin earning dividends on the day that the Fund receives
federal funds. Dividends of the Fund are automatically reinvested in additional
shares of such Fund on payment dates at the ex-dividend date net asset value.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary waiver
and reimbursement of expenses at any time at its sole discretion.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.

DISTRIBUTION OF FUND SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

purposes be deemed to control the Fund and be able to affect the outcome of
certain matters presented for a vote of shareholders.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises its total return, yield and effective
yield.

The yield represents the annualized rate of income earned on an investment in
the Fund over a seven day period. It is the annualized dividends earned during
the period on the investment, shown as a percentage of the investment. The
effective yield is calculated similarly to the yield, but, when annualized, the
income earned on an investment in the Fund is assumed to be reinvested daily.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.

Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated Prime Money Fund II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

FEDERATED PRIME
MONEY FUND II
(FORMERLY, PRIME MONEY FUND)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 22, 1996

[LOGO OF FEDERATED SECURITIES CORP.]
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

[LOGO OF RECYCLED PAPER]

Cusip 458043106
3113011A (4/96)

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus
of Federated Prime Money Fund II (the "Fund") dated April 22, 1996. This
Statement is not a prospectus itself. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVE AND POLICIES 3

Types of Investments 3
When-Issued and Delayed Delivery
Transactions 6
Lending of Portfolio Securities 6
Repurchase Agreements 7
Reverse Repurchase Agreements 3
Credit Enhancement 8
Restricted and Illiquid Securities 8
INVESTMENT LIMITATIONS 9

Regulatory Compliance 13
FEDERATED INSURANCE SERIES MANAGEMENT 13

Fund Ownership 21
Trustees Compensation 23
Trustee Liability 25
INVESTMENT ADVISORY SERVICES 25

Adviser to the Fund 25
Advisory Fees 25
BROKERAGE TRANSACTIONS 26

OTHER SERVICES 27

Fund Administration 27
Custodian and Portfolio Accountant 28

Transfer Agent 28
Independent Auditors 28
PURCHASING SHARES 29

DETERMINING NET ASSET VALUE 29

Use of the Amortized Cost Method 29
MASSACHUSETTS PARTNERSHIP LAW 31

TAX STATUS 32

The Fund's Tax Status 32
Shareholder's Tax Status 33
TOTAL RETURN 33

YIELD 34

EFFECTIVE YIELD 34

PERFORMANCE COMPARISONS 35

ABOUT FEDERATED INVESTORS 36

Mutual Fund Market 37
Institutional Clients 37
Trust Organizations 38
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 38
FINANCIAL STATEMENTS 38

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"),
which was established as Insurance Management Series, a Massachusetts
business trust, under a Declaration of Trust dated September 15, 1993. At
a meeting of the Board of Trustees (the "Trustees") held on November 14,
1995, the Trustees approved an amendment to the Declaration of Trust to
change the name of the Trust from Insurance Management Series to Federated
Insurance Series. At a meeting of the Trustees held on February 26, 1996,
the Trustees approved an amendment to the Declaration of Trust to change
the name of the Fund from Prime Money Fund to Federated Prime Money Fund
II. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest in separate portfolios of securities,
including the Fund. The shares in any one portfolio may be offered in
separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income consistent
with stability of principal and liquidity. The investment objective cannot
be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests exclusively in money market instruments which mature in
397 days or less and which include, but are not limited to, high-quality
commercial paper and variable rate master demand notes, bank instruments,
and U.S. government obligations.

BANK INSTRUMENTS
In addition to domestic bank obligations such as certificates of
deposit, demand and time deposits, savings shares, and bankers'
acceptances, the Fund may invest in:
oEurodollar Certificates of Deposit issued by foreign branches of
U.S. or foreign banks;
oEurodollar Time Deposits, which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks;
oCanadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the U.S.; and
oYankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks
and held in the U.S.

RATINGS
A nationally recognized statistical rating organization's ("NRSROs")
two highest rating categories are determined without regard for sub-
categories and gradations. For example, securities rated A-1+, A-1 or
A-2 by Standard & Poor's Ratings Group ("S&P"), Prime-1 or Prime-2 by
Moody's Investors Service, Inc. ("Moody's"), or F-1 (+ or -) or F-2
(+ or -) by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating
categories. The Fund will limit its investments in securities rated
in the second highest short-term rating category (e.g., A-2 by S&P,
Prime-2 by Moody's or F-2 (+ or -) by Fitch) to not more than 5% of
its total assets, with not more than 1% invested in the securities of
any one issuer. The Fund will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be

treated as being in one of the two highest short-term rating
categories; currently, such securities must be rated by two NRSROs in
one of their two highest rating categories. See "Regulatory
Compliance."

U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as
U.S. Treasury bills, notes, and bonds) and obligations issued and/or
guaranteed by U.S. government agencies or instrumentalities. These
securities are backed by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks, and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association; and
oStudent Loan Marketing Association.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on a Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than
20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
brokers/dealers, banks, or other institutional borrowers of securities.
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker. The Fund does not
have the right to vote securities on loan, but would terminate the loan
and regain the right to vote if that were considered important with
respect to the investment.

REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
other securities to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price. The Fund or its custodian
will take possession of the securities subject to repurchase agreements
and these securities will be marked to market daily. To the extent that
the original seller does not repurchase the securities from the Fund, the
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the Fund
might be delayed pending court action. The Fund believes that under the
regular procedures normally in effect for custody of the Fund's portfolio
securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Trustees.

When effecting reverse repurchase agreements, liquid assets of the Fund,
in a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These assets are marked to
market daily and maintained until the transaction is settled.

CREDIT ENHANCEMENT
The Fund typically evaluates the credit quality and ratings of credit-
enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the "credit enhancer"), rather
than the issuer. However, credit-enhanced securities will not be treated
as having been issued by the credit enhancer for diversification purposes,
unless the Fund has invested more than 10% of its assets in securities
issued, guaranteed or otherwise credit enhanced by the credit enhancer, in
which case the securities will be treated as having been issued by both
the issuer and the credit enhancer.
The Fund may have more than 25% of its total assets invested in securities
credit enhanced by banks.

dealers who make a market in Section 4(2) commercial paper, thus providing
liquidity.
The ability of the Trustees to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission ("SEC") Staff position set forth in the adopting release for
Rule 144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule. The
Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees.
The Trustees may consider the following criteria in determining the
liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
INVESTMENT LIMITATIONS

ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as a
temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous, and then only in amounts not in
excess of one-third of the value of its total assets; provided that,
while borrowings and reverse repurchase agreements outstanding exceed
5% of the Fund's total assets, any such borrowings will be repaid
before additional investments are made. The Fund will not borrow
money or engage in reverse repurchase agreements for investment
leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, it may mortgage,
pledge or hypothecate assets having a market value not exceeding the
lesser of the dollar amounts borrowed or 15% of the value of its
total assets at the time of borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry other
than finance companies. However, the Fund may at any time invest 25%
or more of its total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.

INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts,
or commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale
of real estate or in securities secured by real estate or interests
in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities
up to one-third of its total assets. This shall not prevent the Fund
from purchasing or holding money market instruments, corporate or
U.S. government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, entering into
repurchase agreements, or engaging in other transactions which are
permitted by the Fund's investment objective and policies or the
Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it
may be deemed to be an underwriter under the Securities Act of 1933
in connection with the sale of securities in accordance with its
investment objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase
the securities of any one issuer (other than cash, cash items, or
securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities, and repurchase agreements

collateralized by such securities) if, as a result, more than 5% of
its total assets would be invested in the securities of that issuer.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material changes in these limitations become effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in
securities subject to restrictions on resale under the Securities Act
of 1933, except for commercial paper issued under Section 4(2) of the
Securities Act of 1933 and certain other restricted securities which
meet the criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of its net assets in illiquid
securities, including, among others, repurchase agreements providing
for settlement more than seven days after notice and certain
restricted securities not determined by the Trustees to be liquid.
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 of total or net assets will
not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be "cash items."

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
its prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. In particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates money market mutual funds. The Fund will determine the effective
maturity of its investments, as well as its ability to consider a security
as having received the requisite short-term ratings by NRSROs, according
to Rule 2a-7. The Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its
shareholders.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, President of
the Trust .

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director or Trustee of the Funds; formerly, Senior
Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate

ventures in Southwest Florida; Director or Trustee of the Funds; formerly,
President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director or Trustee of the Funds; formerly, Vice Chairman and Director,
PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of

some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman of
the Trust.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA

Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Director, Eat'N Park Restaurants, Inc., and Statewide Settlement Agency,
Inc.; Director or Trustee of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee of the Funds; formerly, President, State Street Bank and Trust
Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee

Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder Services Company; Trustee
or Director of some of the Funds; President, Executive Vice President and
Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer

Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated
Securities Corp.; Treasurer of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in
the Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.
; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust;
Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional Trust;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S. Government
Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-3

Years; Federated U.S. Government Securities Fund; 3-5 Years; Federated
U.S. Government Securities Fund; 5-10 Years; Federated Utility Fund, Inc.;
First Priority Funds; Fixed Income Securities, Inc.; Fortress Utility
Fund, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. -
1999; Liberty U.S. Government Money Market Trust; Liquid Cash Trust;
Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst
Funds; The Starburst Funds II; The Virtus Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term
U.S. Government Securities; Trust for U.S. Treasury Obligations; and World
Investment Series, Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 11, 1996, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: United of Omaha Life Insurance
Co., Omaha, Nebraska, 43%, Providian Life & Health Insurance Co.,
Louisville, Kentucky, 14%, Aetna Insurance Co. of America, Hartford,
Connecticut, 14%, Glenbrook Life And Annuity Company, Northbrook,
Illinois, 8%, and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, 20%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 59 other investment companies in the
Fund Complex
Thomas G. Bigley++ $1,016 $86,331 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
John T. Conroy, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
William J. Copeland $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
J. Christopher Donahue,$0 $0 for the Trust and
President and Trustee 15 other investment companies in the
Fund Complex
James E. Dowd $1,116 $115,760 for the Trust and

Trustee 54 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D.$1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr.$1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex

*Information is furnished for the fiscal year ended December 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised
of seven portfolios.

+The information is provided for the last calendar year.
++Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October 1, 1995, he
was appointed a Trustee on 15 additional Federated Funds.

TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and
his son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1995, and for the period from
December 10, 1993 (start of business) to December 31, 1994, the adviser
earned advisory fees of $40,601 and $287, respectively, all of which were
waived.

BROKERAGE TRANSACTIONS

They determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. For the fiscal year ended December 31, 1995, and for
the period from December 10, 1993 (start of business) to December 31,
1994, the Fund paid no brokerage commissions on brokerage transactions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When the
Fund and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

Federated Services Company, Federated Administrative Services, and
Federated Administrative Services, Inc. may hereinafter collectively be
referred to as the "Administrators". For the fiscal year ended December
31, 1995, and for the period from December 10, 1993 (start of business) to
December 31, 1994, the Administrators earned $125,000 and $14,041,
respectively. Dr. Henry J. Gailliot, an officer of Federated Advisers, the
adviser to the Fund, holds approximately 20% of the outstanding common
stock and serves as director of Commercial Data Services, Inc., a company
which provides computer processing services to Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-
of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through it registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on the size, type and number of accounts and transactions made by
shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP,
Pittsburgh, PA.

PURCHASING SHARES

Shares of the Fund are sold at their net asset value without a sales
charge on days the New York Stock Exchange is open for business. The
procedure for purchasing shares of the Fund is explained in the prospectus
under "Purchases and Redemptions" and "What Shares Cost."
DETERMINING NET ASSET VALUE

The Fund attempts to stabilize the value of a share at $1.00. The days on
which net asset value is calculated by the Fund are described in the
prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value
of portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value.
The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule 2a-7
(the "Rule") promulgated by the Securities and Exchange Commission under
the Investment Company Act of 1940. Under the Rule, the Trustees must
establish procedures reasonably designed to stabilize the net asset value
per share, as computed for purposes of distribution and redemption, at
$1.00 per share, taking into account current market conditions and the
Fund's investment objective. Under the Rule, the Fund is permitted to
purchase instruments which are subject to demand features or standby
commitments. As defined by the Rule, a demand feature entitles the Fund to
receive the principal amount of the instrument from the issuer or a third
party on (1) no more than 30 days' notice or (2) at specified intervals

not exceeding 397 calendar days on no more than 30 days' notice. A standby
commitment entitles the Fund to achieve same-day settlement and to receive
an exercise price equal to the amortized cost of the underlying instrument
plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between
the amortized cost value per share and the net asset value per share
based upon available indications of market value. The Trustees will
decide what, if any, steps should be taken if there is a difference
of more than 0.5 of 1% between the two values. The Trustees will take
any steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the
two methods of determining net asset value.

INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks
and have received the requisite rating from one or more nationally
recognized statistical rating organizations. If the instruments are
not rated, the Trustees must determine that they are of comparable
quality. The Rule also requires the Fund to maintain a dollar-
weighted average portfolio maturity (not more than 90 days)
appropriate to the objective of maintaining a stable net asset value
of $1.00 per share. In addition, no instrument with a remaining
maturity of more than thirteen months can be purchased by the Fund.

Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, the Fund
will invest its available cash to reduce the average maturity to 90
days or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to
take advantage of short-term market variations. This policy may, from time
to time, result in high portfolio turnover. Under the amortized cost
method of valuation, neither the amount of daily income nor the net asset
value is affected by any unrealized appreciation or depreciation of the
portfolio.
In periods of declining interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on the
Fund's portfolio by the net asset value computed as above may tend to be
higher than a similar computation made by using a method of valuation
based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares
of the Fund computed the same way may tend to be lower than a similar
computation made by using a method of calculation based upon market prices
and estimates.
MASSACHUSETTS PARTNERSHIP LAW

disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a
shareholder for any act or 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.

TAX STATUS

SHAREHOLDER'S TAX STATUS
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. If
the Fund fails to comply with these regulations, contracts invested in the
Fund shall not be treated as annuity, endowment, or life insurance
contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.

TOTAL RETURN

For the fiscal year ended December 31, 1995, and for the period from
November 18, 1994 (date of initial public investment) to December 31, 1995
, the average annual total returns for the Fund were 5.20% and 5.13%,
respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at
the end of the period by the offering price per share at the end of the
period. The number of shares owned at the end of the period is based on
the number of shares purchased at the beginning of the period with $1,000,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions. You should review the
performance figures for your insurance contract, which figures reflect the

applicable charges and expenses of the contract. Such performance figures
will accompany any advertisement of the Fund's performance.

YIELD

The Fund's yield for the seven-day period ended December 31, 1995 was
4.95%.

The Fund calculates its yield daily, based upon the seven days ending on
the day of the calculation, called the "base period." This yield is
computed by:
o determining the net change in the value of a hypothetical account
with a balance of one share at the beginning of the base period, with
the net change excluding capital changes but including the value of
any additional shares purchased with dividends earned from the
original one share and all dividends declared on the original and any
purchased shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and
o multiplying the base period return by 365/7.
EFFECTIVE YIELD

The Fund's effective yield for the seven-day period ended December 31,
1995 was 5.07%.

The Fund's effective yield is computed by compounding the unannualized
base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
Effective yield does not reflect the charges and expense of a variable
annuity contract. You should review the performance figures for your
insurance contract, which figures reflect the applicable charges and
expenses of the contract. Such performance figures will accompany any
advertisement of a Fund's performance.
PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o the relative amount of the Fund's cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
used in advertising may include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.

Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any. From time to time, the Fund will
quote its Lipper ranking in the "money market instruments funds"
category in advertising and sales literature.
o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a
financial reporting service which publishes weekly average rates of
50 leading bank and thrift institution money market deposit accounts.
The rates published in the index are an average of the personal
account rates offered on the Wednesday prior to the date of
publication by ten of the largest banks and thrifts in each of the
five largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the
lowest rate is used. Rates are subject to change at any time
specified by the institution.
o MONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Fund will quote its Money
ranking in advertising and sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment
in the Fund based on the monthly reinvestment of dividends over a
specified period of time.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,

and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, 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 advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.

*Source: Investment Company Institute

TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 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
Mark R. Gensheimer, Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort
to these firms is headed by James F. Getz, President, Broker/Dealer
Division.
FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended December 31,
1995, are incorporated herein by reference to the Annual Report of the
Fund dated December 31, 1995 (File Nos. 33-69268 and 811-8042). A copy of
the Report may be obtained without charge by contacting the Fund.

Cusip 458043106

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated International Equity Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end management investment company. The Fund's
investment objective is to obtain a total return on its assets. Shares of the
Fund may be sold only to separate accounts of insurance companies to serve as
the investment medium for variable life insurance policies and variable annuity
contracts issued by the insurance companies.

This prospectus contains the information you should read and know before you
invest in the Fund through the variable life insurance policies and variable
annuity contracts offered by insurance companies which provide for investment in
the Fund. Keep this prospectus for future reference.

The Fund has also filed a Statement of Additional Information dated April 22,
1996, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS A FUNDING VEHICLE FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE LIFE INSURANCE POLICIES AND VARIABLE ANNUITY
CONTRACTS. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUSES FOR SUCH
CONTRACTS.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

General Information 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Investment Limitations 9

NET ASSET VALUE 11
- ------------------------------------------------------

INVESTING IN THE FUND 11
- ------------------------------------------------------

Purchases and Redemptions 11
What Shares Cost 11
Dividends 12

FUND INFORMATION 12
- ------------------------------------------------------

Management of the Fund 12
Distribution of Fund Shares 14
Administration of the Fund 14
Brokerage Transactions 14

SHAREHOLDER INFORMATION 15
- ------------------------------------------------------

Voting Rights 15

TAX INFORMATION 15
- ------------------------------------------------------

Federal Income Tax 15
State and Local Taxes 16

PERFORMANCE INFORMATION 16
- ------------------------------------------------------

ADDRESSES 17
- ------------------------------------------------------

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the period presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income 0.07
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.28
- --------------------------------------------------------------------------------------- -------
Total from investment operations 0.35
- --------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
Distributions from net investment income --
- --------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.35
- --------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 3.50%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 1.22%*
- ---------------------------------------------------------------------------------------
Net investment income 1.63%*
- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 11.42%*
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,760
- ---------------------------------------------------------------------------------------
Portfolio turnover 34%
- ---------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from May 5, 1995 (date of initial public
investment) to December 31, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from International Stock Fund to Federated
International Equity Fund II. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest in separate portfolios of
securities, including the Fund. The shares in any one portfolio may be offered
in separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The Fund's investment objective is to obtain a total return on its assets. The
investment objective cannot be changed without the approval of the Fund's
shareholders. While there is no assurance that the Fund will achieve its
investment objective, it attempts to do so by following the investment policies
described in this prospectus.

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund will attempt to achieve its objective by
investing at least 65% of its assets (and under normal market conditions
substantially all of its assets) in equity securities of issuers located in at
least three different countries outside of the United States. The Fund's
investment approach is based on the premise that investing in such non-U.S.
securities provides three potential benefits over investing solely in U.S.
securities: (1) the opportunity to invest in foreign issuers believed to have
superior growth potential; (2) the opportunity to invest in foreign countries
with economic policies or business cycles different from those of the U.S.; and
(3) the opportunity to reduce portfolio volatility to the extent that securities
markets inside and outside the U.S. do not move in harmony. The Fund may
purchase sponsored or unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs");
corporate and government fixed income securities of issuers outside of the U.S.;
convertible securities; and options and financial futures contracts. In
addition, the Fund may enter into forward commitments, repurchase agreements,
and foreign currency transactions; and maintain reserves in foreign or U.S.
money market instruments.

Unless otherwise indicated, the investment policies may be changed by the
Trustees without shareholder approval. Shareholders will be notified before any
material change to these policies becomes effective.

DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored ADRs, GDRs,
and EDRs (collectively, "Depositary Receipts"). ADRs are Depositary Receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs and GDRs are
typically issued by foreign banks or trust companies, although they also may be
issued by U.S. banks or trust companies, and evidence ownership of underlying
securities issued by either a foreign or a U.S. corporation. Generally,
Depositary Receipts in registered form are designed for use in the U.S.
securities market and Depositary Receipts in bearer form are designed for use in
securities markets outside the U.S. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Ownership of unsponsored Depositary Receipts may not entitle
the Fund to financial or other reports from the issuer of the underlying
security, to which it would be entitled as the owner of sponsored Depositary
Receipts.

FIXED INCOME SECURITIES. At the date of this prospectus, the Fund has committed
its assets primarily to dividend-paying equity securities of established
companies that appear to have growth potential. However, as a temporary
defensive position, the Fund may shift its emphasis to fixed income securities,
warrants, or other obligations of foreign companies or governments, if they
appear to offer potential higher return. Fixed income securities include
preferred stock, bonds, notes, or other debt securities which are investment
grade or higher, as described below. The prices of fixed income securities
fluctuate inversely to the direction of interest rates.

The debt securities in which the Fund will invest will possess a minimum credit
rating of BBB as assigned by Standard & Poor's Ratings Group ("S&P") or Baa by
Moody's Investors Service, Inc. ("Moody's"), or, if unrated, will be judged by
the Fund's adviser to be of comparable quality. Because the average quality of
the Fund's portfolio investments should remain constantly between AAA and BBB,
the Fund may avoid the adverse consequences that may arise for some debt
securities in difficult economic circumstances. Downgraded securities will be
evaluated on a case by case basis by the adviser. The adviser will determine
whether or not the security continues to be an acceptable investment. If not,
the security will be sold. A description of the ratings categories is contained
in the Appendix to the Statement of Additional Information.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities that are
rated, at the time of purchase, investment grade by a nationally recognized
statistical rating organization ("NRSRO") or, if unrated, of comparable quality
as determined by the adviser. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible bonds,
convertible preferred stock or debentures, units consisting of "usable" bonds
and warrants or a combination of the features of several of these securities.
The investment characteristics of each convertible security vary widely, which
allows convertible securities to be employed for different investment
objectives.

Convertible bonds and convertible preferred stocks are fixed income securities
that generally retain the investment characteristics of fixed income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which entitle the holder to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bonds' maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same company.
The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The Fund
will exchange or convert the convertible securities held in its portfolio into
shares of the underlying common stocks when, in the adviser's opinion, the
investment characteristics of the underlying common shares will assist the Fund
in achieving its investment objective. Otherwise, the Fund will hold or trade
the convertible securities. In selecting convertible securities for the Fund,
the adviser evaluates the investment characteristics of the convertible security
as a fixed income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters with
respect to a particular convertible security, the adviser considers numerous
factors, including the economic and political outlook, the value of the security
relative to other investment alternatives, trends in the determinants of the
issuer's profits, and the issuer's management capability and practices.

OPTIONS AND FINANCIAL FUTURES CONTRACTS. The Fund may purchase put and call
options, financial futures contracts, and options on financial futures
contracts. In addition, the Fund may write (sell) put and call options with
respect to securities in the Fund's portfolio.

FORWARD COMMITMENTS. Forward commitments are contracts to purchase securities
for a fixed price at a date beyond customary settlement time. The Fund may enter
into these contracts if liquid securities in amounts sufficient to meet the
purchase price are segregated on the Fund's records at the trade date and
maintained until the transaction has been settled. Risk is involved if the value
of the security declines before settlement. Although the Fund enters into
forward commitments with the intention of acquiring the security, it may dispose
of the commitment prior to settlement and realize a short-term profit or loss.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.

MONEY MARKET INSTRUMENTS. The Fund may invest in foreign and U.S. money market
instruments, including interest-bearing call deposits with banks, government
obligations, certificates of deposit, banker's acceptances, commercial paper,
short-term corporate debt securities, and repurchase agreements. The commercial
paper in which the Fund invests will be rated A-1 by S&P or P-1 by Moody's.
These investments may be used to temporarily invest cash received from the sale
of Fund shares, to establish and maintain reserves for temporary defensive
purposes, or to take advantage of market opportunities. Investments in the World
Bank, Asian Development Bank, or Inter-American Development Bank are not
anticipated.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. The seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
to broker/dealers, banks, or other institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or other
institutions which the adviser has determined are creditworthy under guidelines
established by the Trustees and will receive collateral at all times equal to at
least 100% of the value of the securities loaned. There is the risk that when
lending portfolio securities, the securities may not be available to the Fund on
a timely basis and the Fund, may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition of the
securities may be delayed pending court action.

FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or cash
basis at prevailing rates or through forward foreign currency exchange
contracts.
The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations.
Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES.
A forward foreign currency exchange contract ("forward contract") is an
obligation to purchase or sell an amount of a particular currency at a specific
price and on a future date agreed upon by the parties.

Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will not enter into
a forward contract with a term of more than one year. The Fund will generally
enter into a forward contract to provide the proper currency to settle a
securities transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24 hours and
30 days, depending upon local custom.

The Fund may also protect against the decline of a particular foreign currency
by entering into a forward contract to sell an amount of that currency
approximating the value of all or a portion of the Fund's assets denominated in
that currency ("hedging"). The success of this type of short-term hedging
strategy is highly uncertain due to the difficulties of predicting short-term
currency market movements and of precisely matching forward contract amounts and
the constantly changing value of the securities involved. Although the adviser
will consider the likelihood of changes in currency values when making
investment decisions, the adviser believes that it is important to be able to
enter into forward contracts when it believes the interests of the Fund will be
served. The Fund will not enter into forward contracts for hedging purposes in a
particular currency in an amount in excess of the Fund's assets denominated in
that currency. No more than 30% of the Fund's assets will be committed to
forward contracts for hedging purposes at any time. (This restriction does not
include forward contracts entered into to settle securities transactions.)

The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the Fund's position,
it may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by the Fund are traded
on U.S. and foreign exchanges or over-the-counter.

RISKS ASSOCIATED WITH FINANCIAL FUTURES CONTRACTS AND OPTIONS ON FINANCIAL
FUTURES CONTRACTS. When the Fund uses futures and options on futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate with the prices of the securities in the
Fund's portfolio. This may cause the futures contract and any related options to
react differently than the portfolio securities to market changes. In addition,
the Fund's adviser could be incorrect in its expectations about the direction or
extent of market factors such as interest or currency exchange rate movements.
In these events, the Fund may lose money on the futures contract or option.
Also, it is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Fund's adviser
will consider liquidity before entering into such transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.

RISKS ASSOCIATED WITH NON-U.S. SECURITIES. Investing in non-U.S. securities
carries substantial risks in addition to those associated with domestic
investments. In an attempt to reduce some of these risks, the Fund diversifies
its investments broadly among foreign countries, including both developed and
developing countries. At least three different countries will always be
represented.

The Fund occasionally takes advantage of the unusual opportunities for higher
returns available from investing in developing countries. These investments,
however, carry considerably more volatility and risk because they are associated
with less mature economies and less stable political systems.

CURRENCY RISKS. Because the Fund may purchase securities denominated in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates could affect the Fund's net asset value; the value of interest earned;
gains and losses realized on the sale of securities; and net investment income
and capital gain, if any, to be distributed to shareholders by the Fund. If the
value of a foreign currency rises against the U.S. dollar, the value of the Fund
assets denominated in that currency will increase; correspondingly, if the value
of a foreign currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease.

The exchange rates between the U.S. dollar and foreign currencies are a function
of such factors as supply and demand in the currency exchange markets,
international balances of payments, governmental interpretation, speculation and
other economic and political conditions. Although the Fund values its assets
daily in U.S. dollars, the Fund will not convert its holdings of foreign
currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.

FOREIGN COMPANIES. Other differences between investing in non-U.S. and U.S.
securities include:

less publicly available information about foreign companies;

the lack of uniform financial accounting standards applicable to foreign
companies;

less readily available market quotations on foreign companies;

differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;

differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;

generally lower foreign stock market volume;

the likelihood that foreign securities may be less liquid or more
volatile;

foreign brokerage commissions may be higher;

unreliable mail service between countries; and

political or financial changes which adversely affect investments in some
countries.

U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have
discouraged or restricted certain investments abroad by investors such as the
Fund. Investors are advised that when such policies are instituted, the Fund
will abide by them.

SHORT SALES. The Fund intends to sell securities short from time to time,
subject to certain restrictions. A short sale occurs when a borrowed security is
sold in anticipation of a decline in its price. If the decline occurs, shares
equal in number to those sold short can be purchased at the lower price. If the
price increases, the higher price must be paid. The purchased shares are then
returned to the original lender. Risk arises because no loss limit can be placed
on the transaction. When the Fund enters into a short sale, assets equal to the
market price of the securities sold short or any lesser price at which the Fund
can obtain such securities, are segregated on the Fund's records and maintained
until the Fund meets its obligations under the short sale.

DEVELOPING/EMERGING MARKETS. The economies of individual emerging countries may
differ favorably from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Further, the economies of developing countries generally are heavily dependent
on international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.

Prior governmental approval for foreign investments may be required under
certain circumstances in some emerging countries, and the extent of foreign
investment in certain debt securities and domestic companies may be subject to
limitation in other emerging countries. Foreign ownership limitations also may
be imposed by the charters of individual companies in emerging countries to
prevent, among other concerns, violation of foreign investment limitations.

Repatriation of investment income, capital and the proceeds of sales by foreign
investors may require governmental registration and/or approval in some emerging
countries. The Fund could be adversely affected by delays in, or a refusal to
grant, any required governmental registration or approval for such repatriation.
Any investment subject to such repatriation controls will be considered illiquid
if it appears reasonably likely that this process will take more than seven
days.

With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic developments
(including war) which could affect adversely the economies of such countries or
the value of the Fund's investments in those countries. In addition, it may be
difficult to obtain and enforce a judgment in a court outside of the U.S.

INVESTMENT LIMITATIONS

The Fund will not:

with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in the securities (other than securities
issued or guaranteed by the government of the U.S. or its agencies or
instrumentalities) of any one issuer, or acquire more than 10% of the
outstanding voting securities of any one issuer;
sell securities short except under strict limitations;

borrow money or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge its assets to secure such borrowings; or

permit margin deposits for financial futures contracts held by the Fund,
plus premiums paid by it for open options on financial futures contracts,
to exceed 5% of the fair market value of the Fund's total assets, after
taking into account the unrealized profits and losses on the contracts.

The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.

The Fund will not:

invest more than 5% of its assets in warrants;

own securities of other investment companies, except under certain
circumstances and subject to certain limitations not exceeding 10% of its
total assets (the Fund will indirectly bear its proportionate share of
any fees and expenses paid by other investment companies, in addition to
the fees and expenses payable directly by the Fund);

invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations;

invest more than 15% of the value of its net assets in illiquid
securities, including securities not determined by the Trustees to be
liquid, repurchase agreements with maturities longer than seven days
after notice, and certain over-the-counter options; or

purchase put options on securities unless the securities or an offsetting
call option is held in the Fund's portfolio.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. It is not anticipated that the portfolio
trading engaged in by the Fund will result in its annual rate of portfolio
turnover exceeding 200%. A portfolio turnover rate of 100% would occur, for
example, if all the securities in the Fund's portfolio were replaced once in a
period of one year. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses which must be borne directly by the Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of capital gains which, when distributed to
the Fund's shareholders, are taxable to them. Nevertheless, transactions for the
Fund's portfolio will be based only upon investment considerations and will not
be limited by any other considerations when the Fund's investment adviser deems
it appropriate to make changes in the Fund's portfolio.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund's
shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable life insurance policies and variable
annuity contracts. The use of Fund shares as investments for both variable life
insurance policies and variable annuity contracts is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

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

WHAT SHARES COST

Purchase orders from separate accounts investing in the Fund which are received
by the insurance companies by 4:00 p.m. (Eastern time) will be computed at the
net asset value of the Fund determined on that day, as long as such purchase
orders are received by the Fund in proper form and in accordance with applicable
procedures by 8:00 a.m. (Eastern time) on the next business day and as long as
federal funds in the amount of such orders are received by the Fund on the next
business day. It is the responsibility of each insurance company which invests
in the Fund to properly transmit purchase orders and federal funds in accordance
with the procedures described above.

DIVIDENDS

Dividends on shares of the Fund are declared and paid annually.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the business affairs of the Trust and for
exercising all of the Trust's powers except those reserved for the shareholders.
The Executive Committee of the Board of Trustees handles the Board's
responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Global Research Corp.,
the Fund's investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee equal to 1.00% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion
of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver and reimbursement of expenses
at any time at its sole discretion.

ADVISER'S BACKGROUND. Federated Global Research Corp., incorporated in
Delaware on May 12, 1995, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Prior to September 1995, Federated Global Research Corp. had not served as
an investment adviser to mutual funds.

Federated Global Research Corp. and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies
and private accounts. Certain other subsidiaries also provide
administrative services to a number of investment companies. With over $80
billion invested across more than 250 funds under management and/or
administration by its subsidiaries, as of December 31, 1995, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 1,800 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide.
More than 100,000 investment professionals have selected Federated funds
for their clients.

Henry A. Frantzen has been the Fund's portfolio manager since November
1995. Mr. Frantzen joined Federated Investors in 1995 as an Executive Vice
President of the Fund's investment adviser. Mr. Frantzen served as Chief
Investment Officer of international equities at Brown Brothers Harriman &
Co. from 1992 to 1995. He was the Executive Vice President and Director of
Equities at Oppenheimer Management Corporation from 1989 to 1991. Mr.
Frantzen received his B.S. in finance and marketing from the University of
North Dakota.

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

Mark S. Kopinski has been the Fund's portfolio manager since November 1995.
Mr. Kopinski joined Federated Investors in 1995 as a Vice President of the
Fund's investment adviser. Mr. Kopinski served as Vice President/Portfolio
Manager of international equity funds at Twentieth Century Mutual Funds
from 1990 to 1995. Mr. Kopinski received his M.A. in Asian Studies from the
University of Illinois.

Frank Semack has been the Fund's portfolio manager since November 1995. Mr.
Semack joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Semack served as an Investment Analyst at Omega
Advisers, Inc. from 1993 to 1994. He served as an Associate
Director/Portfolio Manager of Wardley Investment Services, Ltd. from 1980
to 1993. Mr. Semack received his M.Sc. in economics from the London School
of Economics.

Alexandre de Bethmann has been the Fund's portfolio manager since November
1995. Mr. de Bethmann joined Federated Investors in 1995 as a Vice
President of the Fund's investment adviser. Mr. de Bethmann served as
Assistant Vice President/Portfolio Manager for Japanese and Korean equities
at the College Retirement Equities Fund from 1994 to 1995. He served as an
International Equities Analyst and then as an Assistant Portfolio Manager
at the College Retirement Equities Fund between 1987 and 1994. Mr. de
Bethmann received his M.B.A. in Finance from Duke University.

DISTRIBUTION OF FUND SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of March 11, 1996, Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, and Aetna Insurance Co. of America, Hartford, Connecticut, owned
33.14% and 64.97%, respectively, of the voting securities of the Fund, and,
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust or the
Fund's operation and for the election of Trustees in certain circumstances.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

The Fund will pay no federal income tax because the Fund expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises total return and yield.

Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Fund is calculated
by dividing the net investment income per share (as defined by the Securities
and Exchange Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This number
is then annualized using semi-annual compounding.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated International Federated Investors Tower
Equity Fund II Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Global Research Corp. 175 Water Street
New York, New York 10038-4965
- ---------------------------------------------------------------------------------------------------------------------

FEDERATED INTERNATIONAL
EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company

April 22, 1996

[LOGO]
FEDERATED SECURITIES CORP.
- --------------------------
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

Cusip 458043601
G01078-01 (4/96)

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of Federated International Equity Fund II (the "Fund") dated April 22,
1996. This Statement is not a prospectus itself. You may request a copy of
a prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVE AND POLICIES 3

TYPES OF INVESTMENTS 3
FUTURES AND OPTIONS TRANSACTIONS 4
REPURCHASE AGREEMENTS 13
REVERSE REPURCHASE AGREEMENTS 14
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS 14
LENDING OF PORTFOLIO SECURITIES 14
RESTRICTED AND ILLIQUID SECURITIES 15
RISKS 16
PORTFOLIO TURNOVER 17
INVESTMENT LIMITATIONS 17

FEDERATED INSURANCE SERIES MANAGEMENT 23

FUND OWNERSHIP 13
TRUSTEES COMPENSATION 32
TRUSTEE LIABILITY 34
INVESTMENT ADVISORY SERVICES 34

ADVISER TO THE FUND 34
ADVISORY FEES 35
BROKERAGE TRANSACTIONS 35

OTHER SERVICES 36

FUND ADMINISTRATION 36
CUSTODIAN AND PORTFOLIO ACCOUNTANT 15

TRANSFER AGENT 16
INDEPENDENT PUBLIC AUDITORS 16
PURCHASING SHARES 16

DETERMINING NET ASSET VALUE 37

DETERMINING MARKET VALUE OF SECURITIES37
TRADING IN FOREIGN SECURITIES 38
MASSACHUSETTS PARTNERSHIP LAW 39

TAX STATUS 39

THE FUND'S TAX STATUS 39
FOREIGN TAXES 40
SHAREHOLDERS' TAX STATUS 40
TOTAL RETURN 40

YIELD 41

PERFORMANCE COMPARISONS 42

ABOUT FEDERATED INVESTORS 43

FINANCIAL STATEMENTS 45

APPENDIX 46

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from
International Stock Fund to Federated International Equity Fund II. The
Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest in separate portfolios of securities, including the Fund.
The shares in any one portfolio may be offered in separate classes. As of the
date of this Statement, the Trustees have not established separate classes of
shares.
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to obtain a total return on its assets.
TYPES OF INVESTMENTS
The Fund invests in a diversified portfolio of equity securities issued by
non-U.S. issuers. The Fund will invest at least 65%, and under normal market
conditions, substantially all of its total assets, in equity securities of
issuers located in at least three different countries outside of the United
States. The Fund may also purchase sponsored or unsponsored American
Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and European
Depositary Receipts ("EDRs"); purchase investment grade corporate and
government fixed income securities of issuers outside the U.S.; enter into

forward commitments, repurchase agreements, and foreign currency transactions;
and maintain reserves in foreign or U.S. money market instruments.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio by
buying and selling futures contracts and options on futures contracts, and
buying put and call options on portfolio securities and securities indices.
The Fund may also write covered put and call options on portfolio securities
to attempt to increase its current income or to hedge a portion of its
portfolio investments. The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls until the options
are exercised, closed, or have expired. An option position on a futures
contract may be closed out over-the-counter or on a nationally recognized
exchange which provides a secondary market for options of the same series. The
Fund will not engage in futures transactions for speculative purposes.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and market conditions without
necessarily buying or selling the securities. Although some financial
futures contracts call for making or taking delivery of the underlying
securities, in most cases these obligations are closed out before the
settlement date. The closing of a contractual obligation is accomplished
by purchasing or selling an identical offsetting futures contract. Other
financial futures contracts by their terms call for cash settlements.
The Fund also may purchase and sell stock index futures contracts with
respect to any stock index traded on a recognized stock exchange or board
of trade to hedge against changes in prices. Stock index futures

contracts are based on indices that reflect the market value of common
stock of the firms included in the indices. An index futures contract is
an agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to the difference between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. No physical delivery
of the underlying securities in the index is made. Instead, settlement in
cash must occur upon the termination of the contract, with the settlement
being the difference between the contract price and the actual level of
the stock index at the expiration of the contract.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future. For example,
in the fixed income securities market, prices move inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash,

U.S. government securities or highly-liquid debt securities with its
custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in
securities transactions in that initial margin in futures transactions
does not involve the borrowing of funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions. The Fund is also required to deposit
and maintain margin when it writes call options on futures contracts.
To the extent required to comply with Commodity Futures Trading
Commission ("CFTC") Regulation 4.5 and thereby avoid status as a
"commodity pool operator," the Fund will not enter into a futures
contract, or purchase an option thereon, if immediately thereafter the
initial margin deposits for futures contracts held by it, plus premiums
paid by it for open options on futures contracts, would exceed 5% of the
market value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts it has entered into;
and, provided further, that in the case of an option that is in-the-money

at the time of purchase, the in-the-money amount may be excluded in
computing such 5%. Second, the Fund will not enter into these contracts
for speculative purposes; rather, these transactions are entered into
only for bona fide hedging purposes, or other permissible purposes
pursuant to regulations promulgated by the CFTC. Third, since the Fund
does not constitute a commodity pool, it will not market itself as such,
nor serve as a vehicle for trading in the commodities futures or
commodity options markets. Finally, because the Fund will submit to the
CFTC special calls for information, the Fund will not register as a
commodities pool operator.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
The Fund may purchase listed put options on financial and stock index
futures contracts to protect portfolio securities against decreases in
value resulting from market factors, such as an anticipated increase in
interest rates or stock prices. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contracts entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.

Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
When the Fund sells a put on a futures contract, it receives a cash
premium in exchange for granting to the purchaser of the put the right to
receive from the Fund, at the strike price, a short position in such
futures contract, even though the strike price upon exercise of the
option is greater than the value of the futures position received by such
holder. If the value of the underlying futures position is not such that
exercise of the option would be profitable to the option holder, the
option will generally expire without being exercised. It will generally
be the policy of the Fund, in order to avoid the exercise of an option
sold by it, to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless it is determined to be
in the Fund's interest to deliver the underlying futures position. A
closing purchase transaction consists of the purchase by the Fund of an
option having the same term as the option sold by the Fund, and has the
effect of canceling the Fund's position as a seller. The premium which
the Fund will pay in executing a closing purchase transaction may be
higher than the premium received when the option was sold, depending in
large part upon the relative price of the underlying futures position at
the time of each transaction.

CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates rise,
causing the prices of futures to go down, the Fund's obligation under a
call option on a future (to sell a futures contract) costs less to
fulfill, causing the value of the Fund's call option position to
increase.
In other words, as the underlying futures price falls below the strike
price, the buyer of the option has no reason to exercise the call, so
that the Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of the Fund's portfolio
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but not
the obligation, to enter into the underlying futures contract at a strike
price determined at the time the call was purchased, regardless of the
comparative market value of such futures position at the time the option
is exercised. The holder of a call option has the right to receive a long
(or buyer's) position in the underlying futures contract.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the

unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may purchase put options on portfolio securities and stock
indices to protect against price movements in the Fund's portfolio
securities. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may also write covered call options to generate income and
thereby protect against price movements in the Fund's portfolio
securities. As writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver the underlying
security upon payment of the exercise price or, in the case of a
securities index, a cash payment equal to the difference between the
closing price of the index and the exercise price of the option. The Fund
may only sell call options either on securities held in its portfolio or
on securities which it has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any additional
consideration).
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the Fund
may enter into forward foreign currency exchange contracts and foreign
currency futures contracts, as well as purchase put or call options on
foreign currencies, as described below. The Fund may also conduct its

foreign currency exchange transactions on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from
adverse changes in the relationship between the U.S. dollar and foreign
currencies. A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and
their customers. The Fund may enter into a forward contract, for example,
when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to "lock in" the U.S. dollar
price of the security. In addition, for example, when the Fund believes
that a foreign currency may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the
Fund believes that the U.S. dollar may suffer a substantial decline
against a foreign currency, it may enter into a forward contract to buy
that foreign currency for a fixed dollar amount. This second investment
practice is generally refered to as "cross-hedging." Because in
connection with the Fund's forward foreign currency transactions an
amount of the Fund's assets equal to the amount of the purchase will be
held aside or segregated to be used to pay for the commitment, the Fund
will always have cash, cash equivalents or high quality debt securities
available sufficient to cover any commitments under these contracts or to
limit any potential risk. The segregated account will be marked to market
on a daily basis. While these contracts are not presently regulated by
the CFTC, the CFTC may in the future assert authority to regulate forward

contracts. In such event, the Fund's ability to utilize forward contracts
in the manner set forth above may be restricted. Forward contracts may
limit potential gain from a positive change in the relationship between
the U.S. dollar and foreign currencies. Unanticipated changes in currency
prices may result in poorer overall performance for the Fund than if it
had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar
value of foreign portfolio securities and against increases in the dollar
cost of foreign securities to be acquired. As is the case with other
kinds of options, however, the writing of an option on foreign currency
will constitute only a partial hedge, up to the amount of the premium
received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses.
The purchase of an option on foreign currency may constitute an effective
hedge against fluctuation in exchange rates, although, in the event of
rate movements adverse to the Fund's position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. Options on
foreign currencies to be written or purchased by the Fund will be traded
on U.S. and foreign exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or
sale for future delivery of foreign currencies ("foreign currency
futures"). This investment technique will be used only to hedge against
anticipated future changes in exchange rates which otherwise might
adversely affect the value of the Fund's portfolio securities or
adversely affect the prices of securities that the Fund intends to
purchase at a later date. The successful use of foreign currency futures
will usually depend on the ability of the adviser to forecast currency

exchange rate movements correctly. Should exchange rates move in an
unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
WARRANTS
The Fund may invest in warrants. Warrants are basically options to
purchase common stock at a specific price (usually at a premium above the
market value of the optioned common stock at issuance) valid for a
specific period of time. Warrants may have a life ranging from less than
a year to twenty years or may be perpetual. However, most warrants have
expiration dates after which they are worthless. In addition, if the
market price of the common stock does not exceed the warrant's exercise
price during the life of the warrant, the warrant will expire as
worthless. Warrants have no voting rights, pay no dividends, and have no
rights with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the market
price of the optioned common stock.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily. In
the event that a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending court
action. The Fund believes that under the regular procedures normally in effect
for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only
enter into repurchase agreements with banks and other recognized financial

institutions, such as broker/dealers, which are deemed by the Fund's adviser
to be creditworthy, pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time

portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission Staff
position is set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive, safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule . The Fund believes that the staff of the Securities and Exchange
Commission has left the question of determining the liquidity of all
restricted securities (eligible for resale under the Rule) to the Trustees.
The Trustees consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
When the Fund invests in certain restricted securities determined by the
Trustees to be liquid, such investments could have the effect of increasing

the level of Fund illiquidity to the extent that the buyers in the secondary
market for such securities (whether in resales under the Rule or other exempt
transactions) become, for a time, uninterested in purchasing these securities.
RISKS
When the Fund uses futures and options on futures as hedging devices, there is
a risk that the prices of the securities or foreign currency subject to the
futures contracts may not correlate perfectly with the prices of the
securities or currency in the Fund's portfolio. This may cause the futures
contract and any related options to react differently to market changes than
the portfolio securities or foreign currency. In addition, the adviser could
be incorrect in its expectations about the direction or extent of market
factors such as stock price movements or foreign currency exchange rate
fluctuations. In these events, the Fund may lose money on the futures contract
or option.
It is not certain that a secondary market for positions in futures contracts
or for options will exist at all times. Although the adviser will consider
liquidity before entering into these transactions, there is no assurance that
a liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on
this secondary market. The inability to close out these positions could have
an adverse effect on the Fund's ability to effectively hedge its portfolio.
To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the value of the Fund's total assets after
taking into account the unrealized profits and losses on those contracts it
has entered into; and, provided further, that in the case of an option that is

in-the-money at the time of purchase, the in-the-money amount may be excluded
in computing such 5%. When the Fund purchases futures contracts, an amount of
cash and cash equivalents, equal to the underlying commodity value of the
futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use of
such futures contract is unleveraged. When the Fund sells futures contracts,
it will either own or have the right to receive the underlying future or
security, or will make deposits to collateralize the position as discussed
above.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objective. Portfolio securities will be sold
when the adviser believes it is appropriate, regardless of how long those
securities have been held.
For the period from May 5, 1995 (date of initial public investment) to
December 31, 1995, the portfolio turnover rate of Federated International
Equity Fund II was 34%.
INVESTMENT LIMITATIONS

DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund will not
purchase securities of any one issuer (other than securities issued or
guaranteed by the government of the United States or its agencies or
instrumentalities) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer, or if it would
own more than 10% of the outstanding voting securities of any one issuer.

ACQUIRING SECURITIES
The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of its total assets in securities of
issuers having their principal business activities in the same industry.
BORROWING
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts up to one-
third of the value of its total assets, including the amount borrowed.
This borrowing provision is not for investment leverage but solely to
facilitate management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio securities would be
inconvenient or disadvantageous. The Fund will not purchase securities
while outstanding borrowings exceed 5% of the value of its total assets.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate assets, except when
necessary for permissible borrowings. Neither the deposit of underlying
securities or other assets in escrow in connection with the writing of
put or call options or the purchase of securities on a when-issued basis,
nor margin deposits for the purchase and sale of financial futures
contracts and related options are deemed to be a pledge.
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions, except
that the Fund may make margin payments in connection with its use of
financial futures contracts or related options and transactions.

ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except in connection with
borrowing money directly or through reverse repurchase agreements or as
required by forward commitments to purchase securities or currencies.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or issued
by companies, including real estate investment trusts, which invest in
real estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures contracts
and options on financial futures contracts, provided that the sum of its
initial margin deposits for financial futures contracts held by the Fund,
plus premiums paid by it for open options on financial futures contracts,
may not exceed 5% of the fair market value of the Fund's total assets,
after taking into account the unrealized profits and losses on those
contracts. Further, the Fund may engage in foreign currency transactions
and purchase or sell forward contracts with respect to foreign currencies
and related options.
LENDING CASH OR SECURITIES
The Fund will not lend any assets except portfolio securities. This shall
not prevent the purchase or holding of bonds, debentures, notes,

certificates of indebtedness, or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Fund's investment objective and policies or its Declaration of Trust.
SELLING SHORT
The Fund will not sell securities short unless (1) it owns, or has a
right to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of the
market value of the securities sold short or the amount required to
acquire such securities. The segregated amount will not exceed 10% of the
Fund's net assets. While in a short position, the Fund will retain the
securities, rights, or segregated assets.
To comply with registration requirements in certain states, the Fund (1)
will limit short sales of securities of any class of any one issuer to
the lesser of 2% of the Fund's net assets or 2% of the securities of that
class, (2) will make short sales only on securities listed on recognized
stock exchanges. These restrictions do not apply to short sales of
securities the Fund holds or has a right to acquire without the payment
of any further consideration. (If state requirements change, these
restrictions may be revised without shareholder notification.)
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by
the Trustees without shareholder approval. Except as noted, shareholders will
be notified before any material change in these limitations becomes effective.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.

INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants. No
more than 2% of the Fund's net assets, to be included within the overall
5% limit on investments in warrants, may be warrants which are not listed
on the New York Stock Exchange or the American Stock Exchange. (If state
restrictions change, this latter restriction may be revised without
notice to shareholders.) For purposes of this investment restriction,
warrants acquired by the Fund in units or attached to securities may be
deemed to be without value.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies,
except by purchase in the open market involving only customary brokerage
commissions and as a result of which not more than 10% of the value of
its total assets would be invested in such securities, or except as part
of a merger, consolidation or other acquistion.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN MINERALS
The Fund will not invest in interests in oil, gas, or other mineral
exploration or development programs, other than debentures or equity
stock interests.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities

Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including securities not determined by the Trustees
to be liquid, repurchase agreements with maturities longer than seven
days after notice, and certain over-the-counter options.
DEALING IN PUTS AND CALLS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or the Fund is entitled to them in
deliverable form without further payment or the Fund has segregated cash
in the amount of any further payments. The Fund will not purchase put
options on securities unless the securities or an offsetting call option
is held in the Fund's portfolio. The Fund may also purchase, hold or sell
(i) contracts for future delivery of securities or currencies and (ii)
warrants granted by the issuer of the underlying securities.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser or
sub-adviser owning individually more than 1/2 of 1% of the issuer's
securities together own more than 5% of the issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, the Fund will not enter into
transactions for the purpose of engaging in arbitrage. If state
requirements change, this restriction may be revised without shareholder
notification.

Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a
violation of such restriction.
The Fund has no present intent to borrow money or pledge securities in excess
of 5% of the value of its total assets in the coming fiscal year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings association having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director
or Trustee of the Funds; formerly, Vice Chairman and Director, PNC Bank, N.A.,
and PNC Bank Corp. and Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; and World Investment Series, Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of March 11, 1996, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Aetna Life Insurance & Annuity Co.,
Hartford, Connecticut, 33.14% and Aetna Insurance Co. of America, Hartford,
Connecticut, 64.97%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

J. Christopher Donahue, $0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

*Information is furnished for the fiscal year ended December 31, 1995.
#The aggregate compensation is provided for the Trust which is comprised of
seven portfolios.
+The information is provided for the last calendar year.
++Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was
appointed a Trustee on 15 additional Federated Funds.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Global Research Corp. It is a
subsidiary of Federated Investors. All the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue, his
wife, and his son, J. Christopher Donahue.
The adviser shall not be liable to the Fund, the Trust, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or

reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Global Research Corp. receives an annual
investment advisory fee as described in the prospectus.
For the period from May 5, 1995 (date of initial public investment) to
December 31, 1995, the adviser earned advisory fees of $12,476, all of which
were waived.
BROKERAGE TRANSACTIONS

The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
adviser and may include: 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 provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Fund and other accounts. To the extent that
receipt of these services may supplant services for which the adviser or its
affiliated might otherwise have paid, it would tend to reduce their expenses.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided. During the period from May 5, 1995 (date of
initial public investment) to December 31, 1995, the Fund paid total brokerage
commissions of $15,076.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund

may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From May 5, 1995 (date of initial public investment), to March
1, 1996, Federated Administrative Services, a subsidiary of Federated
Investors, served as the Fund's Administrator. For purposes of this Statement
of Additional Information, Federated Services Company and Federated
Administrative Services may hereinafter collectively be referred to as the
"Administrators." For the period from May 5, 1995 (date of initial public
investment) to December 31, 1995, the Administrators earned $81,165. Dr. Henry
J. Gailliot, an officer of Federated Advisers, the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh, PA,

provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments. The fee paid for this service is based upon the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASING SHARES

Except under certain circumstances described in the prospectus, shares are
sold at their net asset value without a sales charge on days the New York
Stock Exchange is open for business. The procedure for purchasing shares is
explained in the prospectus under "Purchases and Redemptions" and "What Shares
Cost."
DETERMINING NET ASSET VALUE

The net asset value of the Fund generally changes each day. The days on which
net asset value is calculated by the Fund are described in the prospectus.
Dividend income is recorded on the ex-dividend date, except certain dividends
from foreign securities where the ex-dividend date may have passed, are
recorded as soon as the Fund is informed of the ex-dividend date.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities are determined as
follows:

oaccording to the last reported sale price on a recognized securities
exchange, if available. (If a security is traded on more than one exchange,
the price on the primary market for that security, as determined by the
Adviser is used.);
oaccording to the last reported bid price, if no sale on the recognized
exchange is reported or if the security is traded over-the-counter;
oat fair value as determined in good faith by the Trustees; or
ofor short-term obligations with remaining maturities of less than 60 days at
the time of purchase, at amortized cost, which approximates value.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading
in similar groups of securities; yield; quality; coupon rate; maturity; type
of issue; trading characteristics; and other market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on
which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at
the latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange
rates may occur between the times at which they are determined and the closing
of the New York Stock Exchange. If such events materially affect the value of
portfolio securities, these securities may be valued at their fair value as
determined in good faith by the Trustees, although the actual calculation may
be done by others.

MASSACHUSETTS PARTNERSHIP LAW

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
oderive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
oderive less than 30% of its gross income from the sale of securities held
less than three months;
oinvest in securities within certain statutory limits; and

odistribute to its shareholders at least 90% of its net income earned during
the year.
However, the Fund may invest in the stock of certain foreign corporations
which would constitute a Passive Foreign Investment Company (PFIC). Federal
income taxes may be imposed on the Fund upon disposition of PFIC investments.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may invest
may be subject to foreign withholding or other taxes that could reduce the
return on these securities. Tax treaties between the United States and foreign
countries, however, may reduce or eliminate the amount of foreign taxes to
which the Fund would be subject.
SHAREHOLDERS' TAX STATUS
The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and in this Statement of Additional
Information. If the Fund fails to comply with these regulations, contracts
invested in the Fund shall not be treated as annuity, endowment or life
insurance contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

For the period from May 5, 1995 (date of initial public investment) to
December 31, 1995, the cumulative total return for the Fund was 3.50%.
Cumulative total return reflects the Fund's total performance over a specific
period of time. The Fund's cumulative total return is representative of seven
months of Fund activity.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the annual reinvestment of all dividends and
distributions. You should review the performance figures for your insurance
contract, which figures reflect the applicable charges and expenses of the
contract. Such performance figures will accompany any advertisement of the
Fund's performance.
YIELD

The Fund did not calculate a yield for the thirty-day period ended December
31, 1995.
The Fund's yield is determined by dividing the net investment income per share
(as defined by the SEC) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This value
is then annualized using semi-annual compounding. This means that the amount
of income generated during the thirty-day period is assumed to be generated
each month over a twelve-month period and is reinvested every six months. The
yield does not necessarily reflect income actually earned by the Fund because
of certain adjustments required by the SEC and, therefore, may not correlate
to the dividends or other distributions paid to shareholders. Also the yield
does not reflect the charges and expenses of an insurance contract. You should
review the performance figures for your insurance contract, which figures

reflect the applicable charges and expenses of the contract. Such performance
figures will accompany any advertisement of the Fund's performance.
PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates on money market instruments;
ochanges in Fund expenses; and
ovarious other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any indices
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
oLIPPER ANALYTICAL SERVICES, INC., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year periods
which assume the reinvestment of all capital gains distributions and income
dividends.
oMORGAN STANLEY EUROPE, AUSTRALIA, AND FAR EAST (EAFE) Index is a market
capitalization weighted foreign securities index, which is widely used to
measure the performance of European, Australian, New Zealand and Far Eastern

stock markets. The index covers approximately 1,020 companies drawn from 18
countries in the above regions. The index values its securities daily in
both U.S. dollars and local currency and calculates total returns monthly.
EAFE U.S. dollar total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital International, S.A.,
Geneva, Switzerland.
oSALOMON BROTHERS WORLD EQUITY INDEX EX U.S. is a capitalization-weighted
index comprised of equities from 22 countries excluding the United States.
oFT ACTUARIES WORLD - EX U.S. index is comprised of 1,740 stocks, excluding
U.S. stocks, jointly compiled by the Financial Times Ltd., Goldman, Sachs &
Co., and NatWest Securities Ltd. in conjunction with the Institute of
Actuaries and the Faculty of Actuaries.
Advertisements and sales literature for the Fund may quote total returns which
are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based
on annual reinvestment of dividends over a specified period of time.
From time to time as it deems appropriate the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits and
to money market fund using the Lipper Analytical Services money market
instruments average.
ABOUT FEDERATED INVESTORS

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.

J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, 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
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.

TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

*Source: Investment Company Institute

APPENDIX

STANDARD AND POOR'S RATINGS GROUP BOND RATING DEFINITIONS
AAA-Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely
strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating.

B-Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal payments. Adverse business,
financial, or economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is also used for
debt subordinated to senior debt that is assigned an actual or implied BB or
BB- rating.
CCC-Debt rated CCC has a currently identifiable vulnerability to default and
is dependent upon favorable business, financial, and economic conditions to
meet timely payment of interest and repayment of principal.
CC-The rating CC typically is applied to debt subordinated to senior debt that
is assigned an actual or implied CCC debt rating.
C-The rating C typically is applied to debt subordinated to senior debt which
is assigned an actual or implied CCC- debt rating. The C rating may be used
to cover a situation where a bankruptcy petition has been filed but debt
service payments are continued.
CI-The rating CI is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even if
the applicable grace period has not expired, unless Standard & Poor's believes
that such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service payments
are jeopardized.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA-Bonds which are rated AAA are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements

are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA-Bonds which are rated AA are judged to be of high quality by all standards.
Together with the AAA group, they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in AAA
securities.
A-Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.

BAA-Bonds which are rated BAA are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and, in fact, have speculative characteristics as well.
BA-Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA-Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
CA-Bonds which are rated C represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA-Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in the
"AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-
1+."
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligator's ability to pay interest and repay principal is

considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these bonds,
and, therefore, impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than for bonds with
higher ratings.
BB-Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B-Bonds are considered highly speculative. While bonds in this call are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the limited margin of safety
and the need for reasonable business and economic activity throughout the life
of the issue.
CCC-Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an advantageous
business and economic environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probably over time.
C-Bonds are in imminent default in payment of interest or principal.
DDD,DD, AND D-Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the basis of
their ultimate recovery value in liquidation or reorganization of the obligor.
DDD represents the highest potential for recovery on these bonds, and D
represents the lowest potential for recovery.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING

A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING
PRIME-1 - Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries;
high rates of return on funds employed; conservative capitalization structure
with moderate reliance on debt and ample asset protection; broad margins in
earning coverage of fixed financial charges and high internal cash generation;
well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2 - Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING
F-1+ - Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1 - Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated F-
1+.
F-2 - Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as for issues assigned F-1+ and F-1 ratings.
Cusip 458043601

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of Federated Growth Strategies Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment company.
The investment objective of the Fund is capital appreciation. Shares of the Fund
may be sold only to separate accounts of insurance companies to serve as the
investment medium for variable life insurance policies and variable annuity
contracts issued by insurance companies.

The Fund has also filed a Statement of Additional Information dated April 22,
1996, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information, is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information,
or a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about the Fund, contact the Fund at the address
listed in the back of this prospectus.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2

Investment Policies 2
Investment Limitations 7

NET ASSET VALUE 8
- ------------------------------------------------------

INVESTING IN THE FUND 8
- ------------------------------------------------------

Purchases and Redemptions 8
What Shares Cost 8
Dividends 9

FUND INFORMATION 9
- ------------------------------------------------------

Management of the Fund 9
Distribution of Fund Shares 10
Administration of the Fund 10

Brokerage Transactions 11

SHAREHOLDER INFORMATION 11
- ------------------------------------------------------

Voting Rights 11

TAX INFORMATION 11
- ------------------------------------------------------

Federal Taxes 11
State and Local Taxes 12

PERFORMANCE INFORMATION 12
- ------------------------------------------------------

ADDRESSES 13
- ------------------------------------------------------

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the period presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income 0.03
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.27
- --------------------------------------------------------------------------------------- -------
Total from investment operations 0.30
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.30
- --------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 3.00%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 0.85%*
- ---------------------------------------------------------------------------------------
Net investment income 1.91%*
- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 76.95%*
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $368
- ---------------------------------------------------------------------------------------
Portfolio turnover 4% %
- ---------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 9, 1995 (date of initial
public investment) to December 31, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Fund is a portfolio of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the name of the Fund from Growth Stock Fund to Federated Growth
Strategies Fund II. The Declaration of Trust permits the Trust to offer separate
series of shares of beneficial interest in separate portfolios of securities,
including the Fund. The shares in any one portfolio may be offered in separate
classes. As of the date of this prospectus, the Trustees have not established
separate classes of shares.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is capital appreciation. The investment
objective cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment objective,
it endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies with prospects for above-average growth
in earnings and dividends or companies where significant fundamental changes are
taking place. Equity securities include common stocks, preferred stocks, and
securities (including debt securities) that are convertible into common stocks.

ACCEPTABLE INVESTMENTS. The Fund's investment adviser selects equity securities
on the basis of traditional research techniques, including assessment of
earnings and dividend growth prospects and of the risk and volatility of each
company's business. The Fund generally invests in companies with market
capitalization of $100,000,000 or more. The fundamental changes which the
investment adviser will seek to identify in companies include, for example,
restructuring of basic businesses or reallocations of assets which present
opportunities for significant share price appreciation. At times, the Fund will
invest in securities of companies which are deemed by the investment adviser to
be

candidates for acquisition by other entities as indicated by changes in
ownership, changes in standard price-to-value ratios, and an examination of
other standard analytical indices.

The securities in which the Fund invests include, but are not limited to common
stocks, preferred stocks, convertible securities, securities of foreign issuers,
securities of other investment companies, and corporate obligations, including
bonds, debentures, notes, and warrants. In addition, the Fund may engage in
repurchase agreements, lend portfolio securities, purchase securities on a
when-issued or delayed-delivery basis, and invest in put and call options,
futures, and options on futures.

CONVERTIBLE SECURITIES. Convertible securities are fixed income securities
which may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The Fund
invests in convertible bonds rated "B" or higher by Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") at the time of
investment or, if unrated, of comparable quality. If a convertible bond is rated
below "B" according to the characteristics set forth hereafter after the Fund
has purchased it, the Fund is not required to drop the convertible bond from the
portfolio but will consider appropriate action. The investment characteristics
of each convertible security vary widely, which allows convertible securities to
be employed for different investment objectives.

matters with respect to a particular convertible security, the Fund's investment
adviser considers numerous factors, including the economic and political
outlook, the value of the security relative to other investment alternatives,
trends in the determinants of the issuer's profits, and the issuer's management
capability and practices.

In general, the market value of a convertible security is at least the higher of
its "investment value" (i.e, its value as a fixed income security) or its
"conversion value" (i.e., its value upon conversion into its underlying common
stock). As a fixed income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying common stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts. Securities of a
foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions.

As a matter of practice, the Fund will not invest in the securities of a foreign
issuer if any such risk appears to the investment adviser to be substantial.

CORPORATE OBLIGATIONS. The Fund may invest up to 35% of its total assets in
bonds, debentures, notes and warrants of corporate issuers. These securities
will generally be rated "BBB" or better by S&P or "Baa" or better by Moody's at
the time of investment, or if unrated, of comparable quality. Securities which
are rated BBB by S&P or Baa by Moody's have speculative characteristics. Changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than higher-rated
bonds. The prices of fixed income securities generally fluctuate inversely to
the direction of interest rates. Downgrades will be evaluated on a case by case
basis by the investment adviser. The investment adviser will determine whether
or not the security continues to be an acceptable investment. If not, the
security will be sold. A description of the ratings categories is contained in
the Appendix to the Statement of Additional Information.

In addition, with respect to the 35% limit, the Fund may invest up to 5% of its
assets in debt obligations rated "B" or better by S&P or Moody's.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other open-end investment companies and in the securities of
closed-end investment companies, but it will not own more than 3% of the total
outstanding voting stock of any investment company, invest more than 5% of its
total assets in any one investment company, or invest more than 10% of its total
assets in investment companies in general. The Fund will invest in other
investment companies primarily for the purpose of investing its short-term cash
which has not yet been invested in other portfolio instruments. Shareholders
should realize that, when the Fund invests in other investment companies,
certain fund expenses, such as custodian fees and administrative fees,

may be duplicated. The investment adviser will waive its investment advisory fee
on assets invested in securities of other investment companies.

REPURCHASE AGREEMENTS. The Fund will engage in repurchase agreements.
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. The Fund or its custodian will take
possession of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that, under the regular procedures normally in effect for custody of
the Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions, such as
broker/dealers, which are found by the Fund's investment adviser to be
creditworthy pursuant to guidelines established by the Trustees.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
up to one-third of the value of its total assets to broker/dealers, banks, or
other institutional borrowers of securities. This is a fundamental policy which
may not be changed without the approval of shareholders. The Fund will only
enter into loan arrangements with broker/dealers, banks, or other institutions
which the investment adviser has determined are creditworthy under guidelines
established by the Trustees, and will receive collateral in the form of cash or
U.S. government securities equal to at least 100% of the value of the portfolio
securities loaned at all times. There is the risk that when lending portfolio
securities, the securities may not be available to the Fund on a timely basis
and the Fund may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of securities would
file for bankruptcy or become insolvent, disposition of the securities may be
delayed pending court action.

market values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more/less than the market value of the securities
on the settlement date.

.commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch Investors Service, Inc.;

.securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies and instrumentalities;

.certificates of deposit, demand and time deposits, bankers' acceptances,
deposit notes, and other instruments of domestic and foreign banks and
other deposit institutions; and

.repurchase agreements.

PUT AND CALL OPTIONS. The Fund may purchase put options on stocks. These
options will be used only as a hedge to attempt to protect securities which the
Fund holds against decreases in value. The Fund may purchase these put options
as long as they are listed on a recognized options exchange and the underlying
stocks are held in its portfolio. The Fund may also write call options on
securities either held in its portfolio or which it has the right to obtain
without payment of further consideration or for which it has segregated cash in
the amount of any additional consideration. The call options which the Fund
writes and sells must be listed on a recognized options exchange. Writing of
calls by the Fund is intended to generate income for the Fund and, thereby,
protect against price movements in particular securities in the Fund's
portfolio.

Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. This requires a secondary
market on an exchange which may or may not exist for any particular call or put
option at any specific time. The absence of a liquid secondary market also may
limit the Fund's ability to dispose of the securities underlying an option. The
inability to close options also could have an adverse impact on the Fund's
ability to effectively hedge its portfolio.

The Fund may purchase and write over-the-counter options on portfolio securities
in negotiated transactions with the buyers or writers of the options when
options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings associations)
deemed creditworthy by the Fund's adviser.

Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike

prices and expiration dates and are purchased from a clearing corporation.
Exchange-traded options have a continuous liquid market, while over-the-counter
options may not.

FUTURES CONTRACTS AND RELATED OPTIONS. The Fund may purchase and sell financial
futures and stock index futures contracts to hedge all or a portion of its
portfolio against changes in the price of its portfolio securities, but will not
engage in futures transactions for speculative purposes.

The Fund may also write call options and purchase put options on financial
futures and stock index futures contacts as a hedge to attempt to protect
securities in its portfolio against decreases in value.

The Fund will be operated at all times so as to comply with the foregoing
diversification requirements.

INVESTMENT LIMITATIONS

The Fund will not:

The above investment limitations cannot be changed without shareholder approval.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN THE FUND
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

WHAT SHARES COST

DIVIDENDS

Dividends on shares of the Fund are declared and paid quarterly.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Advisers, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.
Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of these codes are subject to review by the Trustees, and could
result in severe penalties.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.

James E. Grefenstette has been the Fund's portfolio manager since the
Fund's inception. Mr. Grefenstette joined Federated Investors in 1992 and
has been an Assistant Vice President of the Fund's investment adviser since
1994. From 1992 until 1994, Mr. Grefenstette acted as an investment
analyst. Mr. Grefenstette was a credit analyst at Westinghouse Credit Corp.
from 1990 until 1992. Mr. Grefenstette received his M.S. in Industrial
Administration from Carnegie Mellon University.

DISTRIBUTION OF FUND SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
ADMINISTRATION OF THE FUND

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of the Fund, will vote
the Fund shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account. As of March 11, 1996, Aetna Insurance Co. of America, Hartford,
Connecticut, and Aetna Life Insurance & Annuity Co., Hartford, Connecticut,
owned 42% and 58%, respectively, of the voting securities of the Fund, and,
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code, as amended, applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time the Fund advertises total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated Growth Strategies Fund II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

FEDERATED GROWTH
STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End, Management
Investment Company

April 22, 1996

[LOGO OF FEDERATED SECURITIES CORP.]
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

[LOGO OF RECYCLED PAPER]

Cusip 458043700
G01283-01 (4/96)

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
(FORMERLY, INSURANCE MANAGEMENT SERIES)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus
of the Federated Growth Strategies Fund II (the "Fund") dated April 22,
1996. This Statement is not a prospectus itself. You may request a copy of
a prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 3

INVESTMENT OBJECTIVE AND POLICIES 3

Types of Investments 3
Restricted and Illiquid Securities 13
When-Issued and Delayed Delivery
Transactions 14
Lending of Portfolio Securities 14
Repurchase Agreements 15
Reverse Repurchase Agreements 16
Portfolio Turnover 16
INVESTMENT LIMITATIONS 17

FEDERATED INSURANCE SERIES MANAGEMENT 13

Fund Ownership 30
Trustees Compensation 31
Trustee Liability 33
INVESTMENT ADVISORY SERVICES 34

Adviser to the Fund 34
Advisory Fees 34
BROKERAGE TRANSACTIONS 34

OTHER SERVICES 35

Fund Administration 35
Custodian and Portfolio Accountant 15
Transfer Agent 16
Independent Auditors 16

PURCHASING SHARES 36

DETERMINING NET ASSET VALUE 37

Determining Value of Securities 37
MASSACHUSETTS PARTNERSHIP LAW 37

TAX STATUS 38

The Fund's Tax Status 38
Shareholder's Tax Status 39
TOTAL RETURN 39

YIELD 40

PERFORMANCE COMPARISONS 40

ABOUT FEDERATED INVESTORS 43

Mutual Fund Market 19
Institutional Clients 19
Trust Organizations 19
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 19
FINANCIAL STATEMENTS 19

APPENDIX 20

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series (the "Trust"), which was
established as Insurance Management Series, a Massachusetts business trust,
under a Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from
Growth Stock Fund to Federated Growth Strategies Fund II. The Declaration of
Trust permits the Trust to offer separate series of shares of beneficial
interest in separate portfolios of securities, including the Fund. The shares
in any one portfolio may be offered in separate classes. As of the date of this
prospectus, the Trustees have not established separate classes of shares.

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is capital appreciation. The Fund pursues
this investment objective by investing primarily in equity securities of
companies with prospects for above-average growth in earnings and dividends or
companies where significant changes are taking place. The investment objective
cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund may invest in common stocks, preferred stocks, convertible securities,
securities of foreign issuers, U.S. government obligations, securities of other
investment companies; and corporate obligations, including bonds, debentures,
notes, and warrants. The Fund may also engage in repurchase agreements, lend

portfolio securities, purchase securities on a when-issued or delayed delivery
basis, and invest in put and call options, futures and options on futures. The
following supplements the discussion of acceptable investments in the
prospectus.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on revenues,
sales or profits, or the purchase of common stock in a unit transaction
(where corporate debt securities and common stock are offered as a unit).
Corporate debt securities that are lower-rated (i.e., rated below BBB by
Standard & Poor's Ratings Group or Baa by Moody's Investors Service, Inc.)
are commonly referred to as "junk bonds." While these lower-rated bonds
will usually offer higher yields than higher-rated securities, there is
more risk associated with these investments. These lower-rated bonds may
be more susceptible to real or perceived adverse economic conditions than
investment grade bonds. These lower-rated bonds are regarded as
predominately speculative with regard to each issuer's continuing ability
to make principal and interest payments. In addition, the secondary
trading market for lower-rated bonds may be less liquid than for
investment grade bonds. As a result of these factors, lower-rated bonds
tend to have more price volatility and carry more risk to principal than
higher-rated bonds. The investment adviser will endeavor to limit these
risks through diversifying the portfolio and through careful credit
analysis of individual issuers.

CONVERTIBLE SECURITIES
As with all fixed-income securities, various market forces influence the
market value of convertible securities, including changes in the level of
interest rates. As interest rates increase, the market value of
convertible securities may decline and, conversely, as interest rates
decline, the market value of convertible securities may increase. The
unique investment characteristic of convertible securities, the right to
be exchanged for the issuer's common stock, causes the market value of
convertible securities to increase when the underlying common stock
increases. However, since securities prices fluctuate, there can be no
assurance of capital appreciation, and most convertible securities will
not reflect quite as much capital appreciation as their underlying common
stocks. When the underlying common stock is experiencing a decline, the
value of the convertible security tends to decline to a level
approximating the yield-to-maturity basis of straight nonconvertible debt
of similar quality, often called "investment value," and may not
experience the same decline as the underlying common stock.
Many convertible securities sell at a premium over their conversion values
(i.e., the number of shares of common stock to be received upon conversion
multiplied by the current market price of the stock). This premium
represents the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege. If this appreciation
potential is not realized, the premium may not be recovered.
WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common
stock at issuance) valid for a specific period of time. Warrants may have

a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not
exceed the warrant's exercise price during the life of the warrant, the
warrant will expire as worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of
the Fund, the Fund may attempt to hedge all or a portion of its portfolio
by buying and selling futures contracts and options on futures contracts,
and buying put and call options on portfolio securities and securities
indices. The Fund may also write covered put and call options on portfolio
securities to attempt to increase its current income or to hedge a portion
of its portfolio investments. The Fund will maintain its positions in
securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An option
position on a futures contract may be closed out over-the-counter or on a
nationally recognized exchange which provides a secondary market for
options of the same series. The Fund will not engage in futures
transactions for speculative purposes.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities due to
anticipated changes in interest rates and market conditions without
necessarily buying or selling the securities. Although some financial

futures contracts call for making or taking delivery of the underlying
securities, in most cases these obligations are closed out before the
settlement date. The closing of a contractual obligation is accomplished
by purchasing or selling an identical offsetting futures contract. Other
financial futures contracts by their terms call for cash settlements.
The Fund also may purchase and sell stock index futures contracts with
respect to any stock index traded on a recognized stock exchange or board
of trade to hedge against changes in prices. Stock index futures contracts
are based on indices that reflect the market value of common stock of the
firms included in the indices. An index futures contract is an agreement
pursuant to which two parties agree to take or make delivery of an amount
of cash equal to the difference between the value of the index at the
close of the last trading day of the contract and the price at which the
index contract was originally written. No physical delivery of the
underlying securities in the index is made. Instead, settlement in cash
must occur upon the termination of the contract, with the settlement being
the difference between the contract price and the actual level of the
stock index at the expiration of the contract.
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in the
contract ("going short") and the buyer who agrees to take delivery of the
security ("going long") at a certain time in the future. For example, in
the fixed income securities market, prices move inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its

fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather, the
Fund is required to deposit an amount of "initial margin" in cash, U.S.
government securities or highly-liquid debt securities with its custodian
(or the broker, if legally permitted). The nature of initial margin in
futures transactions is different from that of margin in securities
transactions in that initial margin in futures transactions does not
involve the borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been
satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as "marking
to market." Variation margin does not represent a borrowing or loan by the
Fund but is instead settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market its open
futures positions. The Fund is also required to deposit and maintain
margin when it writes call options on futures contracts.

To the extent required to comply with Commodity Futures Trading Commission
("CFTC") Regulation 4.5 and thereby avoid status as a "commodity pool
operator," the Fund will not enter into a futures contract, or purchase
an option thereon, if immediately thereafter the initial margin deposits
for futures contracts held by it, plus premiums paid by it for open
options on futures contracts, would exceed 5% of the market value of the
Fund's total assets, after taking into account the unrealized profits and
losses on those contracts it has entered into; and, provided further, that
in the case of an option that is in-the-money at the time of purchase, the
in-the-money amount may be excluded in computing such 5%. Second, the Fund
will not enter into these contracts for speculative purposes; rather,
these transactions are entered into only for bona fide hedging purposes,
or other permissible purposes pursuant to regulations promulgated by the
CFTC. Third, since the Fund does not constitute a commodity pool, it will
not market itself as such, nor serve as a vehicle for trading in the
commodities futures or commodity options markets. Finally, because the
Fund will submit to the CFTC special calls for information, the Fund will
not register as a commodities pool operator.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
The Fund may purchase listed put options on financial and stock index
futures contracts to protect portfolio securities against decreases in
value resulting from market factors, such as an anticipated increase in
interest rates or stock prices. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.

Generally, if the hedged portfolio securities decrease in value during the
term of an option, the related futures contracts will also decrease in
value and the option will increase in value. In such an event, the Fund
will normally close out its option by selling an identical option. If the
hedge is successful, the proceeds received by the Fund upon the sale of
the second option will be large enough to offset both the premium paid by
the Fund for the original option plus the decrease in value of the hedged
securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
When the Fund sells a put on a futures contract, it receives a cash
premium in exchange for granting to the purchaser of the put the right to
receive from the Fund, at the strike price, a short position in such
futures contract, even though the strike price upon exercise of the option
is greater than the value of the futures position received by such holder.
If the value of the underlying futures position is not such that exercise
of the option would be profitable to the option holder, the option will
generally expire without being exercised. It will generally be the policy
of the Fund, in order to avoid the exercise of an option sold by it, to
cancel its obligation under the option by entering into a closing purchase
transaction, if available, unless it is determined to be in the Fund's
interest to deliver the underlying futures position. A closing purchase

transaction consists of the purchase by the Fund of an option having the
same term as the option sold by the Fund, and has the effect of canceling
the Fund's position as a seller. The premium which the Fund will pay in
executing a closing purchase transaction may be higher than the premium
received when the option was sold, depending in large part upon the
relative price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of assuming
a short futures position (selling a futures contract) at the fixed strike
price at any time during the life of the option if the option is
exercised. As stock prices fall or market interest rates rise, causing the
prices of futures to go down, the Fund's obligation under a call option on
a future (to sell a futures contract) costs less to fulfill, causing the
value of the Fund's call option position to increase.
In other words, as the underlying futures price falls below the strike
price, the buyer of the option has no reason to exercise the call, so that
the Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of the Fund's portfolio securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but not
the obligation, to enter into the underlying futures contract at a strike
price determined at the time the call was purchased, regardless of the
comparative market value of such futures position at the time the option

is exercised. The holder of a call option has the right to receive a long
(or buyer's) position in the underlying futures contract.
The Fund will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current
market value of its securities portfolio plus or minus the unrealized gain
or loss on those open positions, adjusted for the correlation of
volatility between the hedged securities and the futures contracts. If
this limitation is exceeded at any time, the Fund will take prompt action
to close out a sufficient number of open contracts to bring its open
futures and options positions within this limitation.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may purchase put options on portfolio securities and stock
indices to protect against price movements in the Fund's portfolio
securities. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may also write covered call options to generate income and
thereby protect against price movements in the Fund's portfolio
securities. As writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver the underlying
security upon payment of the exercise price or, in the case of a
securities index, a cash payment equal to the difference between the
closing price of the index and the exercise price of the option. The Fund
may only sell call options either on securities held in its portfolio or
on securities which it has the right to obtain without payment of further

consideration (or has segregated cash in the amount of any additional
consideration).
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or guaranteed
by the U.S. government agencies or instrumentalities. These securities are
backed by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the obligations.

Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
oFarm Credit System; including the National Bank for Cooperatives, Farm
Credit Banks, and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association; and

oStudent Loan Marketing Association.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal

securities law and is generally sold to institutional investors, such as the
Fund, who agree that they are purchasing the paper for investment purposes and
not with a view to public distribution. Any resale by the purchaser must be in
an exempt transaction. Section 4(2) commercial paper is normally resold to
other institutional investors like the Fund through or with the assistance of
the issuer or investment dealers who make a market in Section 4(2) commercial
paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a non-exclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Fund believes that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal

transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of securities. The
collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker. The Fund does not have the right to vote securities on loan,
but would terminate the loan and regain the right to vote if that were
considered important with respect to the investment.

court action. The Fund believes that under regular procedures normally in
effect for custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the Fund
and allow retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions are
similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may have
been held. It is not anticipated that the portfolio trading engaged in by the
Fund will result in its annual rate of portfolio turnover exceeding 100%.

For the period from November 9, 1995 (date of initial public investment) to
December 31, 1995, the portfolio turnover rate for the Fund was 4%.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options transactions is not considered the
purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money directly or through reverse repurchase agreements as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and reverse
repurchase agreements outstanding exceed 5% of the Fund's total assets,
any such borrowings will be repaid before additional investments are made.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge or
hypothecate assets having a market value not exceeding the lesser of the
dollar amounts borrowed or 15% of its total assets at the time of the
borrowing. For purposes of this limitation, the following are not deemed
to be pledges by the Fund: margin deposits for the purchase and sale of

futures contracts and related options, any segregation or collateral
arrangements made in connection with options activities or the purchase of
securities on a when-issued basis.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of its total assets would be invested in any one industry.
However, the Fund may at any time invest 25% or more of its total assets
in cash or cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts, except that the Fund may purchase and sell
futures contracts and options on futures contracts provided that the sum
of its initial margin deposits for futures contracts plus premiums paid by
it for open options on futures contracts may not exceed 5% of the fair
market value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in securities
of companies whose business involves the purchase or sale of real estate
or in securities secured by real estate or interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up
to one-third of its total assets. This shall not prevent the Fund from
purchasing or holding corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an issuer,
entering into repurchase agreements, or engaging in other transactions

which are permitted by the Fund's investment objective and policies or the
Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of its total assets would be
invested in the securities of that issuer.
In addition, the Fund will not purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Fund considers common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
changes in these limitations become effective.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except it may invest in the
securities of issuers which invest in or sponsor such programs.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, and will invest no more than 10% of its total assets
in investment companies in general. The Fund will purchase securities of
closed-end investment companies only in open market transactions involving
only customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
securities of issuers which have records of less than three years of
continuous operations, including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
Officers and Trustees of the Trust or the Fund's investment adviser,
owning individually more than 1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5% of the
value of the Fund's total assets would be invested in premiums on open put
options.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them in

deliverable form without further payment or after segregating cash in the
amount of any further payment.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of the value of its net assets in
warrants. No more than 2% of the Fund's net assets, to be included within
the overall 5% limit on investments in warrants, may be warrants which are
not listed on the New York Stock Exchange or the American Stock Exchange.
(If state restrictions change, this latter restriction may be revised
without notice to shareholders). For purposes of this investment
restriction, warrants acquired by the Fund in units or attached to
securities may be deemed to be without value.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933, except
for commercial paper issued under Section 4(2) of the Securities Act of
1933 and certain other restricted securities which meet the criteria for
liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice, over the counter options,
and certain restricted securities not determined by the Trustees to be
liquid.
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 of total or net assets will not result in a
violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.

To comply with registration requirements in certain states, the Fund (1) will
limit the margin deposits on futures contracts entered into by the Fund to 5%
of its net assets, (2) will limit the aggregate value of the assets underlying
covered call options or put options written by the Fund to not more than 25% of
its net assets, and (3) will limit the premiums paid for options purchased by
the Fund to 5% of its net assets. (If state requirements change, these
restrictions may be revised without shareholder notification).

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is
the father of J. Christopher Donahue, President of the Trust .

Florida; Director or Trustee of the Funds; formerly, President, Naples Property
Management, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or Trustee
of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee

Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director
or Trustee of the Funds; formerly, Counsel, Horizon Financial, F.A., Western
Region.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and U.S. Space Foundation; Chairman, Czecho Management Center;
Director or Trustee of the Funds; President Emeritus, University of Pittsburgh;
founding Chairman, National Advisory Council for Environmental Policy and
Technology and Federal Emergency Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street

Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee,
Federated Shareholder Services Company; Director, Federated Services Company;

President and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.; Executive Vice President and Secretary of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board
of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated Utility
Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.; Fortress
Utility Fund, Inc.; High Yield Cash Trust; Insurance Management Series;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999; Liberty
U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market

Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds;
RIMCO Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; and
World Investment Series, Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.

As of March 11, 1996, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund: Aetna Insurance Co. of America, Hartford,
Connecticut, 42%, and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, 58%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Trust and

Chairman and Trustee 59 other investment companies in the Fund
Complex
Thomas G. Bigley++ $1,016 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John T. Conroy, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
William J. Copeland $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
J. Christopher Donahue,$0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D.$1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr.$1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security, or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus.

For the period from November 9, 1995 (date of initial public investment) to
December 31, 1995, the adviser earned advisory fees of $231, all of which were
waived.

BROKERAGE TRANSACTIONS

affiliates in advising the Fund and other accounts. To the extent that receipt
of these services may supplant services for which the Adviser or its affiliates
might otherwise have paid, it would tend to reduce their expenses. The Adviser
and its affiliates exercise reasonable business judgment in selecting brokers
who offer brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. For the period from November 9, 1995 (date of initial public
investment) to December 31, 1995, the Fund paid $322, in brokerage commissions
on brokerage transactions.
Although investment decisions for the Fund are made independently from those of
any other accounts managed by the Adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From November 9, 1995 (date of initial public investment) to March
1, 1996, Federated Administrative Services, a subsidiary of Federated

Investors, served as the Fund's Administrator. For purposes of this Statement
of Additional Information, Federated Services Company and Federated
Administrative Services, may hereinafter collectively be referred to as the
"Administrators". For the period from November 9, 1995 (date of initial public
investment) to December 31, 1995, the Administrators earned $17,808. Dr. Henry
J. Gailliot, an officer of Federated Advisers, the adviser to the Fund, holds
approximately 20% of the outstanding common stock and serves as director of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to the
Fund's portfolio investments. The fee paid for this service is based upon the
level of the Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through it registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.

PURCHASING SHARES

Shares of the Fund are sold at their net asset value without a sales charge on
days the New York Stock Exchange is open for business. The procedure for

purchasing shares of the Fund is explained in the prospectus under "Purchases
and Redemptions" and "What Shares Cost."
DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value
is calculated by the Fund are described in the prospectus.
DETERMINING VALUE OF SECURITIES
The values of the Fund's portfolio securities are determined as follows:
o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, 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 for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available; otherwise, as determined by an
independent pricing service;
o for unlisted equity securities, the latest mean prices;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
o for all other securities, at fair value as determined in good faith by the
Trustees.
MASSACHUSETTS PARTNERSHIP LAW

expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
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.

TAX STATUS

SHAREHOLDER'S TAX STATUS
The Fund intends to comply with the variable asset diversification regulations
which are described in the prospectus and this Statement. If the Fund fails to
comply with these regulations, contracts invested in the Fund shall not be
treated as annuity, endowment, or life insurance contracts under the Internal
Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

The Fund's cumulative total return for the period from November 9, 1995 (date
of initial public investment) to December 31, 1995, was 3%. Cumulative total
return reflects a fund's total performance over a specific period of time. The
Fund's cumulative total return is representative of only two months of Fund
activity.

The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the offering price per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the quarterly reinvestment of all dividends and
distributions. You should review the performance figures for your insurance
contract, which figures reflect the applicable charges and expenses of the

contract. Such performance figures will accompany any advertisement of the
Fund's performance.
YIELD

The Fund's 30-day yield for the thirty day period ended December 31, 1995 was
1.26%.

The yield for the Fund is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period by
the offering price per share of the Fund on the last day of the period. This
value is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund because of certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to shareholders. Also,
the yield does not reflect the charges and expenses of an insurance contract.
You should review the performance figures for your insurance contract, which
figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of the Fund's performance.

PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o the relative amount of the Fund's cash flow.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specified period of time. From time to time, the Trust will quote its
Lipper ranking in the "growth funds" category in advertising and sales
literature.
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") is an unmanaged index representing
share prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is cited
as a principal indicator of market conditions.

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

o STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500 COMMON
STOCKS, a composite index of common stocks in industry, transportation,
and financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in the S&P figures.
o STANDARD & POOR'S RATINGS GROUP 500 is an unmanaged index of common stocks
in industry, transportation, finance, and public utilities denoting
general market performance, as monitored by S&P Corporation.

o LIPPER GROWTH FUND AVERAGE is an average of the total returns for 251
growth funds tracked by Lipper Analytical Services, Inc., an independent
mutual fund rating service.
o LIPPER GROWTH FUND INDEX is an average of the net asset-valuated total
returns for the top 30 growth funds tracked by Lipper Analytical Services,
Inc., an independent mutual fund rating service.
o MORNINGSTAR, INC. , an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and sales literature for the Fund may quote total returns which
are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based
on quarterly reinvestment of dividends over a specified period of time.

From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits and
to money market funds using the Lipper Analytical Services money market
instruments average.
ABOUT FEDERATED INVESTORS

INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, 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
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.

FINANCIAL STATEMENTS

*Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. 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, B--Debt rated "BB" and "B" is regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. "B" indicates the highest degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties of major risk
exposures to adverse conditions.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS

AAA--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group, they comprise what are generally
known as high grade Bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or fluctuation
of protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than in
"Aaa" securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are rate "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.
Cusip 458043700

G01283-02 (4/96)

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of three portfolios (individually referred to as a
"Fund" or collectively as the "Funds") of Federated Insurance Series (the
"Trust"), which is an open-end, management investment company. Shares of the
Funds may be sold only to separate accounts of insurance companies to serve as
the investment medium for variable life insurance policies and variable annuity
contracts issued by the insurance companies. This prospectus offers interests in
the following three separate investment portfolios, each having distinct
investment objectives and policies:

Federated Utility Fund II (formerly, Utility Fund);

Federated Fund for U.S. Government Securities II (formerly, U.S.
Government Bond Fund); and

Federated High Income Bond Fund II (formerly, Corporate Bond Fund).

The separate accounts invest in one or more of the Funds in accordance with
allocation instructions received from owners of life insurance policies and
annuity contracts. Such allocation rights are described further in the
prospectus for the separate account. This prospectus contains the information
you should read and know before you invest in any of the Funds through the
variable annuity contracts and variable life insurance policies offered by
insurance companies which provide for investment in the Trust. Keep this
prospectus for future reference.

SPECIAL RISKS

Federated High Income Bond Fund II's portfolio consists primarily of lower-rated
corporate debt obligations, which are commonly referred to as "junk bonds."
These lower-rated bonds may be more susceptible to real or perceived adverse
economic conditions than investment grade bonds. These lower-rated bonds are
regarded as predominantly speculative with regard to each issuer's continuing
ability to make principal and interest payments. In addition, the secondary
trading market for lower-rated bonds may be less liquid than the market for
investment grade bonds. Federated High Income Bond Fund II's investment adviser
will endeavor to limit these risks through diversifying the portfolio and
through careful credit analysis of individual issuers. Purchasers should
carefully assess the risks associated with an investment in this Fund. (See the
sections in this prospectus entitled "Investment Risks" and "Reducing Risks of
Lower-Rated Securities.")

The Trust has also filed a Statement of Additional Information dated April 22,
1996, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information or
a paper copy of this prospectus, if you have received your prospectus
electronically, free of charge by calling 1-800-235-4669. To obtain other
information or to make inquiries about a Fund, contact the Trust at the address
listed in the back of this prospectus.

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS A POOLED FUNDING VEHICLE FOR LIFE
INSURANCE COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE
INSURANCE POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR
SUCH CONTRACTS.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED UTILITY
FUND II 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED FUND FOR
U.S. GOVERNMENT SECURITIES II 2
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED HIGH
INCOME BOND FUND II 3
- ------------------------------------------------------

GENERAL INFORMATION ON FEDERATED
INSURANCE SERIES 4
- ------------------------------------------------------

FEDERATED UTILITY FUND II INVESTMENT INFORMATION 4
- ------------------------------------------------------

Investment Objective 4
Investment Policies 4
Investment Limitations 7

FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II INVESTMENT INFORMATION 7
- ------------------------------------------------------

Investment Objective 7
Investment Policies 7
Investment Limitations 8

FEDERATED HIGH INCOME BOND FUND II
INVESTMENT INFORMATION 9
- ------------------------------------------------------

Investment Objective 9
Investment Policies 9
Investment Risks 10
Investment Limitations 11

INVESTMENT PRACTICES 11
- ------------------------------------------------------

Repurchase Agreements 11
Restricted and Illiquid Securities 12
When-Issued and Delayed Delivery
Transactions 12
Lending of Portfolio Securities 12
Variable Asset Regulations 12
State Insurance Regulations 13

NET ASSET VALUE 13
- ------------------------------------------------------

INVESTING IN THE FUNDS 13
- ------------------------------------------------------

Purchases and Redemptions 13
What Shares Cost 13
Dividends 14

FEDERATED INSURANCE SERIES
INFORMATION 14
- ------------------------------------------------------

Management of Federated
Insurance Series 14
Fund Managers 15
Distribution of Fund Shares 15
Administration of the Funds 15
Brokerage Transactions 16

SHAREHOLDER INFORMATION 16
- ------------------------------------------------------

Voting Rights 16

TAX INFORMATION 16
- ------------------------------------------------------

Federal Taxes 16
State and Local Taxes 17

PERFORMANCE INFORMATION 17
- ------------------------------------------------------

APPENDIX 18
- ------------------------------------------------------

ADDRESSES 21
- ------------------------------------------------------

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.29 $ 9.48
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.45 0.34
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.74 (0.19)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 2.19 0.15
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.45) (0.34)
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 9.29
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 24.18% 1.12%
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.85% 0.60%*
- -----------------------------------------------------------------------------------------------
Net investment income 4.62% 4.77%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 2.24% 54.83%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $29,679 $974
- -----------------------------------------------------------------------------------------------
Portfolio turnover 62% 73 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 9.99
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.54 0.27
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.30 --
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.84 0.27
- ----------------------------------------------------------------------------------------------- --------- -----------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.54) (0.27)
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.29 $ 9.99
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 8.77% 2.62%
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.80% 0.48%*
- -----------------------------------------------------------------------------------------------
Net investment income 6.00% 3.99%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.81% 32.83%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,264 $ 1,244
- -----------------------------------------------------------------------------------------------
Portfolio turnover 65% 0 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report dated February 7, 1996, on the Fund's
financial statements for the year ended December 31, 1995, and on the following
table for the periods presented, is included in the Annual Report, which is
incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.87 $ 10.00
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.85 0.75
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.89 (1.12)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.74 (0.37)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Distributions from net investment income (0.82) (0.75)
- -----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (d) -- (0.01)
- ----------------------------------------------------------------------------------------------- --------- -----------
Total distributions (0.82) (0.76)
- ----------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 8.87
- ----------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 20.38% (3.73%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.80% 0.41%*
- -----------------------------------------------------------------------------------------------
Net investment income 9.27% 9.11%*
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.40% 10.01%*
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $20,165 $ 1,457
- -----------------------------------------------------------------------------------------------
Portfolio turnover 48% 18 %
- -----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (the start of business) to February 1, 1994, the Fund had no public
investment.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION ON
FEDERATED INSURANCE SERIES

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

The Funds are portfolios of Federated Insurance Series, which was established as
Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the names of the Funds from Utility Fund to Federated Utility
Fund II; U.S. Government Bond Fund to Federated Fund for U.S. Government
Securities II; and Corporate Bond Fund to Federated High Income Bond Fund II.
The Declaration of Trust permits the Trust to offer separate series of shares of
beneficial interest in separate portfolios of securities, including the Funds.
The shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have not established separate classes of
shares.

An insurance company chooses which portfolios to make available as funding
vehicles for its variable annuity contracts and variable life insurance
policies. Shares of each Fund are sold at net asset value as described in the
section entitled "What Shares Cost." Shares of the Funds are redeemed at net
asset value.

Shares of beneficial interest in the following three separate portfolios are
offered by this prospectus:

Federated Utility Fund II--a portfolio seeking high current income and
moderate capital appreciation by investing primarily in a professionally
managed, diversified portfolio of equity and debt securities of utility
companies;
Federated Fund for U.S. Government Securities II--a portfolio seeking
current income by investing in U.S. government securities; and

Federated High Income Bond Fund II--a portfolio seeking high current
income by investing in lower-rated fixed income securities, including
preferred stocks, bonds, debentures and notes.

Each of the Funds may also invest in certain other types of securities as
further described in this prospectus.

Since the Funds use a single prospectus, it is possible that one Fund might
become liable for a misstatement in the prospectus regarding another Fund. The
Trustees of the Trust considered this when approving the use of a single
prospectus.

FEDERATED UTILITY FUND II
INVESTMENT INFORMATION

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund's investment approach is based on the
conviction that over the long term, the economy will continue to expand and
develop and that this economic growth will be reflected in the growth of the
revenues and earnings of utility companies. The Fund intends to achieve its
investment objective by investing in equity and debt securities of utility
companies that produce, transmit, or distribute gas and electric energy as well
as those companies that provide
communications facilities, such as telephone and telegraph companies. Under
normal market conditions, the Fund will invest at least 65% of its total assets
in securities of utility companies. The prices of fixed income securities
fluctuate inversely to the direction of interest rates.

COMMON STOCKS. The Fund invests primarily in common stocks of utility companies
selected by the Fund's investment adviser on the basis of traditional research
techniques, including assessment of earnings and dividend growth prospects and
of the risk and volatility of the company's industry. However, other factors,
such as product position, market share, or profitability will also be considered
by the Fund's investment adviser.

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts, as well as
securities of foreign issuers that trade on foreign stock exchanges. Securities
of a foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities of
companies. Convertible securities are fixed income securities which may be
exchanged or converted into a predetermined number of the issuer's underlying
common stock at the option of the holder during a specified time period.
Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The Fund
invests in convertible bonds rated "B" or higher by Standard & Poor's Ratings
Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") at the time of
investment or, if unrated, of comparable quality. If a convertible bond is rated
below "B" according to the characteristics set forth hereafter after the Fund
has purchased it, the Fund is not required to drop the convertible bond from the
portfolio but will consider appropriate action. The investment characteristics
of each convertible security vary widely, which allows convertible securities to
be employed for different investment objectives.

RISKS. When the Fund uses financial futures and options on financial futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities to market
changes. In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures contract
or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the investment adviser will
consider liquidity before entering into futures and options transactions, there
is no assurance that a liquid secondary market on an exchange will exist
for any particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on this
secondary market.

TEMPORARY INVESTMENTS. The Fund may also invest temporarily in cash, cash items,
and short-term instruments, including notes and commercial paper, for liquidity
and during times of unusual market conditions for defensive purposes. Cash items
may include obligations such as:

certificates of deposit (including those issued by domestic and foreign
branches of FDIC insured banks);

obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities; and

repurchase agreements.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.
In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
INVESTMENT INFORMATION

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Under normal circumstances, the Fund pursues its investment objective by
investing at least 65% of the value of its total assets in securities issued or
guaranteed as to payment of principal and interest by the U.S. government, its
agencies or instrumentalities. For purposes of this 65% statement, the Fund will
consider collateralized mortgage obligations issued by U.S. government agencies
or instrumentalities to be U.S. government securities. Unless indicated
otherwise, the investment policies of the Fund may be changed by the Trustees
without the approval of shareholders. Shareholders will be notified before any
material change in these policies becomes effective.

The U.S. government securities in which the Fund invests include:

direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

notes, bonds and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the
National Bank for Cooperatives and Banks for Cooperatives; Federal Home
Loan Banks; Federal Home Loan Mortgage Corporation; Federal National
Mortgage Association; Government National Mortgage Association;
Export-Import Bank of the United States; Commodity Credit Corporation;
Federal Financing Bank; The

Student Loan Marketing Association; National Credit Union Administration;
and Tennessee Valley Authority.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

the credit of the agency or instrumentality.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The Fund will not:

invest more than 10% of its total assets in securities of other
investment companies.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED HIGH INCOME BOND FUND II
INVESTMENT INFORMATION

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund invests at least 65% of its assets in lower
rated fixed income bonds. Under normal circumstances, the Fund will not invest
more than 10% of the value of its total assets in equity securities. The prices
of fixed income securities fluctuate inversely to the direction of interest
rates. The fixed income securities in which the Fund invests include, but are
not limited to:

preferred stocks;

bonds;

debentures;

notes;

equipment lease certificates; and

equipment trust certificates.

The securities in which the Fund may invest are generally rated BBB or lower by
S&P or Fitch Investors Services Inc. ("Fitch") or Baa or lower by Moody's, or
are not rated but are determined by the Fund's investment adviser to be of
comparable quality. Securities which are rated BBB or lower by S&P or Fitch or
Baa or lower by Moody's have speculative characteristics. Changes in economic
conditions or other circumstances are more likely to lead to weakened capacity
to make principal and interest payments than highly rated bonds. A description
of the rating categories is contained in the Appendix to this combined
prospectus. There is no lower limit with respect to rating categories for
securities in which the Fund may invest. See "Investment Risks."

FOREIGN SECURITIES. The Fund may invest in foreign securities, including
-
foreign securities not publicly traded in the United States, which may include
any of the types of securities described above (see "Acceptable Investments.")
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investments in domestic issuers. These considerations include the possibility of
expropriation, the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards,
less liquidity and more volatility in foreign securities markets, the impact of
political, social, or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.

TEMPORARY INVESTMENTS. The Fund may invest temporarily in cash and short-term
obligations for defensive purposes during times of unusual market conditions.
Short-term obligations may include:

certificates of deposit;

commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch and variable rate demand master notes;

short-term notes;

obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities; and

repurchase agreements.

INVESTMENT RISKS

In the event of a restructuring, the Fund may bear additional legal or
administrative expenses in order to maximize recovery from an issuer.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. In 1989, legislation was
enacted that requires federally insured savings and loan associations to divest
their holdings of lower-rated bonds by 1994. The reduction of the number of
institutions empowered to purchase and hold lower-rated bonds could have an
adverse impact on the overall liquidity of the market. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may also
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

The Fund may, from time to time, own zero coupon bonds or pay-in-kind
securities. A zero coupon bond makes no periodic interest payments and the
entire obligation becomes due only upon maturity. Pay-in-kind securities make
periodic payments in the form of additional securities (as opposed to cash). The
price of zero coupon bonds and pay-in-kind securities are generally more
sensitive to fluctuations in interest rates than are conventional bonds.
Additionally, federal tax law requires that interest on zero coupon bonds and
pay-in-kind securities be reported as income to the
Fund even though the Fund received no cash interest until the maturity or
payment date of such securities.

REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser believes
that the risks of investing in lower-rated securities can be reduced. The
professional portfolio management techniques used by the Fund to attempt to
reduce these risks include:

CREDIT RESEARCH. The Fund's investment adviser will perform its own credit
analysis in addition to using recognized rating agencies and other sources,
including discussions with the issuer's management, the judgment of other
investment analysts, and its own informed judgment. The adviser's credit
analysis will consider the issuer's financial soundness, its responsiveness
to changes in interest rates and business conditions, and its anticipated
cash flow, interest, or dividend coverage and earnings. In evaluating an
issuer, the adviser places special emphasis on the estimated current value
of the issuer's assets rather than historical cost.

DIVERSIFICATION. The Fund invests in securities of many different issuers,
industries, and economic sectors to reduce portfolio risk.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

INVESTMENT PRACTICES
- --------------------------------------------------------------------------------

The following investment practices are common to two or more of the Funds and,
unless indicated otherwise, may be changed without approval of shareholders.

REPURCHASE AGREEMENTS

All of the Funds will engage in repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to a Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. Such Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from a
Fund, such Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Funds believe that, under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
a Fund and allow retention or disposition of such securities. The Funds will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by each Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES

Each Fund may invest up to 15% of its total assets in restricted securities.
This restriction is not applicable to commercial paper issued under Section 4(2)
of the Securities Act of 1933. Restricted securities are any securities in which
these Funds may otherwise invest pursuant to their respective investment
objectives and policies but which are subject to restriction on resale under
federal securities law. To the extent restricted securities are deemed to be
illiquid, these Funds will limit their purchase, including non-negotiable time
deposits, repurchase agreements providing for settlement in more than seven days
after notice, over-the-counter options, and certain restricted securities
determined by the Trustees not to be liquid, to 15% of the net assets of each
Fund.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Funds may purchase portfolio securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, the Fund may pay more/less than the
market value of the securities on the settlement date.

The Funds may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Funds may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Funds may realize short-term profits or losses upon the sale of such
commitments.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, each Fund may lend its portfolio
securities on a short-term or long-term basis, or both, up to one-third of the
value of its total assets, to broker/dealers, banks, or other institutional
borrowers of securities. This policy is a fundamental policy of each Fund and
may not be changed without shareholder approval. The Funds will only enter into
loan arrangements with broker/dealers, banks, or other institutions which the
adviser has determined are creditworthy under guidelines established by the
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned at all
times. There is the risk that when lending portfolio securities, the securities
may not be available to a Fund on a timely basis and a Fund may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

VARIABLE ASSET REGULATIONS

The Funds are 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 a Fund may be represented by any one investment, no more
than 70% of the total assets of a Fund may be represented by any two
investments, no more than 80% of the total assets of a Fund may be represented
by any three investments, and no more than 90% of the total assets of a 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 a Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the Fund
will not be treated as annuity, endowment, or life insurance contracts.

The Funds will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

The Funds are intended to be funding vehicles 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 applied to the Trust, each Fund may be limited in its ability to
engage in such investments and to manage its portfolio with desired flexibility.
The Trust intends that each 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 Funds.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value per share of Federated Utility Fund II, Federated Fund for
U.S. Government Securities II and Federated High Income Bond Fund II fluctuates.
They are determined by dividing the sum of the market value of all securities
and other assets of the particular Fund, less liabilities, by the number of
shares outstanding.
INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

Shares of the Funds are not sold directly to the general public. With respect to
Federated High Income Bond Fund II, the Fund reserves the right to reject any
purchase request. The Funds' shares are used solely as the investment vehicle
for separate accounts of insurance companies offering variable annuity contracts
and variable life insurance policies. The use of Fund shares as investments for
both variable annuity contracts and variable life insurance policies is referred
to as "mixed funding." The use of Fund shares as investments by separate
accounts of unaffiliated life insurance companies is referred to as "shared
funding."

The Funds intend to engage in mixed funding and shared funding in the future.
Although the Funds do 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 would 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
Trust.

Shares of the Funds are purchased or redeemed on behalf of participating
insurance companies at the next computed net asset value after an order is
received on days on which the New York Stock Exchange is open.

WHAT SHARES COST

The net asset value of shares is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of a
Fund's portfolio securities that its net asset value might be materially
affected; (ii) days on which no shares are tendered for redemption and no orders
to purchase shares are received; or (iii) the following holidays: New Year's
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.

Purchase orders from separate accounts investing in the Funds which are received
by the insurance companies by 4:00 p.m. (Eastern time), will be computed at the
net asset value of the applicable Funds determined on that day, as long as such
purchase orders are received by the applicable Fund in proper form and in
accordance with applicable procedures by 8:00 a.m. (Eastern time) on the next
business day and as long as federal funds in the amount of such orders are
received by the respective Funds on the next business day. It is the
responsibility of each insurance company which invests in the Funds to properly
transmit purchase orders and federal funds in accordance with the procedures
described above.

DIVIDENDS

Dividends on shares of Federated Utility Fund II, Federated Fund for U.S.
Government Securities II and Federated High Income Bond Fund II are declared and
paid monthly.

Shares of each Fund will begin earning dividends if owned on the record date.
Dividends of each Fund are automatically reinvested in additional shares of such
Fund on payment dates at the ex-dividend date net asset value.

FEDERATED INSURANCE SERIES INFORMATION

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

MANAGEMENT OF FEDERATED INSURANCE SERIES

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all of
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Funds are made by Federated Advisers, the Funds'
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Funds and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from each Fund.

Both the Funds and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Funds and their portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Funds'
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

ADVISORY FEES. The Funds' adviser receives an annual investment advisory
fee equal to .75 of 1% of the average daily net assets for Federated
Utility Fund II and .60 of 1% of the average daily net assets for Federated
Fund for U.S. Government Securities II and Federated High Income Bond Fund
II. The adviser may voluntarily choose to waive a portion of its fees or
reimburse a Fund for certain operating expenses. The adviser can terminate
this voluntary reimbursement of expenses at any time at its sole
discretion.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.

FUND MANAGERS

FEDERATED UTILITY FUND II. Christopher H. Wiles has been the Fund's portfolio
manager since the Fund commenced operations. Mr. Wiles joined Federated
Investors in 1990 and has been a Vice President of the Fund's investment adviser
since 1992. Mr. Wiles served as Assistant Vice President of the Fund's
investment adviser in 1991. Mr. Wiles is a Chartered Financial Analyst and
received his M.B.A. in Finance from Cleveland State University.

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II. Kathleen M. Foody-Malus has
been the Fund's portfolio manager since the Fund commenced operations. Ms.
Foody-Malus joined Federated Investors in 1983 and has been a Vice President of
the Fund's investment adviser since 1993. Ms. Foody-Malus served as an Assistant
Vice President of the investment adviser from 1990 until 1992, and from 1986
until 1989 she acted as investment analyst. Ms. Foody-Malus received her M.B.A.
in Accounting/Finance from the University of Pittsburgh.

James D. Roberge has been the Fund's portfolio manager since March 1995. Mr.
Roberge joined Federated Investors in 1990 and has been a Vice President of the
Fund's investment adviser since 1994. Mr. Roberge served as an Assistant Vice
President of the Fund's investment adviser from 1992 to 1994 and as an
investment analyst from 1990 to 1992. Mr. Roberge is a Chartered Financial
Analyst and received his M.B.A. in Finance from the Wharton School of The
University of Pennsylvania.

FEDERATED HIGH INCOME BOND FUND II. Mark E. Durbiano has been the Fund's
portfolio manager since the Fund commenced operations. Mr. Durbiano joined
Federated Investors in 1982 and has been a Senior Vice President of the Fund's
investment adviser since January 1996. From 1988 through 1995, Mr. Durbiano was
a Vice President of the Fund's investment adviser. Mr. Durbiano is a Chartered
Financial Analyst and received his M.B.A. in Finance from the University of
Pittsburgh.

DISTRIBUTION OF FUND SHARES

Federated Securities Corp. is the principal distributor for shares of the Funds.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE FUNDS

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund. Federated
Services Company provides these at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

Federated Services Company may choose voluntarily to waive a portion of its fee.

BROKERAGE TRANSACTIONS

With respect to Federated Utility Fund II, when selecting brokers and dealers to
handle the purchase and sale of portfolio instruments, the adviser looks for
prompt execution of the order at a favorable price. In working with dealers, the
adviser will generally utilize those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the order can
be obtained elsewhere. In selecting among firms believed to meet these criteria,
the adviser may give consideration to those firms which have sold or are selling
shares of Federated Utility Fund II and other funds distributed by Federated
Securities Corp. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Trustees.

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of each Fund, will vote
the Fund shares held in their separate accounts at meetings of shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of each such
separate account. As of March 11, 1996, Life of Virginia, Richmond, Virginia,
and Aetna Life Insurance & Annuity Co., Hartford, Connecticut, owned 41% and
29%, respectively, of the voting securities of Federated Utility Fund II, and,
therefore, may for certain purposes be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders. As
of March 11, 1996, Aetna Life Insurance & Annuity Co., Hartford, Connecticut,
owned 32% of the voting securities of Federated Fund for U.S. Government
Securities II, and, therefore, may for certain purposes be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders. As of March 11, 1996, Aetna Life Insurance & Annuity Co.,
Hartford, Connecticut, owned 54.19% of the voting securities of Federated High
Income Bond Fund II, and, therefore, may for certain purposes be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.

Each share of each of the Funds gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
each Fund have equal voting rights, except that only shares of a particular Fund
are entitled to vote on matters affecting that Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in a Fund's or the
Trust's operation and for the election of Trustees under certain circumstances.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

The Funds will pay no federal income tax because the Funds expect to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.

Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by each of
the Funds in the Trust will not be combined for tax purposes with those realized
by any other Fund.

Each Fund intends to comply with the variable asset diversification regulations
which are described earlier in this prospectus. If a Fund fails to comply with
these regulations, contracts invested in that Fund shall not be treated as
annuity, endowment, or life insurance contracts under the Internal Revenue Code.

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

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time Federated Utility Fund II, Federated Fund for U.S. Government
Securities II and Federated High Income Bond Fund II advertise total return and
yield.

Total return represents the change, over a specific period of time, in the value
of an investment in a Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The yields of Federated Utility Fund II, Federated Fund for U.S. Government
Securities II and Federated High Income Bond Fund II are calculated by dividing
the net investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the offering price
per share of the Fund on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by a Fund and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. Performance information
for each Fund will not reflect the charges and expenses of a variable annuity or
variable life insurance contract. Because shares of each Fund can only be
purchased by a separate account of an insurance company offering such a
contract, you should review the performance figures of the contract in which you
are invested, which performance figures will accompany any advertisement of a
Fund's performance.

From time to time, advertisements for the Funds may refer to ratings, rankings,
and other information in certain financial publications and/or compare a Fund's
performance to certain indices.

APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

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 B or B- rating.

C--The rating C is reserved for income bonds on which no interest is being paid.

D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

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.

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.

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 in imminent default in payment of interest or principal.

NR--NR indicates that Fitch does not rate the specific issue. Plus + or Minus:
Plus or minus signs are used with a rating symbol to indicate the relative
position of a credit within the rating category. Plus and minus signs, however,
are not used in the AAA category.

STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

Leading market positions in well established industries.

High rates of return on funds employed.

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

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

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

FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

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
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated Utility Fund II Federated Investors Tower
Federated Fund for U.S. Pittsburgh, Pennsylvania 15222-3779
Government Securities II
Federated High Income Bond Fund II
- ------------------------------------------------------------------------------------------------------------------------

FEDERATED
INSURANCE
SERIES
(FORMERLY, INSURANCE
MANAGEMENT SERIES)
PROSPECTUS

An Open-End, Management
Investment Company

Federated Utility Fund II
(formerly, Utility Fund)

Federated Fund for U.S.
Government Securities II
(formerly, U.S. Government Bond Fund)

Federated High Income Bond Fund II
(formerly, Corporate Bond Fund)

[LOGO]
FEDERATED SECURITIES CORP.
- --------------------------
Distributor

A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779

April 22, 1996

Cusip 458043205
Cusip 458043304
Cusip 458043403
3120303A (4/96)
FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)
OFFERING THREE PORTFOLIOS:
OFEDERATED UTILITY FUND II
(formerly, Utility Fund);
OFEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(formerly, U.S. Government Bond Fund); and
OFEDERATED HIGH INCOME BOND FUND II
(formerly, Corporate Bond Fund).
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of Federated Insurance Series dated April 22, 1996. This Statement is not a
prospectus itself. You may request a copy of a prospectus or a paper copy
of this Statement, if you have received it electronically, free of charge
by calling 1-800-235-4669.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated April 22, 1996
FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 2

INVESTMENT INFORMATION 3

INVESTMENT OBJECTIVES 3
FEDERATED UTILITY FUND II 3
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II 3
FEDERATED HIGH INCOME BOND FUND II 3
TYPES OF INVESTMENTS 3
FEDERATED UTILITY FUND II 3
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II 4
FEDERATED HIGH INCOME BOND FUND II 5
CURRENCY RISK 7
INVESTING IN FOREIGN CURRENCIES 8
INVESTMENT PRACTICES OF THE FUNDS 5

REPURCHASE AGREEMENTS 11
REVERSE REPURCHASE AGREEMENTS 12
RESTRICTED AND ILLIQUID SECURITIES 12
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS 13
LENDING OF PORTFOLIO SECURITIES 14
PORTFOLIO TURNOVER 14
INVESTMENT LIMITATIONS 15

FEDERATED INSURANCE SERIES MANAGEMENT 20

FUND OWNERSHIP 28

TRUSTEES COMPENSATION 29
TRUSTEE LIABILITY 31
INVESTMENT ADVISORY SERVICES 31

ADVISER TO THE FUNDS 31
ADVISORY FEES 32
BROKERAGE TRANSACTIONS 32

OTHER SERVICES 34

FUND ADMINISTRATION 34
CUSTODIAN AND PORTFOLIO ACCOUNTANT 35
TRANSFER AGENT 16
INDEPENDENT PUBLIC AUDITORS 35
PURCHASING SHARES 35

DETERMINING NET ASSET VALUE 35

DETERMINING VALUE OF SECURITIES 36
MASSACHUSETTS PARTNERSHIP LAW 36

TAX STATUS 37

THE FUNDS' TAX STATUS 37
SHAREHOLDER'S TAX STATUS 37
TOTAL RETURN 38

YIELD 39

PERFORMANCE COMPARISONS 39

ABOUT FEDERATED INVESTORS 43

FINANCIAL STATEMENTS 45

GENERAL INFORMATION

This Statement of Additional Information includes information about three of
the Trust's portfolios (individually referred to as a "Fund" and collectively
as the "Funds"):
o Federated Utility Fund II;
o Federated Fund for U.S. Government Securities II; and
o Federated High Income Bond Fund II.
The Funds are portfolios of Federated Insurance Series (the "Trust"), which
was established as Insurance Management Series, a Massachusetts business
trust, under a Declaration of Trust dated September 15, 1993. At a meeting of
the Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the names of the Funds from
Utility Fund to Federated Utility Fund II; U.S. Government Bond Fund to
Federated Fund for U.S. Government Securities II; and Corporate Bond Fund to
Federated High Income Bond Fund II. The Declaration of Trust permits the Trust
to offer separate series of shares of beneficial interest in separate
portfolios of securities, including the Funds. The shares in any one portfolio
may be offered in separate classes. As of the date of this Statement, the
Trustees have not established separate classes of shares.
Shares of the Funds are sold only to insurance companies as funding vehicles
for variable annuity and variable life insurance contracts issued by the
insurance companies. The Trust has separate portfolios. An insurance company
chooses which portfolios to make available as funding vehicles for its
variable annuity and variable life insurance policies.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVES
FEDERATED UTILITY FUND II
Federated Utility Fund II's investment objective is to achieve high
current income and moderate capital appreciation.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Federated Fund for U.S. Government Securities II's investment objective
is to provide current income. Current income includes, in general,
discount earned on U.S. Treasury bills and agency discount notes,
interest earned on all other U.S. government securities and short-term
capital gains.
FEDERATED HIGH INCOME BOND FUND II
Federated High Income Fund II's investment objective is to seek high
current income.
The investment objectives of the Funds cannot be changed without the approval
of shareholders.
TYPES OF INVESTMENTS
FEDERATED UTILITY FUND II
Federated Utility Fund II endeavors to achieve its investment objective by
investing primarily in a professionally managed, diversified portfolio of
equity and debt securities of utility companies.
U.S. GOVERNMENT OBLIGATIONS
The Fund may also invest in U.S. government obligations which generally
include direct obligations of the U.S. Treasury (such as U.S. Treasury bills,
notes, and bonds) and obligations issued and/or guaranteed by U.S. government
agencies or instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;

o the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit System, including the National Bank for Cooperatives,Farm
Credit Banks and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association; and
oStudent Loan Marketing Association.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Federated Fund for U.S. Government Securities II invests in U.S. government
securities which are primary or direct obligations of the U.S. government or
its agencies or instrumentalities, or which are guaranteed by the U.S.
government, its agencies or instrumentalities, and in certain collateralized
mortgage obligations described below, and repurchase agreements.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
Privately issued CMOs generally represent an ownership interest in
federal agency mortgage pass-through securities such as those issued by
the Government National Mortgage Association. The terms and
characteristics of the mortgage instruments may vary among pass-through
mortgage loan pools.
The market for such CMOs has expanded considerably since its inception.
The size of the primary issuance market and the active participation in

the secondary market by securities dealers and other investors make
government-related pools highly liquid.
STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may
represent an interest solely in the principal repayments or solely in the
interest payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates fall
below the level at which SMBSs were issued, there may be substantial
prepayment on the underlying mortgages, leading to the relatively early
prepayment of principal-only SMBSs and a reduction in the amount of
payment made to holders of interest-only SMBSs. It is possible that the
Fund might not recover its original investment on interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise
and decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends
to use this characteristic of interest-only SMBSs to reduce the effects
of interest rate changes on the value of the Fund's portfolio, while
continuing to pursue current income.
FEDERATED HIGH INCOME BOND FUND II
Federated High Income Bond Fund II endeavors to achieve its objective by
investing primarily in a professionally managed, diversified portfolio of
fixed income securities. Some of these fixed income securities may involve
equity features. Capital growth will be considered, but only when consistent
with the investment objective of high current income.

CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered
as a unit).
Equipment lease or trust certificates are secured obligations issued in
serial form, usually sold by transportation companies such as railroads
or airlines, to finance equipment purchases. The certificate holders own
a share of the equipment, which can be resold if the issuer of the
certificate defaults. The Fund does not currently intend to invest more
than 5% of its assets in equipment lease certificates.
EQUITY SECURITIES
Generally, less than 10% of the value of the Fund's total assets will be
invested in equity securities, including common stocks, warrants, or
rights. The Fund's investment adviser may choose to exceed this 10%
limitation if unusual market conditions suggest such investments
represent a better opportunity to reach the Fund's investment objective.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments for defensive purposes
during times of unusual market conditions.
CERTIFICATES OF DEPOSIT
The Fund may invest in certificates of deposit of domestic and foreign
banks and savings and loans if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund ("BIF") or the Savings

Association Insurance Fund ("SAIF"), both of which are administered by
the Federal Deposit Insurance Corporation ("FDIC"). These instruments may
include Eurodollar Certificates of Deposit issued by foreign branches of
U.S. or foreign banks, Eurodollar Time Deposits which are U.S. dollar-
denominated deposits in foreign branches of U.S. or foreign banks,
Canadian Time Deposits which are U.S. dollar-denominated deposits issued
by branches of major Canadian banks located in the United States, and
Yankee Certificates of Deposit which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and held
in the United States.
CURRENCY RISK
To the extent that debt securities purchased by the Fund are denominated
in currencies other than the U.S. dollar, changes in foreign currency
exchange rates will affect the Fund's net asset value, the value of
interest earned, gains and losses realized on the sale of securities, and
net investment income and capital gains, if any, to be distributed to
shareholders by the Fund. If the value of a foreign currency rises
against the U.S. dollar, the value of the Fund assets denominated in that
currency will increase; correspondingly, if the value of a foreign
currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the
Fund values its assets daily in U.S. dollars, the Fund may not convert
its holdings of foreign currencies to U.S. dollars daily. When the Fund
converts its holdings to another currency, it may incur conversion costs.

Foreign exchange dealers may realize a profit on the difference between
the price at which they buy and sell currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund will
conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through forward contracts to purchase or sell foreign
currencies.
INVESTING IN FOREIGN CURRENCIES
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign currency
involved in an underlying transaction. However, forward foreign currency
exchange contracts may limit potential gains which could result from a
positive change in such currency relationships. The Fund's investment
adviser believes that it is important to have the flexibility to enter
into forward foreign currency exchange contracts whenever it determines
that it is in the Fund's best interest to do so. The Fund will not
speculate in foreign currency exchange.
There is no limitation as to the percentage of the Fund's assets that may
be committed to such contracts.
The Fund does not enter into forward foreign currency exchange contracts
or maintain a net exposure in such contracts when the Fund would be
obligated to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency or
currencies that the Fund's adviser believes will tend to be closely

correlated with the currency with regard to price movements. Generally,
the Fund does not enter into a forward foreign currency exchange contract
with a term longer than one year.
FOREIGN CURRENCY OPTIONS
A foreign currency option provides the option buyer with the right to buy
or sell a stated amount of foreign currency at the exercise price on a
specified date or during the option period. The owner of a call option
has the right, but not the obligation, to buy the currency. Conversely,
the owner of a put option has the right, but not the obligation to sell
the currency.
When the option is exercised, the seller (i.e., writer) of the option is
obligated to fulfill the terms of the sold option. However, either the
seller or the buyer may, in the secondary market, close its position
during the option period at any time prior to expiration.
A call option on foreign currency generally rises in value if the
underlying currency appreciates in value, and a put option on foreign
currency generally falls in value if the underlying currency depreciates
in value. Although purchasing a foreign currency option can protect the
Fund against an adverse movement in the value of a foreign currency, the
option will not limit the movement in the value of such currency. For
example, if the Fund were holding securities denominated in a foreign
currency that was appreciating and had purchased a foreign currency put
to hedge against a decline in the value of the currency, the Fund would
not have to exercise its put option. Likewise, if the Fund were to enter
into a contract to purchase a security denominated in foreign currency
and, in conjunction with that purchase, were to purchase a foreign
currency call option to hedge against a rise in value of the currency,
and if the value of the currency instead depreciated between the date of

purchase and the settlement date, the Fund would not have to exercise its
call. Instead, the Fund could acquire in the spot market the amount of
foreign currency needed for settlement.
SPECIAL RISKS ASSOCIATED WITH FOREIGN CURRENCY OPTIONS
Buyers and sellers of foreign currency options are subject to the same
risks that apply to options generally.
In addition, there are certain additional risks associated with foreign
currency options. The markets in foreign currency options are relatively
new, and the Fund's ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market.
Although the Fund will not purchase or write such options unless and
until, in the opinion of the Fund's adviser, the market for them has
developed sufficiently to ensure that the risks in connection with such
options are not greater than the risks in connection with the underlying
currency, there can be no assurance that a liquid secondary market will
exist for a particular option at any specific time.
In addition, options on foreign currencies are affected by all of those
factors that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price
of the option position may vary with changes in the value of either or
both currencies and may have no relationship to the investment merits of
a foreign security. Because foreign currency transactions occurring in
the interbank market involve substantially larger amounts than those that
may be involved in the use of foreign currency options, investors may be
disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying
foreign currencies at prices that are less favorable than for round lots.

INVESTMENT PRACTICES OF THE FUNDS

any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a Fund
might be delayed pending court action. The Funds believe that under the
regular procedures normally in effect for custody of a Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of such
securities. The Funds will only enter into repurchase agreements with banks
and other recognized financial institutions, such as broker/dealers, which are
deemed by the Funds' adviser to be creditworthy pursuant to guidelines
established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement,
a Fund transfers possession of a portfolio instrument to another person, such
as a financial institution, broker, or dealer, in return for a percentage of
the instrument's market value in cash, and agrees that on a stipulated date in
the future a Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Funds, who agree that they are purchasing the paper for investment purposes

and not with a view to public distribution. Any resale by the purchaser must
be in an exempt transaction. Section 4(2) commercial paper is normally resold
to other institutional investors like the Funds through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Funds believe that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and
o the nature of the security and the nature of the marketplace trades.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for a Fund. No fees or other expenses, other than normal

transactions costs, are incurred. However, liquid assets of a Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Funds do not intend to
engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of their
assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, all of the Funds may lend their
portfolio securities, up to one-third of the value of each Fund's total
assets, to broker/dealers, banks, or other institutional borrowers of
securities. The collateral received when the Fund lends portfolio securities
must be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund. During
the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest paid on such securities. Loans are subject to
termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Fund does not have the right
to vote securities or loan but would terminate the loan and regain the right
to vote if that were considered important with respect to the investment.
PORTFOLIO TURNOVER
Securities in a Fund's portfolio will be sold whenever a Fund's investment
adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may
have been held. Federated Fund for U.S. Government Securities II's policy of
managing its portfolio of U.S. government securities, including the sale of

securities held for a short period of time, to achieve its investment
objective of current income may result in high portfolio turnover. Federated
Fund for U.S. Government Securities II will not attempt to set or meet a
portfolio turnover rate as any turnover would be incidental to transactions
undertaken in an attempt to achieve the Fund's investment objective.
For fiscal year ended December 31, 1995, and for the period from April 14,
1994 (date of initial public investment) to December 31, 1994, the portfolio
turnover rates of Federated Utility Fund II were 62% and 73%, respectively.
For the fiscal year ended December 31, 1995, and for the period from March 29,
1994 (date of initial public investment) to December 31, 1994, the portfolio
turnover rates of Federated Fund for U.S. Government Securities II were 65%
and 0%, respectively. For the fiscal year ended December 31, 1995, and for the
period from February 2, 1994 (date of initial public investment) to December
31, 1994, the portfolio turnover rates of Federated High Income Bond Fund II
were 48% and 18%, respectively.
INVESTMENT LIMITATIONS

of the portfolio by enabling such Fund to meet redemption requests when
the liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one- third of
the value of such Fund's total assets; provided that, while borrowings
and reverse repurchase agreements outstanding exceed 5% of each such
Fund's total assets, any such borrowings will be repaid before additional
investments are made. The Funds will not borrow money or engage in
reverse repurchase agreements for investment leverage purposes.

PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, each Fund may mortgage,
pledge or hypothecate assets having a market value not exceeding the
lesser of the dollar amounts borrowed or 15% of the value of total assets
at the time of the time of borrowing. For purposes of this limitation,
the following are not deemed to be pledges by Federated Utility Fund II:
margin deposits for the purchase and sale of futures contracts and
related options, any segregation or collateral arrangements made in
connection with options activities or the purchase of securities on a
when-issued basis.
CONCENTRATION OF INVESTMENTS
Federated Utility Fund II will not purchase securities if, as a result of
such purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry other
than the utilities industry. However, Federated Utility Fund II may at
any time invest 25% or more of its total assets in cash or cash items and

securities issued and/or guaranteed by the U.S. government, its agencies
or instrumentalities.
Federated High Income Bond Fund II and Federated Fund for U.S. Government
Securities II will not purchase securities if, as a result of such
purchase, 25% or more of their respective total assets would be invested
in any one industry. However, each Fund may at any time invest 25% or
more of its respective total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
INVESTING IN COMMODITIES
The Funds will not purchase or sell commodities, commodity contracts, or
commodity futures contracts, except that Federated Utility Fund II may
purchase and sell futures and stock index futures contracts and related
options.
INVESTING IN REAL ESTATE
The Funds will not purchase or sell real estate, including limited
partnership interests in real estate, although each Fund may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
No Fund will lend any of its assets, except portfolio securities up to
one-third of its total assets. This shall not prevent a Fund from
purchasing or holding corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of an
issuer, entering into repurchase agreements, or engaging in other
transactions which are permitted by the Fund's investment objectives and
policies or the Trust's Declaration of Trust.

UNDERWRITING
No Fund will not underwrite any issue of securities, except as such Fund
may be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its respective
investment objectives, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, no Fund will purchase the
securities of any one issuer (other than cash, cash items, or securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of such Fund's total assets
would be invested in the securities of that issuer.
In addition, no Fund will purchase more than 10% of any class of the
outstanding voting securities of any one issuer. For these purposes, the
Funds consider common stock and all preferred stock of an issuer each as
a single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed by the Funds without
shareholder approval. The following limitations, however, may be changed by
the Trustees without shareholder approval. Shareholders will be notified
before any material changes in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
No Fund will invest more than 15% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for commercial paper issued under Section 4(2) of the Securities
Act of 1933 and certain other restricted securities which meet the
criteria for liquidity as established by the Trustees.

INVESTING IN ILLIQUID SECURITIES
No Fund will invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing for
settlement more than seven days after notice, over-the counter options
(with respect to Federated Utility Fund II) and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN PUT OPTIONS
Federated Utility Fund II will not purchase put options on securities,
unless the securities are held in the Fund's portfolio and not more than
5% of the Fund's total assets would be invested in premiums on open put
option positions.
WRITING COVERED CALL OPTIONS
Federated Utility Fund II will not write call options on securities
unless the securities are held in the Fund's portfolio or unless the Fund
is entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment.
With respect to all of the Funds, 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 of total
or net assets will not result in a violation of such restriction.
No Fund has any present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings association having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

J. Christopher Donahue *
Federated Investors Tower

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee

Federated Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some of the Funds.

David M. Taylor

Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of March 11, 1996 , the following shareholders of record owned 5% or more
of the outstanding shares of Federated Utility Fund II: Life of Virginia,
Richmond, Virginia, 41%, Lincoln Benefit Life Co., Lincoln, Nebraska, 8%,
Aetna Insurance Co. of America, Hartford, Connecticut, 17%, and Aetna Life
Insurance & Annuity Co., Hartford, Connecticut, 29%. As of March 11, 1996, the
following shareholders of record owned 5% or more of the outstanding shares of
Fund for U.S. Government Securities II: United of Omaha Life Insurance Co.,
Omaha, Nebraska, 20%, Transamerica Occidental Life Insurance Co., Los Angeles,
California, 21%, Lincoln Benefit Life Co., Lincoln, Nebraska, 8%, Aetna

Insurance Co. of America, Hartford, Connecticut, 11%, and Aetna Life Insurance
& Annuity Co., Hartford, Connecticut, 32%. As of March 11, 1996 , the
following shareholders of record owned 5% or more of the outstanding shares of
Federated High Income Bond Fund II: Lincoln Benefit Life Co., Lincoln,
Nebraska, 12.41%, Life of Virginia, Richmond, Virginia, 13.09%, Aetna
Insurance Co. of America, Hartford, Connecticut, 15.65% and Aetna Life
Insurance & Annuity Co., Hartford, Connecticut, 54.19%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

Trustee 54 other investment companies in the Fund
Complex
J. Christopher Donahue, $0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and

Trustee 54 other investment companies in the Fund
Complex

ADVISER TO THE FUNDS
The Funds' investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All voting securities of Federated Investors are owned by
a trust, the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.
The adviser shall not be liable to the Funds or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.

ADVISORY FEES
For its advisory services, Federated Advisers receives annual investment
advisory fees as described in the prospectus.
For the fiscal year ended December 31, 1995, and for the period from December
9, 1993 (start of business) to December 31, 1994, the adviser earned advisory
fees from Federated Utility Fund II of $ 89,752 and $2,077, respectively, all
of which were voluntarily waived. For the fiscal year ended December 31, 1995,
and for the period from December 8, 1993 (start of business) to December 31,
1994, the adviser earned advisory fees from Federated Fund for U.S. Government
Securities II of $30,465 and $2,605, respectively, all of which were
voluntarily waived. For the fiscal year ended December 31, 1995, and for the
period from December 9, 1993 (start of business) to December 31, 1994, the
adviser earned advisory fees from Federated High Income Bond Fund II of
$46,425 and $7,966, respectively,all of which were voluntarily waived.
BROKERAGE TRANSACTIONS

provided by brokers and dealers may be used by the adviser or by affiliates in
advising the Funds and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The adviser and
its affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research services
provided. During the fiscal year ended December 31, 1995, and for the period
from December 9, 1993 (start of business) to December 31, 1994, Federated
Utility Fund II paid total brokerage commissions of $59,746 and $476,
respectively. For the fiscal year ended December 31, 1995, and for the period
from December 8, 1993 (start of business) to December 31, 1994, Federated Fund
for U.S. Government Securities II paid total brokerage commissions of $322 and
$0, respectively. For the fiscal year ended December 31, 1995, and for the
period from December 9, 1993 (start of business) to December 31, 1994,
Federated High Income Bond Fund II paid total brokerage commissions of $0 and
$0, respectively.
Although investment decisions for the Funds are made independently from those
of the other accounts managed by the adviser, investments of the type the
Funds may make may also be made by those other accounts. When the Funds and
one or more other accounts managed by the adviser are prepared to invest in,
or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Funds or the size of the position obtained
or disposed of by the Funds. In other cases, however, it is believed that

coordination and the ability to participate in volume transactions will be to
the benefit of the Funds.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Funds for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Funds' Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators." For the
fiscal year ended December 31, 1995, and for the period from December 8, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000
and $63,015, respectively, from Federated Fund for U.S. Government Securities
II. For the fiscal year ended December 31, 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the Administrators
earned $125,000 and $73,289, respectively, from Federated Utility Fund II. For
the fiscal year ended December 31, 1995, and for the period from December 9,
1993 (start of business) to December 31, 1994, the Administrators earned
$125,000 and $52,398, respectively, from Federated High Income Bond Fund II.
Dr. Henry J. Gailliot, an officer of Federated Advisers, the adviser to the
Trust, holds approximately 20% of the outstanding common stock and serves as a
director of Commercial Data Services, Inc., a company which provides computer
processing services to Federated Services Company.

CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Funds. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to each
Fund's portfolio investments. The fee paid for this service is based upon the
level of each Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC AUDITORS
The independent auditors for the Funds are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASING SHARES

Shares of the Funds are sold at their net asset value without a sales charge
on days the New York Stock Exchange is open for business. The procedure for
purchasing shares of the Funds is explained in the Prospectus under "Purchases
and Redemptions" and "What Shares Cost."
DETERMINING NET ASSET VALUE

The net asset value of the Federated Utility Fund II, Federated Fund for U.S.
Government Securities II and Federated High Income Bond Fund II generally
changes each day. The days on which net asset value is calculated by the Funds
are described in the prospectus.

DETERMINING VALUE OF SECURITIES
The values of the portfolio securities in Federated Utility Fund II, Federated
Fund for U.S. Government Securities II and Federated High Income Bond Fund II
are determined as follows:
o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, 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 for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise as determined by an
independent pricing service;
o for unlisted equity securities, the latest mean prices;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
MASSACHUSETTS PARTNERSHIP LAW

each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or 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.
TAX STATUS

THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because each expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, a Fund must, among
other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities held
less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDER'S TAX STATUS
Each Fund intends to comply with the variable asset diversification
regulations which are described in the Prospectus and this Statement of
Additional Information. If a Fund fails to comply with these regulations,

contracts invested in that fund shall not be treated as annuity, endowment, or
life insurance contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from each Fund to the separate accounts.
TOTAL RETURN

For the fiscal year ended December 31, 1995, and for the period from April 14,
1994 (date of initial public investment), to December 31, 1995, the average
annual total returns for Federated Utility Fund II were 24.18% and 1.12%,
respectively. For the fiscal year December 31, 1995, and for the period from
March 29, 1994, (date of initial public investment), to December 31, 1995, the
average annual total returns for Federated Fund for U.S. Government Securities
II were 8.77% and 2.62%, respectively. For the fiscal year ended December 31,
1995, and for the period from February 2, 1994 (date of initial public
investment), to December 31, 1995, the average annual total returns for
Federated High Income Bond Fund II were 20.38% and 8.45%, respectively.
The average annual total returns for Federated Utility Fund II, Federated Fund
for U.S. Government Securities II and Federated High Income Bond Fund II are
the average compounded rates of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that investment.
The ending redeemable value is computed by multiplying the number of shares
owned at the end of the period by the offering price per share at the end of
the period. The number of shares owned at the end of the period is based on
the number of shares purchased at the beginning of the period with $1,000,
adjusted over the period by any additional shares, assuming the monthly or
quarterly, as applicable, reinvestment of all dividends and distributions. You
should review the performance figures for your insurance contract, which

figures reflect the applicable charges and expenses of the contract. Such
performance figures will accompany any advertisement of a Fund's performance.
YIELD

The 30-day yields for Federated Utility Fund II, Federated Fund for U.S.
Government Securities II and Federated High Income Bond Fund II for the
thirty-day period ended December 31, 1995, were 3.84%, 5.89%, and 9.15%,
respectively.
The yields for Federated Utility Fund II, Federated Fund for U.S. Government
Securities II and Federated High Income Bond Fund II are determined by
dividing the net investment income per share (as defined by the SEC) earned by
the Fund over a thirty-day period by the offering price per share of the Fund
on the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the thirty-
day period is assumed to be generated each month over a twelve-month period
and is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments required by
the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. Also the yield does not reflect the
charges and expenses of an insurance contract. You should review the
performance figures for your contract, which figures reflect the applicable
charges and expenses of the contract. Such performance figures will accompany
any advertisement of the Fund's performance.
PERFORMANCE COMPARISONS

Each Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;

o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o the relative amount of the Fund's cash flow.
A Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Funds' performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute net asset value. The
financial publications and/or indices which the Funds use in advertising may
include:
o DOW JONES INDUSTRIAL AVERAGE is an unmanaged index representing share
prices of major industrial corporations, public utilities, and
transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains

distributions, if any. From time to time, the Trust may quote its Lipper
ranking in various fund categories in advertising and sales literature.

o LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: non-convertible bonds publicly
issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly
issued, fixed-rate, non- convertible domestic bonds of companies in
industry, public utilities and finance. The average maturity of these
bonds approximates nine years. Tracked by Lehman Brothers, Inc., the
index calculates total returns for one month, three month, twelve month,
and ten year periods and year-to-date.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of the
same types of issues as defined above. However, the average maturity of
the bonds included in this index approximates 22 years.
o LEHMAN BROTHERS GOVERNMENT INDEX is an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation and of corporate
debt guaranteed by the U.S. government. Only notes and bonds with a
minimum outstanding principal of $1 million and a minimum maturity of one
year are included.
o LEHMAN BROTHERS CORPORATE B INDEX is an index composed of all bonds
covered by Lehman Brothers High Yield Index rated "B" by Moody's
Investors Service. Bonds have a minimum amount outstanding of $100
million and at least one year to maturity. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.

o LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and 30-year
fixed-rated securities backed by mortgage pools of the Government
National Mortgage Association, Federal Home Loan Mortgage Corporation,
and Federal National Mortgage Corporation. Graduated payment mortgages
and balloons are included in the index.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi- weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ- listed mutual funds of all types, according to their risk-
adjusted returns. The maximum rating is five stars, and ratings are
effective for two weeks.
O BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading bank
and thrift institution money market deposit accounts. The rates published
in the index are an average of the personal account rates offered on the
Wednesday prior to the date of publication by ten of the largest banks
and thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest
rate is used. Rates are subject to change at any time specified by the
institution.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective)
yield. From time to time, a Fund will quote its MONEY ranking in
advertising and sales literature.
o STANDARD & POOR'S UTILITY INDEX is an unmanaged index of common stocks
from forty different utilities. This index indicates daily changes in the
price of the stocks. The index also provides figures for changes in price
from the beginning of the year to date, and for a twelve month period.

o DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six month
period. The index also provides the highs and lows for each of the past
five years.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.
Advertisements and other sales literature for the Funds may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
the Funds based on monthly reinvestment of dividends over a specific period of
time.
From time to time as it deems appropriate, the Funds may advertise their
performance using charts, graphs and descriptions, compared to federally
insured bank products including certificates of deposit and time deposits and
to money market funds using the Lipper Analytical Services money market
instrument average.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected
in its investment decision making-structured, straightforward, and consistent.

This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, 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
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.

TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
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 Mark R. Gensheimer,
Executive Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. The marketing effort to
these firms is headed by James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

The Funds' Financial Statements for the fiscal year ended December 31, 1995,
are incorporated herein by reference to the Annual Reports of the Funds dated
December 31, 1995 (File Nos. 33-69268 and 811-8042). Copies of the Reports may
be obtained without charge by contacting the respective Fund.

Cusip 458043
Cusip 458043
Cusip 458043403
3120303B (4/96)
*Source: Investment Company Institute

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)

PROSPECTUS

This prospectus offers shares of seven portfolios (individually referred to as a
"Fund" or collectively as the "Funds") of Federated Insurance Series (the
"Trust"), an open-end, management investment company. Shares of the Funds may be
sold only to separate accounts of insurance companies to serve as the investment
medium for variable life insurance policies and variable annuity contracts
issued by the insurance companies. The Trust offers interests in the following
seven separate investment portfolios, each having distinct investment objectives
and policies:

Federated American Leaders Fund II (formerly, Equity Growth and Income
Fund);

Federated Growth Strategies Fund II (formerly, Growth Stock Fund);

Federated Utility Fund II (formerly, Utility Fund);

Federated Prime Money Fund II (formerly, Prime Money Fund);

Federated Fund for U.S. Government Securities II (formerly, U.S.
Government Bond Fund);

Federated High Income Fund II (formerly, Corporate Bond Fund);

and Federated International Equity Fund II (formerly, International
Stock Fund).

SPECIAL RISKS

Federated High Income Fund II's portfolio consists primarily of lower-rated
corporate debt obligations, which are commonly referred to as "junk bonds."
These lower-rated bonds may be more susceptible to real or perceived adverse

economic conditions than investment grade bonds. These lower-rated bonds are
regarded as predominantly speculative with regard to each issuer's continuing
ability to make principal and interest payments. In addition, the secondary
trading market for lower-rated bonds may be less liquid than the market for
investment grade bonds. Federated High Income Fund II's investment adviser will
endeavor to limit these risks through diversifying the portfolio and through
careful credit analysis of individual issuers. Purchasers should carefully
assess the risks associated with an investment in this Fund. (See the sections
in this prospectus entitled "Investment Risks" and "Reducing Risks of
Lower-Rated Securities.")

An investment in Federated Prime Money Fund II is neither insured nor guaranteed
by the U.S. government. Federated Prime Money Fund II attempts to maintain a
stable net asset value of $1.00 per share; there can be no assurance that
Federated Prime Money Fund II will be able to do so.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES

AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated April 22, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED AMERICAN
LEADERS FUND II 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED GROWTH
STRATEGIES FUND II 2
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED UTILITY
FUND II 3
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED PRIME
MONEY FUND II 4
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED FUND FOR
U.S. GOVERNMENT SECURITIES II 5
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED HIGH
INCOME BOND FUND II 6
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--FEDERATED
INTERNATIONAL EQUITY FUND II 7
- ------------------------------------------------------

GENERAL INFORMATION ON FEDERATED
INSURANCE SERIES 8
- ------------------------------------------------------

FEDERATED AMERICAN LEADERS FUND II
INVESTMENT INFORMATION 9
- ------------------------------------------------------

Investment Objective 9
Investment Policies 9

Investment Limitations 10

FEDERATED GROWTH STRATEGIES FUND II
INVESTMENT INFORMATION 11
- ------------------------------------------------------

Investment Objective 11
Investment Policies 11

Investment Limitations 14

FEDERATED UTILITY FUND II
INVESTMENT INFORMATION 14
- ------------------------------------------------------

Investment Objective 14
Investment Policies 14
Investment Limitations 16

FEDERATED PRIME MONEY FUND II
INVESTMENT INFORMATION 17
- ------------------------------------------------------

Investment Objective 17
Investment Policies 17

Investment Risks 18

Investment Limitations 19

FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II INVESTMENT INFORMATION 19
- ------------------------------------------------------

Investment Objective 19
Investment Policies 19
Investment Limitations 20

FEDERATED HIGH INCOME BOND FUND II
INVESTMENT INFORMATION 20
- ------------------------------------------------------

Investment Objective 20
Investment Policies 20
Investment Risks 21
Investment Limitations 23

FEDERATED INTERNATIONAL EQUITY FUND II
INVESTMENT INFORMATION 23
- ------------------------------------------------------

Investment Objective 23
Investment Policies 23

Investment Limitations 28

INVESTMENT PRACTICES 29
- ------------------------------------------------------

Repurchase Agreements 29
Restricted and Illiquid Securities 29
When-Issued and Delayed Delivery
Transactions 29
Lending of Portfolio Securities 29
Variable Asset Regulations 30
State Insurance Regulations 30

NET ASSET VALUE 30
- ------------------------------------------------------

INVESTING IN THE FUNDS 30
- ------------------------------------------------------

Purchases and Redemptions 30
What Shares Cost 31
Dividends 31

FEDERATED INSURANCE SERIES INFORMATION 31
- ------------------------------------------------------

Management of Federated
Insurance Series 31

Fund Managers 32
Distribution of Fund Shares 34
Administration of the Trust 34
Brokerage Transactions 34

SHAREHOLDER INFORMATION 34
- ------------------------------------------------------

Voting Rights 34

TAX INFORMATION 35
- ------------------------------------------------------

Federal Taxes 35
State and Local Taxes 36

PERFORMANCE INFORMATION 36
- ------------------------------------------------------

APPENDIX 37
- ------------------------------------------------------

ADDRESSES 40
- ------------------------------------------------------

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.74 $ 10.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.20 0.19
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 3.06 (0.26)
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 3.26 (0.07)
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.19) (0.19)
- ----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (b) (0.01) --
- ---------------------------------------------------------------------------------------------- --------- -----------
Total distributions from net investment income (0.20) (0.19)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 12.80 $ 9.74
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (C) 33.71% (0.70%)
- ----------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 0.85% 0.54%*
- ----------------------------------------------------------------------------------------------
Net investment income 2.03% 2.58%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 1.36% 25.42%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 48,514 $ 2,400
- ----------------------------------------------------------------------------------------------
Portfolio turnover 43% 32 %
- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 10, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to January 31, 1994, the Fund had no investment
activity.

(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.

(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income 0.03
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.27
- --------------------------------------------------------------------------------------- -------
Total from investment operations 0.30
- ---------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $ 10.30
- --------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 3.00%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 0.85%*
- ---------------------------------------------------------------------------------------
Net investment income 1.91%*
- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 76.95%*
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA

- ---------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $368
- ---------------------------------------------------------------------------------------
Portfolio turnover 4%
- ---------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 9, 1995 (date of initial
public investment) to December 31, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.29 $ 9.48
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.45 0.34
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign currency transactions 1.74 (0.19)
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 2.19 0.15
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.45) (0.34)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.03 $ 9.29
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 24.18% 1.12%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 0.85% 0.60%*
- ----------------------------------------------------------------------------------------------

Net investment income 4.62% 4.77%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 2.24% 54.83%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $29,679 $974
- ----------------------------------------------------------------------------------------------
Portfolio turnover 62% 73 %
- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- ---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------
Net investment income 0.05 0.01
- ---------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------
Distributions from net investment income (0.05) (0.01)
- --------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- --------------------------------------------------------------- ------- -------
TOTAL RETURN (B) 5.20% 0.50%
- ---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------
Expenses 0.80% 0.80%*
- ---------------------------------------------------------------
Net investment income 5.12% 4.26%*
- ---------------------------------------------------------------
Expense waiver/reimbursement (c) 2.69% 71.84%*
- ---------------------------------------------------------------
SUPPLEMENTAL DATA

- ---------------------------------------------------------------
Net assets, end of period (000 omitted) $17,838 $552
- ---------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from November 18, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 10,
1993 (start of business) to November 17, 1994, the Fund had no public
investment.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
<S> <C> <C>
1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.99 $ 9.99
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.54 0.27
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.30 --
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 0.84 0.27
- ---------------------------------------------------------------------------------------------- --------- -----------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.54) (0.27)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.29 $ 9.99
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 8.77% 2.62%
- ----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 0.80% 0.48%*
- ----------------------------------------------------------------------------------------------

Net investment income 6.00% 3.99%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 4.81% 32.83%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $12,264 $ 1,244
- ----------------------------------------------------------------------------------------------
Portfolio turnover 65% 0 %
- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995 1994(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.87 $ 10.00
- ----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------
Net investment income 0.85 0.75
- ----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.89 (1.12)
- ---------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations 1.74 (0.37)
- ----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------------------
Distributions from net investment income (0.82) (0.75)
- ----------------------------------------------------------------------------------------------
Distributions in excess of net investment income (d) -- (0.01)
- ---------------------------------------------------------------------------------------------- --------- -----------
Total distributions (0.82) (0.76)
- ---------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 9.79 $ 8.87
- ---------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 20.38% (3.73%)
- ----------------------------------------------------------------------------------------------

RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------------------------------------------------------------
Expenses 0.80% 0.41%*
- ----------------------------------------------------------------------------------------------
Net investment income 9.27% 9.11%*
- ----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 3.40% 10.01%*
- ----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $20,165 $ 1,457
- ----------------------------------------------------------------------------------------------
Portfolio turnover 48% 18 %
- ----------------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)

FINANCIAL HIGHLIGHTS

- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
PERIOD ENDED
DECEMBER 31, 1995(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- ---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------
Net investment income 0.07
- ---------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.28
- --------------------------------------------------------------------------------------- -------
Total from investment operations 0.35
- --------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------
Distributions from net investment income --
- --------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 10.35
- --------------------------------------------------------------------------------------- -------
TOTAL RETURN (B) 3.50%
- ---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------
Expenses 1.22%*
- ---------------------------------------------------------------------------------------
Net investment income 1.63%*

- ---------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 11.42%*
- ---------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $4,760
- ---------------------------------------------------------------------------------------
Portfolio turnover 34%
- ---------------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from May 5, 1995 (date of initial public
investment) to December 31, 1995.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated December 31, 1995, which can be obtained free of charge.

GENERAL INFORMATION ON
FEDERATED INSURANCE SERIES

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

The Funds are portfolios of Federated Insurance Series, which was established as

Insurance Management Series, a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. At a meeting of the Board of Trustees (the
"Trustees") held on November 14, 1995, the Trustees approved an amendment to the
Declaration of Trust to change the name of the Trust from Insurance Management
Series to Federated Insurance Series. At a meeting of the Trustees held on
February 26, 1996, the Trustees approved an amendment to the Declaration of
Trust to change the names of the Funds from Equity Growth and Income Fund to
Federated American Leaders Fund II; Growth Stock Fund to Federated Growth
Strategies Fund II; Utility Fund to Federated Utility Fund II; Prime Money Fund
to Federated Prime Money Fund II; U.S. Government Bond Fund to Federated Fund
for U.S. Government Securities II; Corporate Bond Fund to Federated High Income
Bond Fund II and International Stock Fund to Federated International Equity Fund
II. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest in separate portfolios of securities, including
the Funds. The shares in any one portfolio may be offered in separate classes.
As of the date of this prospectus, the Trustees have not established separate
classes of shares.

Shares of each Fund are sold only to insurance companies as funding vehicles for
variable annuity contracts and variable life insurance policies issued by the
insurance companies. Shares of each Fund are sold at net asset value as
described in the section entitled "What Shares Cost." Shares of the Funds are
redeemed at net asset value.

The Trust, which is designed to meet a variety of investment objectives, offers
shares of beneficial interest in the following seven separate portfolios:

Federated American Leaders Fund II--a portfolio seeking long-term growth
of capital and income by investing in the securities of "blue-chip"
companies;

Federated Growth Strategies Fund II--a portfolio seeking capital
appreciation by investing in equity securities of companies with
prospects for above-average growth in earnings and dividends or companies
where significant fundamental changes are taking place;

Federated Utility Fund II--a portfolio seeking high current income and
moderate capital appreciation by investing primarily in a professionally
managed and diversified portfolio of equity and debt securities of
utility companies;

Federated Prime Money Fund II--a portfolio seeking current income
consistent with stability of principal and liquidity by investing in high
quality money market instruments;

Federated Fund for U.S. Government Securities II--a portfolio seeking

current income by investing in U.S. government securities;

Federated High Income Bond Fund II--a portfolio seeking high current
income by investing in lower-rated fixed income securities, including
preferred stocks, bonds, debentures and notes; and

Federated International Equity Fund II--a portfolio seeking a total
return on its assets by investing in the equity securities of issuers
located in at least three different countries outside of the United
States.

Each of the Funds may also invest in certain other types of securities as
further described in this prospectus.

FEDERATED AMERICAN LEADERS FUND II
INVESTMENT INFORMATION

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

INVESTMENT OBJECTIVE

The primary investment objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income. The investment
objectives cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objectives, it endeavors to do so by following the investment policies described
in this prospectus.

INVESTMENT POLICIES

industry leader with proven management capabilities;

historical and future earnings growth rate of approximately 10%
compounded annually;

strong balance sheet with pension liabilities funded;

products with brand recognition and consumer acceptance;

growing consumer-based demand with limited government sales;

ability to meet social, political, and environmental problems;

vigorous research effort with continuing new product flow;

low external capital requirements; and

not an import competitive company but possessing international
capabilities.

alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.

commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch Investors Service, Inc. ("Fitch");

securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies and instrumentalities;
and

repurchase agreements.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to

one-third of the value of its total assets and pledge up to 15% of its
total assets to secure such borrowings.

in this limitation becomes effective.

The Fund will not:

invest more than 10% of its total assets in securities of other
investment companies.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED GROWTH STRATEGIES FUND II
INVESTMENT INFORMATION

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The Fund pursues its investment objective by investing at least 65% of its

assets in equity securities of companies with prospects for above-average growth
in earnings and dividends or companies where significant fundamental changes are
taking place. Equity securities include common stocks, preferred stocks, and
securities (including debt securities) that are convertible into common stocks.

The securities in which the Fund invests include, but are not limited to common
stocks, preferred stocks, convertible securities, securities of foreign issuers,
securities of other investment companies, and corporate obligations, including
bonds, debentures, notes, and warrants. In addition, the Fund may invest in put
and call options, futures, and options on futures.

CONVERTIBLE SECURITIES. Convertible securities are fixed income securities which
may be exchanged or converted into a predetermined number of the issuer's
underlying common stock at the option of the holder during a specified time
period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of "usable" bonds and warrants
or a combination of the features of several of these securities. The Fund
invests in convertible bonds rated "B" or higher by S&P or Moody's at the time
of investment or, if unrated, of comparable quality. If a convertible bond is
rated below "B" according to the characteristics set forth hereafter after the
Fund has purchased it, the Fund is not required to drop the convertible bond
from the portfolio but will consider appropriate action. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for different investment objectives.

or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same company.
The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The Fund
will exchange or convert the convertible securities held in its portfolio into
shares of the underlying common stock in instances in which, in the investment
adviser's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund will hold or trade the convertible securities. In selecting convertible
securities for the Fund, the Fund's investment adviser evaluates the investment
characteristics of the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible security,
the Fund's investment adviser considers numerous factors, including the economic
and political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts. Securities of a
foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions.

As a matter of practice, the Fund will not invest in the securities of a foreign
issuer if any such risk appears to the investment adviser to be substantial.

the time of investment, or if unrated, of comparable quality. Securities which
are rated BBB by S&P or Baa by Moody's have speculative characteristics. Changes
in economic conditions or other circumstances are more likely to lead to a
weakened capacity to make principal and interest payments than higher-rated
bonds. The prices of fixed income securities generally fluctuate inversely to
the direction of interest rates. Downgrades will be evaluated on a case by case
basis by the investment adviser. The investment adviser will determine whether
or not the security continues to be an acceptable investment. If not, the
security will be sold. A description of the ratings categories is contained in
the Appendix to this prospectus.

In addition, with respect to the 35% limit, the Fund may invest up to 5% of its
assets in debt obligations rated "B" or better by S&P or Moody's.

TEMPORARY INVESTMENTS. For defensive purposes only, the Fund may also invest

temporarily in cash and cash items during times of unusual market conditions and
to maintain liquidity. Cash items may include short-term obligations such as:

commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch Investors Service, Inc.;

securities issued and/or guaranteed as to the payment of principal and
interest by the U.S. government or its agencies and instrumentalities;

certificates of deposit, demand and time deposits, bankers' acceptances,
deposit notes, and other instruments of domestic and foreign banks and
other deposit institutions; and

repurchase agreements.

PUT AND CALL OPTIONS. The Fund may purchase put options on stocks. These options
will be used only as a hedge to attempt to protect securities which the Fund
holds against decreases in value. The Fund may purchase these put options as
long as they are listed on a recognized options exchange and the underlying
stocks are held in its portfolio. The Fund may also write call options on
securities either held in its portfolio or which it has the right to obtain
without payment of further consideration or for which it has segregated cash in
the amount of any additional consideration. The call options which the Fund
writes and sells must be listed on a recognized options exchange. Writing of
calls by the Fund is intended to generate income for the Fund and, thereby,
protect against price movements in particular securities in the Fund's
portfolio.

Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market, while over-the-counter options may not.

The Fund may also write call options and purchase put options on financial
futures and stock index futures contacts as a hedge to attempt to protect

securities in its portfolio against decreases in value.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED UTILITY FUND II
INVESTMENT INFORMATION

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INVESTMENT OBJECTIVE

INVESTMENT POLICIES

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of foreign
issuers which are freely traded on United States securities exchanges or in the
over-the-counter market in the form of depositary receipts, as well as
securities of foreign issuers that trade on foreign stock exchanges. Securities
of a foreign issuer may present greater risks in the form of nationalization,
confiscation, domestic marketability, or other national or international
restrictions. As a matter of practice, the Fund will not invest in the
securities of a foreign issuer if any such risk appears to the investment
adviser to be substantial.

several of these securities. The Fund invests in convertible bonds rated "B" or
higher by S&P or Moody's at the time of investment or, if unrated, of comparable
quality. If a convertible bond is rated below "B" according to the
characteristics set forth hereafter after the Fund has purchased it, the Fund is
not required to drop the convertible bond from the portfolio but will consider
appropriate action. The investment characteristics of each convertible security
vary widely, which allows convertible securities to be employed for different
investment objectives.

bond's maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same company.
The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. The Fund
will exchange or convert the convertible securities held in its portfolio into
shares of the underlying common stock in instances in which, in the investment
adviser's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objective. Otherwise,
the Fund will hold or trade the convertible securities. In selecting convertible
securities for the Fund, the Fund's adviser evaluates the investment
characteristics of the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible security,
the Fund's adviser considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.

interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying common stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

The Fund may also write call options on all or any portion of its portfolio to
generate income for the Fund. The Fund will write call options on securities
either held in its portfolio or for which it has the right to obtain without
payment of further consideration or for which it has segregated cash in the
amount of any additional consideration. The call options which the Fund writes
must be listed on a
recognized options exchange. Although the Fund reserves the right to write
covered call options on its entire portfolio, it will not write such options on
more than 25% of its total assets unless a higher limit is authorized by its

Trustees.

broker, if legally permitted) to collateralize the position and thereby insure
that the use of such futures contracts is unleveraged.

RISKS. When the Fund uses financial futures and options on financial futures as
hedging devices, there is a risk that the prices of the securities subject to
the futures contracts may not correlate perfectly with the prices of the
securities in the Fund's portfolio. This may cause the futures contract and any
related options to react differently than the portfolio securities to market
changes. In addition, the Fund's investment adviser could be incorrect in its
expectations about the direction or extent of market factors such as interest
rate movements. In these events, the Fund may lose money on the futures contract
or option.

It is not certain that a secondary market for positions in futures contracts or
for options will exist at all times. Although the investment adviser will
consider liquidity before entering into futures and options transactions, there
is no assurance that a liquid secondary market on an exchange will exist for any
particular futures contract or option at any particular time. The Fund's ability
to establish and close out futures and options positions depends on this
secondary market.

TEMPORARY INVESTMENTS. The Fund may also invest temporarily in cash, cash items,
and short-term instruments, including notes and commercial paper, for liquidity
and during times of unusual market conditions for defensive purposes. Cash items
may include obligations such as:

certificates of deposit (including those issued by domestic and foreign
branches of FDIC insured banks);

obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities; and

repurchase agreements.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

FEDERATED PRIME MONEY FUND II

INVESTMENT INFORMATION

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INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity. The investment objective cannot be
changed without approval of shareholders. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by complying
with the various requirements of Rule 2a-7 under the Investment Company Act of
1940 which regulates money market mutual funds following the investment policies
described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing exclusively in a
portfolio of money market instruments maturing in 397 days or less. The average
maturity of the money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies of the Fund may be changed by the Trustees without the
approval of shareholders. Shareholders will be notified before any material
change in these policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests in high-quality money market
instruments that are either rated in one of the two highest short-term rating

categories by one or more nationally recognized statistical rating organizations
("NRSROs") or of comparable quality to securities having such ratings. Examples
of these instruments include, but are not limited to:

domestic issues of corporate debt obligations, including variable rate
demand notes;

commercial paper (including Canadian Commercial Paper ("CCP") and
Europaper);

certificates of deposit, demand and time deposits, bankers' acceptances
and other instruments of domestic and foreign banks and other deposit
institutions ("Bank Instruments");

short-term credit facilities, such as demand notes;

asset-backed securities;

obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities
("Government Securities");

repurchase agreements; and

other money market instruments.

The Fund invests only in instruments denominated and payable in U.S. dollars.

BANK INSTRUMENTS. The Fund only invests in Bank Instruments either issued by an
institution having capital, surplus and undivided profits over $100 million or
insured by the Bank Insurance Fund ("BIF") or the Savings Association Insurance
Fund ("SAIF"). Bank Instruments may include Eurodollar Certificates of Deposit
("ECDs"), Yankee Certificates of Deposit ("Yankee CDs") and

Eurodollar Time Deposits ("ETDs"). The Fund will treat securities credit
enhanced by a bank as Bank Instruments.

SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing arrangements
between a corporation and an institutional lender (such as the Fund) payable

upon demand by either party. The notice period for demand typically ranges from
one to seven days, and the party may demand full or partial payment. The Fund
may also enter into, or acquire participations in, short-term revolving credit
facilities with corporate borrowers. Demand notes and other short-term credit
arrangements usually provide for floating or variable rates of interest.

CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit
enhanced by a guaranty, letter of credit or insurance. Any bankruptcy,
receivership, or default of the party providing the credit enhancement will
adversely affect the quality and marketability of the underlying security.

security. The Fund uses these arrangements to provide the Fund with liquidity
and not to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership or default by the issuer of the demand
feature, or a default on the underlying security or other event that terminates
the demand feature before its exercise, will adversely affect the liquidity of
the underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of credit
enhancement.

In addition, the Fund may invest more than 25% of the value of its total assets
in cash or cash items, securities issued or guaranteed by the U.S. government,
its agencies or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

INVESTMENT RISKS

ECDs, ETDs, Yankee CDs, CCP, and Europaper are subject to somewhat different
risks than domestic obligations of domestic banks. Examples of these risks
include international, economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact of
interruptions in the flow of international currency transactions. Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing
these instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping, and the public availability of information. These factors
will be carefully considered by the Fund's adviser in selecting investments for
the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of

its total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
INVESTMENT INFORMATION

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INVESTMENT OBJECTIVE

INVESTMENT POLICIES

agencies or instrumentalities. For purposes of this 65% statement, the Fund will
consider collateralized mortgage obligations issued by U.S. government agencies
or instrumentalities to be U.S. government securities. Unless indicated
otherwise, the investment policies of the Fund may be changed by the Trustees
without the approval of shareholders. Shareholders will be notified before any
material change in these policies becomes effective.

The U.S. government securities in which the Fund invests include:

direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

Export-Import Bank of the United States; Commodity Credit Corporation;
Federal Financing Bank; The Student Loan Marketing Association; National
Credit Union Administration; and Tennessee Valley Authority.

the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

the credit of the agency or instrumentality.

The Fund may also invest in CMOs which are rated AAA by an NRSRO and which are
issued by private entities such as investment banking firms and companies
related to the construction industry. The CMOs in which the Fund may invest may
be: (i) privately issued securities which are collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal and
interest by an agency or instrumentality of the U.S. government; (ii) privately
issued securities which are collateralized by pools of mortgages in which
payment of principal and interest are guaranteed by the issuer and such

guarantee is collateralized by U.S. government securities; and (iii) other
privately issued securities in which the proceeds of the issuance are invested
in mortgage-backed securities and payment of the principal and interest are
supported by the credit of an agency or instrumentality of the U.S. government.
The mortgage-related securities provide for a periodic payment consisting of
both interest and principal. The interest portion of these payments will be
distributed by the Fund as income, and the capital portion will be reinvested.

Mortgage-backed securities may be subject to certain prepayment risks because
the underlying mortgage loans may be prepaid without penalty or premium.
Prepayment risks on mortgage-backed securities tend to increase during periods
of declining interest rates because many borrowers refinance their mortgages to
take advantage of favorable rates. At the time the Fund reinvests the proceeds,
it may receive a rate of interest which is actually lower than the rate of
interest paid on those securities.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The Fund will not:

invest more than 10% of its total assets in securities of other
investment companies.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED HIGH INCOME BOND FUND II
INVESTMENT INFORMATION

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INVESTMENT OBJECTIVE

INVESTMENT POLICIES

are lower-rated corporate debt obligations, which are commonly referred to as
"junk bonds." Some of these fixed income securities may involve equity features.
Capital growth will be considered, but only when consistent with the investment
objective of high current income.

preferred stocks;

bonds;

debentures;

notes;

equipment lease certificates; and

equipment trust certificates.

The securities in which the Fund may invest are generally rated BBB or lower by
S&P or Fitch or Baa or lower by Moody's, or are not rated but are determined by
the Fund's investment adviser to be of comparable quality. Securities which are
rated BBB or lower by S&P or Fitch or Baa or lower by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are more
likely to lead to weakened capacity to make principal and interest payments than
highly rated bonds. A description of the rating categories is contained in the
Appendix to this combined prospectus. There is no lower limit with respect to
rating categories for securities in which the Fund may invest. See "Investment
Risks."

FOREIGN SECURITIES. The Fund may invest in foreign securities, including foreign
securities not publicly traded in the United States, which may include any of
the types of securitis described above (see "Acceptable Investments").
Investments in foreign securities, particularly those of non-governmental
issuers, involve considerations which are not ordinarily associated with
investments in domestic issuers. These considerations include the possibility of
expropriation, the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards,

less liquidity and more volatility in foreign securities markets, the impact of
political, social, or diplomatic developments, and the difficulty of assessing
economic trends in foreign countries. It may also be more difficult to enforce
contractual obligations abroad than would be the case in the United States
because of differences in the legal systems. Transaction costs in foreign
securities may be higher. The adviser will consider these and other factors
before investing in foreign securities and will not make such investments
unless, in its opinion, such investments will meet the Fund's standards and
objectives.

TEMPORARY INVESTMENTS. The Fund may invest temporarily in cash and short-term
obligations for defensive purposes during times of unusual market conditions.
Short-term obligations may include:

certificates of deposit;

commercial paper rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's,
or F-1 or F-2 by Fitch and variable rate demand master notes;

short-term notes;

obligations issued or guaranteed as to principal and interest by the U.S.
government or any of its agencies or instrumentalities; and

repurchase agreements.

INVESTMENT RISKS

The corporate debt obligations in which the Fund invests are usually not in the
three highest rating categories of the nationally recognized statistical rating
organizations (AAA, AA, or A for S&P or Fitch and Aaa, Aa or A for Moody's) but
are in the lower rating categories or are unrated but are of comparable quality
and have speculative characteristics. Lower-rated or unrated bonds are commonly
referred to as "junk bonds." There is no minimal acceptable rating for a
security to be purchased or held in the Fund's portfolio, and the Fund may, from
to time, purchase or hold
securities rated in the lowest rating category. A description of the rating
categories is contained in the Appendix to this prospectus.

An economic downturn may adversely affect the value of some lower-rated bonds.
Such a downturn may especially affect highly leveraged companies or companies in

cyclically sensitive industries, where deterioration in a company's cash flow
may impair its ability to meet its obligation to pay principal and interest to
bondholders in a timely fashion. From time to time, as a result of changing
conditions, issuers of lower-rated bonds may seek or may be required to
restructure the terms and conditions of the securities they have issued. As a
result of these restructurings, holders of lower-rated securities may receive
less principal and interest than they had bargained for at the time such bonds
were purchased.

In the event of a restructuring, the Fund may bear additional legal or
administrative expenses in order to maximize recovery from an issuer.

The secondary trading market for lower-rated bonds is generally less liquid than
the secondary trading market for higher-rated bonds. In 1989, legislation was
enacted that requires federally insured savings and loan associations to divest
their holdings of lower-rated bonds by 1994. The reduction of the number of
institutions empowered to purchase and hold lower-rated bonds could have an
adverse impact on the overall liquidity of the market. Adverse publicity and the
perception of investors relating to issuers, underwriters, dealers or underlying
business conditions, whether or not warranted by fundamental analysis, may also
affect the price or liquidity of lower-rated bonds. On occasion, therefore, it
may become difficult to price or dispose of a particular security in the
portfolio.

price of zero coupon bonds and pay-in-kind securities are generally more
sensitive to fluctuations in interest rates than are conventional bonds.
Additionally, federal tax law requires that interest on zero coupon bonds and
pay-in-kind securities be reported as income to the Fund even though the Fund
received no cash interest until the maturity or payment date of such securities.

REDUCING RISKS OF LOWER-RATED SECURITIES. The Fund's investment adviser believes
that the risks of investing in lower-rated securities can be reduced. The
professional portfolio management techniques used by the Fund to attempt to
reduce these risks include:

CREDIT RESEARCH. The Fund's investment adviser will perform its own credit
analysis in addition to using recognized rating agencies and other sources,
including discussions with the issuer's management, the judgment of other
investment analysts, and its own informed judgment. The adviser's credit
analysis will consider the issuer's financial soundness, its responsiveness
to changes in interest rates and business conditions, and its anticipated
cash flow,
interest, or dividend coverage and earnings. In evaluating an issuer, the
adviser places special emphasis on the estimated current value of the

issuer's assets rather than historical cost.

DIVERSIFICATION. The Fund invests in securities of many different issuers,
industries, and economic sectors to reduce portfolio risk.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts
up to one-third of the value of its total assets and pledge up to 15% of
its total assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder approval.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

FEDERATED INTERNATIONAL EQUITY FUND II
INVESTMENT INFORMATION

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INVESTMENT OBJECTIVE

INVESTMENT POLICIES

markets inside and outside the U.S. do not move in harmony. The Fund may
purchase sponsored or unsponsored American Depositary Receipts ("ADRs"), Global
Depositary Receipts ("GDRs"), and European Depositary Receipts ("EDRs");
corporate and government fixed income securities of issuers outside of the U.S.;
convertible securities; and options and financial futures contracts. In
addition, the Fund may enter into forward commitments, repurchase agreements,
and foreign currency transactions, and maintain reserves in foreign or U.S.
money market instruments.

DEPOSITARY RECEIPTS. The Fund may purchase sponsored or unsponsored ADRs, GDRs,
and EDRs (collectively, "Depositary Receipts"). ADRs are Depositary Receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs and GDRs are
typically issued by foreign banks or trust companies, although they also may be
issued by U.S. banks or trust companies, and evidence ownership of underlying
securities
issued by either a foreign or a U.S. corporation. Generally, Depositary Receipts
in registered form are designed for use in the U.S. securities market and
Depositary Receipts in bearer form are designed for use in securities markets
outside the U.S. Depositary Receipts may not necessarily be denominated in the
same currency as the underlying securities into which they may be converted.
Ownership of unsponsored Depositary Receipts may not entitle the Fund to
financial or other reports from the issuer of the underlying security, to which

it would be entitled as the owner of sponsored Depositary Receipts.

The debt securities in which the Fund will invest will possess a minimum credit
rating of BBB as assigned by S&P or Baa by Moody's, or, if unrated, will be
judged by the Fund's adviser to be of comparable quality. Because the average
quality of the Fund's portfolio investments should remain constantly between AAA
and BBB, the Fund may avoid the adverse consequences that may arise for some
debt securities in difficult economic circumstances. Downgraded securities will
be evaluated on a case by case basis by the adviser. The adviser will determine
whether or not the security continues to be an acceptable investment. If not,
the security will be sold. A description of the ratings categories is contained
in the Appendix to the Statement of Additional Information.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities that are
rated, at the time of purchase, investment grade by an NRSRO or, if unrated, of
comparable quality as determined by the adviser. Convertible securities are
fixed income securities which may be exchanged or converted into a predetermined
number of the issuer's underlying common stock at the option of the holder

during a specified time period. Convertible securities may take the form of
convertible bonds, convertible preferred stock or debentures, units consisting
of "usable" bonds and warrants or a combination of the features of several of
these securities. The investment characteristics of each convertible security
vary widely, which allows convertible securities to be employed for different
investment objectives.

The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality. A Fund will
exchange or convert the convertible securities held in its portfolio into shares
of the underlying common stocks when, in the adviser's opinion, the investment
characteristics of the underlying common shares will assist the Fund in
achieving its investment objective. Otherwise, the Fund will hold or trade the
convertible securities. In selecting convertible securities for the Fund, the
adviser evaluates the investment characteristics of the convertible security as
a fixed income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the adviser considers numerous factors,
including the economic and political outlook, the
value of the security relative to other investment alternatives, trends in the
determinants of the issuer's profits, and the issuer's management capability and
practices.

investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or exchange
control regulations. Such changes could unfavorably affect the value of Fund
assets which are denominated in foreign currencies, such as foreign securities
or funds deposited in foreign banks, as measured in U.S. dollars. Although
foreign currency exchanges may be used by the Fund to protect against a decline
in the value of one or more currencies, such efforts may also limit any
potential gain that might result from a relative increase in the value of such
currencies and might, in certain cases, result in losses to the Fund. Further,
the Fund may be affected either unfavorably or favorably by fluctuations in the
relative rates of exchange between the currencies of different nations.
Cross-hedging transactions by the Fund involve the risk of imperfect correlation
between changes in the values of the currencies to which such transactions
relate and changes in the value of the currency or other asset or liability that
is the subject of the hedge.

FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. A
forward foreign currency exchange contract ("forward contract") is an obligation
to purchase or sell an amount of a particular currency at a specific price and
on a future date agreed upon by the parties.

Generally, no commission charges or deposits are involved. At the time the Fund
enters into a forward contract, Fund assets with a value equal to the Fund's
obligation under the forward contract are segregated on the Fund's records and
are maintained until the contract has been settled. The Fund will not enter into
a forward contract with a term of more than one year. The Fund will
generally enter into a forward contract to provide the proper currency to settle
a securities transaction at the time the transaction occurs ("trade date"). The
period between the trade date and settlement date will vary between 24 hours and
30 days, depending upon local custom.

The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign

currency-denominated portfolio securities and against increases in the U.S.
dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Fund
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates although, in the event of rate movements adverse to the Fund's position,
it may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by the Fund are traded
on U.S. and foreign exchanges or over-the-counter.

currencies to U.S. dollars daily. When the Fund converts its holdings to another
currency, it may incur conversion costs. Foreign exchange dealers may realize a
profit on the difference between the price at which they buy and sell
currencies.

FOREIGN COMPANIES. Other differences between investing in non-U.S. and U.S.
securities include:

less publicly available information about foreign companies;

the lack of uniform financial accounting standards applicable to foreign
companies;

less readily available market quotations on foreign companies;

differences in government regulation and supervision of foreign stock
exchanges, brokers, listed companies, and banks;

differences in legal systems which may affect the ability to enforce
contractual obligations or obtain court judgments;

generally lower foreign stock market volume;

the likelihood that foreign securities may be less liquid or more
volatile;

foreign brokerage commissions may be higher;

unreliable mail service between countries; and

political or financial changes which adversely affect investments in some
countries.

U.S. GOVERNMENT POLICIES. In the past, U.S. government policies have discouraged
or restricted certain investments abroad by investors such as the Fund.
Investors are advised that when such policies are instituted, the Fund will
abide by them.

DEVELOPING/EMERGING MARKETS. The economics of individual emerging countries may
differ favorably from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency and balance of payments position.

Further, the economics of developing countries generally are heavily dependent
on international trade and, accordingly, have been, and may continue to be,
adversely affected by trade barriers, exchange controls, managed adjustments in
relative currency values and other protectionist measures imposed or negotiated
by the countries with which they trade. These economies also have been, and may
continue to be, adversely affected by economic conditions in the countries with
which they trade.

With respect to any emerging country, there is the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
governmental regulation, social instability or diplomatic
developments (including war) which could affect adversely the economies of such
countries or the value of the Fund's investments in those countries. In

addition, it may be difficult to obtain and enforce a judgment in a court
outside of the U.S.

INVESTMENT LIMITATIONS

The Fund will not:

sell securities short except under strict limitations;

borrow money or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge its assets to secure such borrowings; or

The Fund will not:

invest more than 5% of its assets in warrants;

invest more than 5% of its total assets in securities of issuers that
have records of less than three years of continuous operations;

purchase put options on securities unless the securities or an offsetting
call option is held in the Fund's portfolio.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Practices."

the Fund's investment objective, without regard to the length of time a
particular security may have been held. It is not anticipated that the portfolio
trading engaged in by the Fund will result in its annual rate of portfolio
turnover exceeding 200%. A portfolio turnover rate of 100% would occur, for
example, if all the securities in the Fund's portfolio were replaced once in a
period of one year. The Fund's rate of portfolio turnover may exceed that of
certain other mutual funds with the same investment objective. A higher rate of
portfolio turnover involves correspondingly greater brokerage commissions and
other expenses which must be borne directly by the Fund and, thus, indirectly by
its shareholders. In addition, a high rate of portfolio turnover may result in
the realization of larger amounts of capital gains which, when distributed to
the Fund's shareholders, are taxable to them. Nevertheless, transactions for the
Fund's portfolio will be based only upon investment considerations and will not
be limited by any other considerations when the Fund's investment adviser deems
it appropriate to make changes in the Fund's portfolio.

INVESTMENT PRACTICES
- --------------------------------------------------------------------------------

The following investment practices are common to two or more of the Funds and,
unless indicated otherwise, may be changed without approval of shareholders.

REPURCHASE AGREEMENTS

price. Such Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market daily. To
the extent that the original seller does not repurchase the securities from a
Fund, such Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Funds believe that, under the regular procedures
normally in effect for custody of a Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
a Fund and allow retention or disposition of such securities. The Funds will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by each Fund's adviser to
be creditworthy pursuant to guidelines established by the Trustees.

RESTRICTED AND ILLIQUID SECURITIES

Each Fund may invest up to 15% of its total assets in restricted securities (10%
with respect to Federated Prime Money Fund II). This restriction is not
applicable to commercial paper issued under Section 4(2) of the Securities Act
of 1933. Restricted securities are any securities in which these Funds may
otherwise invest pursuant to their respective investment objectives and policies
but which are subject to restriction on resale under federal securities law. To
the extent restricted securities are deemed to be illiquid, these Funds will
limit their purchase, including non-negotiable time deposits, repurchase
agreements providing for settlement in more than seven days after notice,
over-the-counter options, and certain restricted securities determined by the
Trustees not to be liquid, to 15% of the net assets of each Fund (10% with

respect to Federated Prime Money Fund II).

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Funds may purchase portfolio securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which a Fund purchases securities
with payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause a Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering into
these transactions, and the market values of the securities purchased may vary
from the purchase prices. Accordingly, a Fund may pay more/less than the market
value of the securities on the settlement date.

The Funds may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Funds may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The funds may realize short-term profits or losses upon the sale of such
commitments.

LENDING OF PORTFOLIO SECURITIES

to this one-third limitation). This policy is a fundamental policy of each Fund
and may not be changed without shareholder approval. The Funds will only enter
into loan arrangements with broker/dealers, banks, or other institutions which
the adviser has determined are creditworthy under guidelines established by the
Trustees and will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned at all
times. There
is the risk that when lending portfolio securities, the securities may not be
available to a Fund on a timely basis and a Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

VARIABLE ASSET REGULATIONS

instrumentality shall be treated as a separate issuer. If a Fund fails to
achieve the diversification required by the regulations, unless relief is
obtained from the Internal Revenue Service, the contracts invested in the Fund
will not be treated as annuity, endowment, or life insurance contracts.

The Funds will be operated at all times so as to comply with the foregoing
diversification requirements.

STATE INSURANCE REGULATIONS

NET ASSET VALUE
- --------------------------------------------------------------------------------

The net asset value per share of Federated American Leaders Fund II, Federated
Growth Strategies Fund II, Federated Utility Fund II, Federated Fund for U.S.
Government Securities II, Federated High Income Bond Fund II and Federated

International Equity Fund II fluctuates. They are determined by dividing the sum
of the market value of all securities and other assets of the particular Fund,
less liabilities, by the number of shares outstanding.

Federated Prime Money Fund II attempts to stabilize the net asset value of its
shares at $1.00 by valuing the portfolio securities using the amortized cost
method. The net asset value per share of Federated Prime Money Fund II is
determined by subtracting total liabilities from total assets and dividing by
the number of shares outstanding. Federated Prime Money Fund II cannot guarantee
that its net asset value will always remain at $1.00 per share.

INVESTING IN THE FUNDS
- --------------------------------------------------------------------------------

PURCHASES AND REDEMPTIONS

Shares of the Funds are not sold directly to the general public. With respect to
Federated High Income Bond Fund II, the Fund reserves the right to reject any
purchase request. The Funds' shares are used solely as the investment vehicle
for separate accounts of insurance companies offering variable annuity contracts
and variable life insurance policies. The use of Fund shares as investments for
both variable annuity contracts and variable life insurance policies is referred
to as
"mixed funding." The use of Fund shares as investments by separate accounts of

unaffiliated life insurance companies is referred to as "shared funding."

WHAT SHARES COST

DIVIDENDS

Dividends on shares of Federated International Equity Fund II are declared and
paid annually. Dividends on shares of Federated American Leaders Fund II and
Federated Growth Strategies Fund II are declared and paid quarterly. Dividends
on shares of Federated Prime Money Fund II are declared daily and paid monthly.
Dividends on shares of Federated Utility Fund II, Federated Fund for U.S.
Government Securities II, and Federated High Income Bond Fund II are declared
and paid monthly.

Shares of Federated Prime Money Fund II begin earning dividends on the day that
the Fund receives federal funds. Shares of Federated American Leaders Fund II,

Federated Growth Strategies Fund II, Federated Utility Fund II, Federated Fund
for U.S. Government Securities II, Federated High Income Bond II, and Federated
International Equity Fund II will begin earning dividends if owned on the
applicable record date. Dividends of each Fund are automatically reinvested in
additional shares of such Fund on payment dates at the ex-dividend date net
asset value.

FEDERATED INSURANCE SERIES INFORMATION

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

MANAGEMENT OF FEDERATED INSURANCE SERIES

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

INVESTMENT ADVISERS. Pursuant to an investment advisory contract with the Trust,
investment decisions for Federated American Leaders Fund II, Federated Growth
Strategies Fund II, Federated Utility Fund II, Federated Prime Money Fund II,
Federated Fund for U.S. Government Securities II, and Federated High Income Bond

Fund II are made by Federated Advisers, the Funds' investment
adviser, subject to direction by the Trustees. Pursuant to an investment
advisory contract with the Trust, investment decisions for Federated
International Equity Fund II are made by Federated Global Research Corp., the
Fund's investment adviser, subject to direction by the Trustees. The advisers
continually conduct investment research and supervision for the Funds and are
responsible for the purchase or sale of portfolio instruments, for which they
receive an annual fee from each Fund.

Both the Funds and the advisers have adopted strict codes of ethics governing
the conduct of all employees who manage the Funds and their portfolio
securities. These codes recognize that such persons owe a fiduciary duty to the
Funds' shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Funds; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

ADVISORY FEES. The Funds' advisers receive an annual investment advisory
fee equal to 1% of the average daily net assets for Federated International
Equity Fund II, .75 of 1% of the average daily net assets for Federated

American Leaders Fund II, Federated Growth Strategies Fund II, and
Federated Utility Fund II, .60 of 1% of the average daily net assets for
Federated Fund for U.S. Government Securities II and Federated High Income
Bond Fund II, and .50 of 1% of the average daily net assets for Federated
Prime Money Fund II. The advisers may voluntarily choose to waive a portion
of their fees or reimburse a Fund for certain operating expenses. The
advisers can terminate this voluntary waiver and reimbursement of expenses
at any time at their sole discretion.

ADVISERS' BACKGROUND. Federated Advisers, a Delaware business trust
-
organized on April 11, 1989, and Federated Global Research Corp.,
incorporated in Delaware on May 12, 1995, are registered investment
advisers under the Investment Advisers Act of 1940. They are subsidiaries
of Federated Investors. All of the Class A (voting) shares of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and Mr.
Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Prior to September 1995, Federated Global Research
Corp. had not served as an investment adviser to mutual funds.

Federated Advisers, Federated Global Research Corp. and other subsidiaries
of Federated Investors serve as investment advisers to a number of
investment companies and private accounts. Certain other subsidiaries also
provide administrative services to a number of investment companies. With

over $80 billion invested across more than 250 funds under management
and/or administration by its subsidiaries, as of December 31, 1995,
Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,800 employees, Federated continues
to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,000 financial institutions
nationwide. More than 100,000 investment professionals have selected
Federated funds for their clients.

FUND MANAGERS

FEDERATED AMERICAN LEADERS FUND II. Timothy E. Keefe has been the Fund's
portfolio manager since March 1996. Mr. Keefe joined Federated Investors in 1987
and has been a Vice President of the Fund's investment adviser since 1995. Mr.
Keefe served as an Assistant Vice President of the Fund's investment adviser
between 1993 and 1995, and as an Investment Analyst from 1991 to 1993. Mr. Keefe
is a Chartered Financial Analyst and received his M.B.A. in Business
Administration from the University of Pittsburgh.

Peter R. Anderson has been the Fund's portfolio manager since the Fund commenced
operations. Mr. Anderson joined Federated Investors in 1972 as, and is
presently, a Senior Vice President of the Fund's investment adviser. Mr.
Anderson is a Chartered Financial Analyst and received his M.B.A. in Finance
from the University of Wisconsin.

FEDERATED GROWTH STRATEGIES FUND II. James E. Grefenstette has been the Fund's
portfolio manager since the Fund's inception. Mr. Grefenstette joined Federated
Investors in 1992 and has been an Assistant Vice President of the Fund's
investment adviser since 1994. From 1992 until 1994, Mr. Grefenstette acted as
an investment analyst. Mr. Grefenstette was a credit analyst at Westinghouse
Credit Corp. from 1990 until 1992. Mr. Grefenstette received his M.S. in
Industrial Administration from Carnegie Mellon University.

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

James D. Roberge has been the Fund's portfolio manager since March 1995. Mr.
Roberge joined Federated Investors in 1990 and has been a Vice President of the
Fund's investment adviser since 1994. Mr. Roberge served as an Assistant Vice
President of the Fund's investment adviser from 1992 to 1994 and as an
investment analyst from 1990 to 1992. Mr. Roberge is a Chartered Financial
Analyst and received his M.B.A. in Finance from the Wharton School of The
University of Pennsylvania.

FEDERATED INTERNATIONAL EQUITY FUND II. Henry A. Frantzen has been the Fund's
portfolio manager since November 1995. Mr. Frantzen joined Federated Investors
in 1995 as an Executive Vice President of the Fund's investment adviser. Mr.
Frantzen served as Chief Investment Officer of international equities at Brown
Brothers Harriman & Co. from 1992 to 1995. He was the Executive Vice President
and Director of Equities at Oppenheimer Management Corporation from 1989 to
1991. Mr. Frantzen received his B.S. in finance and marketing from the
University of North Dakota.

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

international equity funds at Twentieth Century Mutual Funds from 1990 to 1995.
Mr. Kopinski received his M.A. in Asian Studies from the University of Illinois.

Frank Semack has been the Fund's portfolio manager since November 1995. Mr.
Semack joined Federated Investors in 1995 as a Vice President of the Fund's
investment adviser. Mr. Semack
served as an Investment Analyst at Omega Advisers, Inc. from 1993 to 1994. He
served as an Associate Director/Portfolio Manager of Wardley Investment
Services, Ltd. from 1980 to 1993. Mr. Semack received his M.Sc. in economics
from the London School of Economics.

Alexandre de Bethmann has been the Fund's portfolio manager since November 1995.
Mr. de Bethmann joined Federated Investors in 1995 as a Vice President of the
Fund's investment adviser. Mr. de Bethmann served as Assistant Vice
President/Portfolio Manager for Japanese and Korean equities at the College
Retirement Equities Fund from 1994 to 1995. He served as an International
Equities Analyst and then as an Assistant Portfolio Manager at the College
Retirement Equities Fund between 1987 and 1994. Mr. de Bethmann received his
M.B.A. in Finance from Duke University.

DISTRIBUTION OF FUND SHARES

Federated Securities Corp. is the principal distributor for shares of the Funds.

Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

ADMINISTRATION OF THE TRUST

<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

BROKERAGE TRANSACTIONS

With respect to Federated American Leaders Fund II, Federated Utility Fund II,
Federated Growth Strategies Fund II and Federated International Equity Fund II,
when selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the advisers look for prompt execution of the order at a favorable
price. In working with dealers, the advisers will generally utilize those who
are recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. In selecting among
firms believed to meet these criteria, the advisers may give consideration to
those firms which have sold or are selling shares of the Funds and other funds
distributed by Federated Securities Corp. The advisers make decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

The insurance company separate accounts, as shareholders of each Fund, will vote
the Fund shares held in their separate accounts at meetings of shareholders.
Voting will be in accordance prospectus of each such separate account. As of
March 11, 1996, Aetna Insurance Co. of America, Hartford, Connecticut, and Aetna
Life Insurance & Annuity Co., Hartford, Connecticut, owned 35% and 53%,
respectively, of the voting securities of Federated American Leaders Fund II,
and, therefore, may for certain purposes be deemed to control the Fund and be
able to affect the outcome of certain matters
presented for a vote of shareholders. As of March 11, 1996, Aetna Insurance Co.
of America, Hartford, Connecticut, and Aetna Life Insurance & Annuity Co.,
Hartford, Connecticut, owned 42% and 58%, respectively, of the voting securities
of Federated Growth Strategies Fund II, and, therefore, may for certain purposes
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders. As of March 11, 1996, Life of
Virginia, Richmond, Virginia, and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, owned 41% and 29%, respectively, of the voting securities of
Federated Utility Fund II, and, therefore, may for certain purposes be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders. As of March 11, 1996, United of Omaha Life Insurance
Co., Omaha, Nebraska, owned 43% of the voting securities of Federated Prime
Money Fund II, and, therefore, may for certain purposes be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders. As of March 11, 1996, Aetna Life Insurance & Annuity Co.,
Hartford, Connecticut, owned 32% of the voting securities of Federated Fund for
U.S. Government Securities II, and, therefore, may for certain purposes be

deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders. As of March 11, 1996, Aetna Life Insurance
& Annuity Co., Hartford, Connecticut, owned 54.19% of the voting securities of
Federated High Income Bond Fund II, and, therefore, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders. As of March 11, 1996, Aetna Life Insurance
& Annuity Co., Hartford, Connecticut, and Aetna Insurance Co. of America,
Hartford, Connecticut, owned 33.14% and 64.97%, respectively, of the voting
securities of Federated International Equity Fund II, and, therefore, may for
certain purposes be deemed to control the Fund and be able to affect the outcome
of certain matters presented for a vote of shareholders.

Each share of each of the Funds gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
each Fund have equal voting rights, except that only shares of a particular Fund
are entitled to vote on matters affecting that Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's
operation and for the election of Trustees under certain circumstances.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL TAXES

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time Federated American Leaders Fund II, Federated Growth
Strategies Fund II, Federated Utility Fund II, Federated Fund for U.S.
Government Securities II, Federated High Income Bond Fund II, and Federated
International Equity Fund II advertise total return and yield. From time to time
Federated Prime Money Fund II advertises its total return, yield and effective
yield.

The yields of Federated American Leaders Fund II, Federated Growth Strategies
Fund II, Federated Utility Fund II, Federated Fund for U.S. Government
Securities II, Federated High Income Bond Fund II, and Federated International
Equity Fund II are calculated by dividing the net investment income per share
(as defined by the Securities and Exchange Commission) earned by the Fund over a
thirty-day period by the offering price per share of the Fund on the last day of
the period. This number is then annualized using semi-annual compounding. The
yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.

The yield of Federated Prime Money Fund II represents the annualized rate of
income earned on an investment over a seven-day period. It is the annualized
dividends earned during the period on an investment shown as a percentage of the
investment. The effective yield is calculated similarly to the yield, but when
annualized, the income earned on an investment is assumed to be reinvested
daily. The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.

Advertisements and sales literature for Federated Prime Money Fund II may also
refer to total return. Total return represents the change, over a specified
period of time, in the value of an investment in Federated Prime Money Fund II
after reinvesting all income distributions. It is calculated by dividing that
change by the initial investment and is expressed as a percentage.

Performance information for each Fund will not reflect the charges and expenses
of a variable annuity or variable life insurance contract. Because shares of
each Fund can only be purchased by a separate account of an insurance company
offering such a contract, you should review the performance figures of the
contract in which you are invested, which performance figures will accompany any
advertisement of a Fund's performance.

From time to time, advertisements for the Funds may refer to ratings, rankings,
and other information in certain financial publications and/or compare a Fund's
performance to certain indices.

APPENDIX
- --------------------------------------------------------------------------------

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS

AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.

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 B or B- rating.

C--The rating C is reserved for income bonds on which no interest is being paid.

D--Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.

MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS

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.

bonds in this class.

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 INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

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 in imminent default in payment of interest or principal.

STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.

MOODY'S INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a

superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

Leading market positions in well established industries.

High rates of return on funds employed.

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

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

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

FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS

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

<TABLE>
<S> <C> <C>
Federated Insurance Series
Federated American Leaders Fund II Federated Investors Tower
Federated Growth Strategies Fund II Pittsburgh, Pennsylvania 15222-3779
Federated Utility Fund II
Federated Prime Money Fund II
Federated Fund for U.S. Government
Securities II
Federated High Income Bond Fund II
Federated International Equity Fund II
- -----------------------------------------------------------------------------------------------------------------------

Investment Advisers
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Federated Global Research Corp. 175 Water Street
New York, New York 10038-4965
- -----------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and P.O. Box 8600

Trust Company Boston, Massachusetts 02266-8600
- -----------------------------------------------------------------------------------------------------------------------

FEDERATED
INSURANCE
SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)
PROSPECTUS

An Open-End Management
Investment Company

Federated American Leaders Fund II
(formerly, Equity Growth and Income Fund)

Federated Growth Strategies Fund II
(formerly, Growth Stock Fund)

Federated Utility Fund II
(formerly, Utility Fund)

Federated Prime Money Fund II
(formerly, Prime Money Fund)

Federated Fund for U.S. Government
Securities II

(formerly, U.S. Government Bond Fund)

Federated High Income Bond Fund II
(formerly, Corporate Bond Fund)

Federated International Equity Fund II
(formerly, International Stock Fund)

April 22, 1996

[LOGO]
FEDERATED SECURITIES CORP.
- --------------------------
Distributor

A Subsidiary of Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

Cusip 458043502
Cusip 458043304
Cusip 458043205
Cusip 458043403
Cusip 458043106
Cusip 458043601

Cusip 458043700
4011006A (4/96)

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)
consisting of seven portfolios:
oFEDERATED AMERICAN LEADERS FUND II
(formerly, Equity Growth and Income Fund);
oFEDERATED GROWTH STRATEGIES FUND II
(formerly, Growth Stock Fund);
oFEDERATED UTILITY FUND II
(formerly, Utility Fund);
oFEDERATED PRIME MONEY FUND II
(formerly, Prime Money Fund);
oFEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(formerly, U.S. Government Bond Fund);
oFEDERATED HIGH INCOME BOND FUND II
(formerly, Corporate Bond Fund); and
oFEDERATED INTERNATIONAL EQUITY FUND II
(formerly, International Stock Fund).
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus
of Federated Insurance Series dated April 22, 1996. This Statement is not a
prospectus itself. You may request a copy of a prospectus or a paper copy

of this Statement, if you have received it electronically, free of charge
by calling 1-800-235-4669.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated April 22, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

GENERAL INFORMATION 4

INVESTMENT INFORMATION 5

INVESTMENT OBJECTIVES 5
FEDERATED AMERICAN LEADERS FUND II 5
FEDERATED GROWTH STRATEGIES FUND II 5
FEDERATED UTILITY FUND II 5
FEDERATED PRIME MONEY FUND II 5
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II 5
FEDERATED HIGH INCOME BOND FUND II 5
FEDERATED INTERNATIONAL EQUITY FUND
II 6
TYPES OF INVESTMENTS 6
FEDERATED AMERICAN LEADERS FUND II 6
FEDERATED GROWTH STRATEGIES FUND II 9
FEDERATED UTILITY FUND II 17
FEDERATED PRIME MONEY FUND II 18
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II 19
FEDERATED HIGH INCOME BOND FUND II 20
CURRENCY RISK 22
INVESTING IN FOREIGN CURRENCIES 23
FEDERATED INTERNATIONAL EQUITY FUND
II 26
RISKS 29
INVESTMENT PRACTICES OF THE FUNDS 31

REPURCHASE AGREEMENTS 31
REVERSE REPURCHASE AGREEMENTS 32
CREDIT ENHANCEMENT 32
RESTRICTED AND ILLIQUID SECURITIES 33
WHEN-ISSUED AND DELAYED
DELIVERY TRANSACTIONS 34
LENDING OF PORTFOLIO SECURITIES 34
PORTFOLIO TURNOVER 35
INVESTMENT LIMITATIONS 36

REGULATORY COMPLIANCE 46
FEDERATED INSURANCE SERIES MANAGEMENT 46

FUND OWNERSHIP 55
TRUSTEES COMPENSATION 56
TRUSTEE LIABILITY 58
INVESTMENT ADVISORY SERVICES 58

ADVISERS TO THE FUNDS 58
ADVISORY FEES 59
BROKERAGE TRANSACTIONS 60

OTHER SERVICES 62

FUND ADMINISTRATION 62
CUSTODIAN AND PORTFOLIO ACCOUNTANT 63
TRANSFER AGENT 25
INDEPENDENT PUBLIC AUDITORS 64
PURCHASING SHARES 64

DETERMINING NET ASSET VALUE 64

DETERMINING VALUE OF SECURITIES 64
TRADING IN FOREIGN SECURITIES 65
USE OF THE AMORTIZED COST METHOD 66
MASSACHUSETTS PARTNERSHIP LAW 68

TAX STATUS 69

THE FUNDS' TAX STATUS 69
SHAREHOLDER'S TAX STATUS 70
FOREIGN TAXES 70
TOTAL RETURN 70

YIELD 72

EFFECTIVE YIELD 73

PERFORMANCE COMPARISONS 74

ABOUT FEDERATED INVESTORS 79

FINANCIAL STATEMENTS 81

GENERAL INFORMATION

The Funds are portfolios of Federated Insurance Series (the "Trust"), which
was established as Insurance Management Series, a Massachusetts business
trust, under a Declaration of Trust dated September 15, 1993. At a meeting of
the Board of Trustees (the "Trustees") held on November 14, 1995, the Trustees
approved an amendment to the Declaration of Trust to change the name of the
Trust from Insurance Management Series to Federated Insurance Series. At a
meeting of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the names of the Funds from
Equity Growth and Income Fund to Federated American Leaders Fund II; Growth
Stock Fund to Federated Growth Strategies Fund II, Utility Fund to Federated
Utility Fund II; Prime Money Fund to Federated Prime Money Fund II; U.S.
Government Bond Fund to Federated Fund for U.S. Government Securities II;
Corporate Bond Fund to Federated High Income Bond Fund II and International
Stock Fund to Federated International Equity Fund II. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial interest in
separate portfolios of securities, including the Funds. The shares in any one
portfolio may be offered in separate classes. As of the date of this
Statement, the Trustees have not established separate classes of shares.
The Trust consists of seven portfolios (individually referred to as a "Fund"
and collectively as the "Funds"):
o Federated American Leaders Fund II;
o Federated Growth Strategies Fund II;
o Federated Utility Fund II;
o Federated Prime Money Fund II;
o Federated Fund for U.S. Government Securities II;
o Federated High Income Bond Fund II; and

o Federated International Equity Fund II.
Shares of the Fund are sold only to insurance companies as funding vehicles
for variable annuity and variable life insurance contracts issued by the
insurance companies.
INVESTMENT INFORMATION

INVESTMENT OBJECTIVES
FEDERATED AMERICAN LEADERS FUND II
Federated American Leaders Fund II's primary investment objective is to
achieve long-term growth of capital. The Fund's secondary objective is to
provide income.
FEDERATED GROWTH STRATEGIES FUND II
Federated Growth Strategies Fund II's investment objective is capital
appreciation.
FEDERATED UTILITY FUND II
Federated Utility Fund II's investment objective is to achieve high
current income and moderate capital appreciation.
FEDERATED PRIME MONEY FUND II
Federated Prime Money Fund II's investment objective is to provide
current income consistent with stability of principal and liquidity.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Federated Fund for U.S. Government Securities II's investment objective
is to provide current income.
FEDERATED HIGH INCOME BOND FUND II
Federated High Income Bond Fund II's investment objective is to seek high
current income.

FEDERATED INTERNATIONAL EQUITY FUND II
Federated International Equity Fund II's investment objective is to
obtain a total return on its assets.
The investment objectives of the Funds cannot be changed without the approval
of shareholders.
TYPES OF INVESTMENTS
FEDERATED AMERICAN LEADERS FUND II
Federated American Leaders Fund II invests, under normal circumstances, at
least 65% of its total assets in common stock of "blue-chip" companies, as
defined in the prospectus. The Fund may also invest in other securities of
these companies, U.S. government securities, and bank instruments. The
following supplements the discussion of acceptable investments in the
prospectus.
CONVERTIBLE SECURITIES
As with all fixed-income securities, various market forces influence the
market value of convertible securities, including changes in the level of
interest rates. As interest rates increase, the market value of
convertible securities may decline and, conversely, as interest rates
decline, the market value of convertible securities may increase. The
unique investment characteristics of convertible securities, the right to
be exchanged for the issuer's common stock, causes the market value of
convertible securities to increase when the underlying common stock
increases. However, since securities prices fluctuate, there can be no
assurance of capital appreciation, and most convertible securities will
not reflect quite as much capital appreciation as their underlying common
stocks. When the underlying common stock is experiencing a decline, the
value of the convertible security tends to decline to a level
approximating the yield-to-maturity basis of straight nonconvertible debt

of similar quality, often called "investment value," and may not
experience the same decline as the underlying common stock.
Many convertible securities sell at a premium over their conversion
values (i.e., the number of shares of common stock to be received upon
conversion multiplied by the current market price of the stock). This
premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of
capital appreciation due to the conversion privilege. If this
appreciation potential is not realized, the premium may not be recovered.
WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned common
stock at issuance) valid for a specific period of time. Warrants may have
a life ranging from less than a year to twenty years or may be perpetual.
However, most warrants have expiration dates after which they are
worthless. In addition, if the market price of the common stock does not
exceed the warrant's exercise price during the life of the warrant, the
warrant will expire as worthless. Warrants have no voting rights, pay no
dividends, and have no rights with respect to the assets of the
corporation issuing them. The percentage increase or decrease in the
market price of the warrant may tend to be greater than the percentage
increase or decrease in the market price of the optioned common stock.
BANK INSTRUMENTS
The Fund only invests in bank instruments (as defined in the prospectus)
either issued by an institution having capital, surplus, and undivided
profits over $100 million or insured by the Bank Insurance Fund ("BIF")
or the Savings Association Insurance Fund ("SAIF"), both of which are
administered by the Federal Deposit Insurance Corporation. Bank

instruments may include Eurodollar Certificates of Deposit, Yankee
Certificates of Deposit, and Eurodollar Time Deposits. Institutions
issuing Eurodollar instruments are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as reserve
requirements, loan limitations, examinations, accounting, auditing,
recordkeeping and the public availability of information.

U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued and/or
guaranteed by the U.S. government, its agencies or instrumentalities.
These securities are backed by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit System, including the National Bank for Cooperatives,Farm
Credit Banks and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association; and
oStudent Loan Marketing Association.

FEDERATED GROWTH STRATEGIES FUND II
Federated Growth Strategies Fund II pursues its investment objective by
investing primarily in equity securities of companies with prospects for
above-average growth in earnings and dividends or companies where significant
changes are taking place.
The Fund may invest in common stocks, preferred stocks, convertible securities
of foreign issuers, securities of other investment companies, corporate
obligations, including bonds, debentures, notes, and warrants and the types of
U.S. government obligations set forth above in the section describing
Federated American Leaders Fund II.
The Fund may also engage in repurchase agreements, lend portfolio securities,
purchase securities on a when-issued or delayed delivery basis and invest in
put and call options, futures and options on futures. The following
supplements the discussion of acceptable investments in the prospectus.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered
as a unit).
Corporate debt securities that are lower-rated - i.e., rated below BBB by
Standard & Poor's Ratings Group ("S&P") or Baa by Moody's Investors
Service, Inc. ("Moody's") - are commonly referred to as "junk bonds."
While these lower-rated bonds will usually offer higher yields than
higher-rated securities, there is more risk associated with these
investments. These lower-rated bonds may be more susceptible to real or

perceived adverse economic conditions than investment grade bonds. These
lower-rated bonds are regarded as predominately speculative with regard
to each issuer's continuing ability to make principal and interest
payments. In addition, the secondary trading market for lower-rated
bonds may be less liquid than for investment grade bonds. As a result of
these factors, lower-rated bonds tend to have more price volatility and
carry more risk to principal than higher-rated bonds. The investment
adviser will endeavor to limit these risks through diversifying the
portfolio and through careful credit analysis of individual issuers.
CONVERTIBLE SECURITIES
The description of convertible securities which appears under the sub-
section entitled "Convertible Securities" under the section entitled
"Types of Investments - Federated American Leaders Fund II" is also
applicable to the Fund.
WARRANTS
The description of warrants which appears under the sub-section entitled
"Warrants" under the main section entitled "Types of Investments -
Federated American Leaders Fund II" is also applicable to the Fund.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of its shares,
the Fund may attempt to hedge all or a portion of its portfolio by buying
and selling futures contracts and options on futures contracts, and
buying put and call options on portfolio securities and securities
indices. The Fund may also write covered put and call options on
portfolio securities to attempt to increase its current income or to
hedge a portion of its portfolio investments. The Fund will maintain its
positions in securities, option rights, and segregated cash subject to
puts and calls until the options are exercised, closed, or have expired.

An option position on a futures contract may be closed out over-the-
counter or on a nationally recognized exchange which provides a secondary
market for options of the same series. The Fund will not engage in
futures transactions for speculative purposes.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities due
to anticipated changes in interest rates and market conditions without
necessarily buying or selling the securities. Although some financial
futures contracts call for making or taking delivery of the underlying
securities, in most cases these obligations are closed out before the
settlement date. The closing of a contractual obligation is accomplished
by purchasing or selling an identical offsetting futures contract. Other
financial futures contracts by their terms call for cash settlements.
The Fund also may purchase and sell stock index futures contracts with
respect to any stock index traded on a recognized stock exchange or board
of trade to hedge against changes in prices. Stock index futures
contracts are based on indices that reflect the market value of common
stock of the firms included in the indices. An index futures contract is
an agreement pursuant to which two parties agree to take or make delivery
of an amount of cash equal to the differences between the value of the
index at the close of the last trading day of the contract and the price
at which the index contract was originally written. No physical delivery
of the underlying securities in the index is made. Instead, settlement
in cash must occur upon the termination of the contract, with the
settlement being the difference between the contract price and the actual
level of the stock index at the expiration of the contract.

A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future. For
example, in the fixed income securities market, prices move inversely to
interest rates. A rise in rates means a drop in price. Conversely, a
drop in rates means a rise in price. In order to hedge its holdings of
fixed income securities against a rise in market interest rates, the Fund
could enter into contracts to deliver securities at a predetermined price
(i.e., "go short") to protect itself against the possibility that the
prices of its fixed income securities may decline during the Fund's
anticipated holding period. The Fund would "go long" (agree to purchase
securities in the future at a predetermined price) to hedge against a
decline in market interest rates.
"MARGIN " IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash or
U.S. government securities or highly-liquid debt securities with its
custodian (or the broker, if legally permitted). The nature of initial
margin in futures transactions is different from that of margin in
securities transactions in that initial margin in futures transactions
does not involve a borrowing of the funds by the Fund to finance the
transactions. Initial margin is in the nature of a performance bond or
good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations
have been satisfied.

A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin", equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions. The Fund is also required to deposit
and maintain margin when it writes call options on futures contracts.
To the extent required to comply with Commodity Futures Trading
Commission ("CFTC") Regulation 4.5 and thereby avoid status as a
"commodity pool operator," the Fund will not enter into a futures
contract, or purchase an option thereon, if immediately thereafter the
initial margin deposits for futures contracts held by it, plus premiums
paid by it for open options on futures contracts, would exceed 5% of the
market value of the Fund's total assets, after taking into account the
unrealized profits and losses on those contracts it has entered into;
and, provided further, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in
computing such 5%. Second, the Fund will not enter into these contracts
for speculative purposes; rather, these transactions are entered into
only for bona fide hedging purposes, or other permissible purposes
pursuant to regulations promulgated by the CFTC. Third, since the Fund
does not constitute a commodity pool, it will not market itself as such,
nor serve as a vehicle for trading in the commodities futures or
commodity options markets. Finally, because the Fund will submit to the

CFTC special calls for information, the Fund will not register as a
commodities pool operator.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
The Fund may purchase listed put options on financial and stock index
futures contracts to protect portfolio securities against decreases in
value resulting from market factors, such as an anticipated increase in
interest rates or stock prices. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contracts entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.

When the Fund sells a put on a futures contract, it receives a cash
premium in exchange for granting to the purchaser of the put the right to
receive from the Fund, at the strike price, a short position in such
futures contract, even though the strike price upon exercise of the
option is greater than the value of the futures position received by such
holder. If the value of the underlying futures position is not such that
exercise of the option would be profitable to the option holder, the
option will generally expire without being exercised. It will generally
be the policy of the Fund, in order to avoid the exercise of an option
sold by it, to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless it is determined to be
in the Fund's interest to deliver the underlying futures position. A
closing purchase transaction consists of the purchase by the Fund of an
option having the same term as the option sold by the Fund, and has the
effect of canceling the Fund's position as a seller. The premium which
the Fund will pay in executing a closing purchase transaction may be
higher than the premium received when the option was sold, depending in
large part upon the relative price of the underlying futures position at
the time of each transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates rise,
causing the prices of futures to go down, the Fund's obligation under a

call option on a future (to sell a futures contract) costs less to
fulfill, causing the value of the Fund's call option position to
increase.
In other words, as the underlying futures price falls below the strike
price, the buyer of the option has no reason to exercise the call, so
that the Fund keeps the premium received for the option. This premium can
substantially offset the drop in value of the Fund's portfolio
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but not
the obligation, to enter into the underlying futures contract at a strike
price determined at the time the call was purchased, regardless of the
comparative market value of such futures position at the time the option
is exercised. The holder of a call option has the right to receive a long
(or buyer's) position in the underlying futures contract.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may purchase put options on portfolio securities and stock
indices to protect against price movements in the Fund's portfolio
securities. A put option gives the Fund, in return for a premium, the

right to sell the underlying security to the writer (seller) at a
specified price during the term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may also write covered call options to generate income and
thereby protect against price movements in the Fund's portfolio
securities. As writer of a call option, the Fund has the obligation upon
exercise of the option during the option period to deliver the underlying
security upon payment of the exercise price or, in the case of a
securities index, a cash payment equal to the difference between the
closing price of the index and the exercise price of the option. The Fund
may only sell call options either on securities held in its portfolio or
on securities which it has the right to obtain without payment of further
consideration (or has segregated cash in the amount of any additional
consideration).
U.S. GOVERNMENT OBLIGATIONS
The description of U.S. government obligations which appears under the sub-
section entitled "U.S. Government Obligations" under the section entitled
"Types of Investments - Federated American Leaders Fund II" is also applicable
to the Fund.
FEDERATED UTILITY FUND II
Federated Utility Fund II endeavors to achieve its investment objective by
investing primarily in a professionally managed and diversified portfolio of
equity and debt securities of utility companies. The Fund may also invest in
the types of U.S. government obligations which appear under the sub-section
entitled "U.S. Government Obligations" under the section entitled "Types of
Investments - Federated American Leaders Fund II."

FEDERATED PRIME MONEY FUND II
Federated Prime Money Fund II invests exclusively in money market instruments
which mature in 397 days or less and which include, but are not limited to,
high-quality commercial paper and variable rate master demand notes, bank
instruments, and U.S. government obligations.
BANK INSTRUMENTS
In addition to domestic bank obligations such as certificates of deposit,
demand and time deposits, savings shares, and bankers' acceptances, the
Fund may invest in:
oEurodollar Certificates of Deposit issued by foreign branches of U.S.
or foreign banks;
oEurodollar Time Deposits, which are U.S. dollar-denominated deposits in
foreign branches of U.S. or foreign banks;
oCanadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the U.S.; and
oYankee Certificates of Deposit, which are U.S. dollar-denominated
certificates of deposit issued by U.S. branches of foreign banks and
held in the U.S.
U.S. GOVERNMENT OBLIGATIONS
The description of U.S. government obligations which appears under the sub-
section entitled "U.S. Government Obligations" under the section entitled
"Types of Investments - Federated American Leaders Fund II" is also applicable
to the Fund.
RATINGS
A nationally recognized statistical rating organization's ("NRSROs") two
highest rating categories are determined without regard for sub-categories and
gradations. For example, securities rated A-1+, A-1 or A-2 by S&P, Prime-1 or
Prime-2 by Moody's, or F-1 (+ or -) or F-2 (+ or -) by Fitch are all

considered rated in one of the two highest short-term rating categories. The
Fund will limit its investments in securities rated in the second highest
short-term rating category (e.g., A-2 by S&P, Prime-2 by Moody's or F-2 (+ or
- -) by Fitch) to not more than 5% of its total assets, with not more than 1%
invested in the securities of any one issuer. The Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in one of the two highest short-term rating categories;
currently, such securities must be rated by two NRSROs in one of their two
highest rating categories. See "Regulatory Compliance."
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
Federated Fund for U.S. Government Securities II invests in U.S. government
securities which are primary or direct obligations of the U.S. government or
its agencies or instrumentalities or which are guaranteed by the U.S.
government, its agencies or instrumentalities, and in certain collateralized
mortgage obligations described below, and repurchase agreements.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
Privately issued CMOs generally represent an ownership interest in
federal agency mortgage pass-through securities such as those issued by
the Government National Mortgage Association. The terms and
characteristics of the mortgage instruments may vary among pass-through
mortgage loan pools.
The market for such CMOs has expanded considerably since its inception.
The size of the primary issuance market and the active participation in
the secondary market by securities dealers and other investors make
government-related pools highly liquid.
STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may
represent an interest solely in the principal repayments or solely in the

interest payments on mortgage-backed securities (stripped mortgage-backed
securities or "SMBSs"). Due to the possibility of prepayments on the
underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates fall
below the level at which SMBSs were issued, there may be substantial
prepayment on the underlying mortgages, leading to the relatively early
prepayment of principal-only SMBSs and a reduction in the amount of
payment made to holders of interest-only SMBSs. It is possible that the
Fund might not recover its original investment on interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise
and decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends
to use this characteristic of interest-only SMBSs to reduce the effects
of interest rate changes on the value of the Fund's portfolio, while
continuing to pursue current income.
FEDERATED HIGH INCOME BOND FUND II
Federated High Income Bond Fund II endeavors to achieve its objective by
investing primarily in a professionally managed, diversified portfolio of
fixed income securities. Some of these fixed income securities may involve
equity features. Capital growth will be considered, but only when consistent
with the investment objective of high current income.

stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are offered
as a unit).
Equipment lease or trust certificates are secured obligations issued in
serial form, usually sold by transportation companies such as railroads
or airlines, to finance equipment purchases. The certificate holders own
a share of the equipment, which can be resold if the issuer of the
certificate defaults. The Fund does not currently intend to invest more
than 5% of its assets in equipment lease certificates.
EQUITY SECURITIES
Generally, less than 10% of the value of the Fund's total assets will be
invested in equity securities, including common stocks, warrants, or
rights. The Fund's investment adviser may choose to exceed this 10%
limitation if unusual market conditions suggest such investments
represent a better opportunity to reach the Fund's investment objective.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments for defensive purposes
during times of unusual market conditions.
CERTIFICATES OF DEPOSIT
The Fund may invest in certificates of deposit of domestic and foreign
banks and savings and loans if they have capital, surplus, and undivided
profits of over $100,000,000, or if the principal amount of the
instrument is insured by the Bank Insurance Fund or the Savings
Association Insurance Fund, both of which are administered by the Federal
Deposit Insurance Corporation ("FDIC"). These instruments may include
Eurodollar Certificates of Deposit issued by foreign branches of U.S. or
foreign banks, Eurodollar Time Deposits which are U.S. dollar-denominated

deposits in foreign branches of U.S. or foreign banks, Canadian Time
Deposits which are U.S. dollar-denominated deposits issued by branches of
major Canadian banks located in the United States, and Yankee
Certificates of Deposit which are U.S. dollar-denominated certificates of
deposit issued by U.S. branches of foreign banks and held in the United
States.
CURRENCY RISK
To the extent that debt securities purchased by the Fund are denominated
in currencies other than the U.S. dollar, changes in foreign currency
exchange rates will affect the Fund's net asset value, the value of
interest earned, gains and losses realized on the sale of securities, and
net investment income and capital gains, if any, to be distributed to
shareholders by the Fund. If the value of a foreign currency rises
against the U.S. dollar, the value of the Fund assets denominated in that
currency will increase; correspondingly, if the value of a foreign
currency declines against the U.S. dollar, the value of Fund assets
denominated in that currency will decrease.
The exchange rates between the U.S. dollar and foreign currencies are a
function of such factors as supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation and other economic and political conditions. Although the
Fund values its assets daily in U.S. dollars, the Fund may not convert
its holdings of foreign currencies to U.S. dollars daily. When the Fund
converts its holdings to another currency, it may incur conversion costs.
Foreign exchange dealers may realize a profit on the difference between
the price at which they buy and sell currencies.
The Fund will engage in foreign currency exchange transactions in
connection with its investments in foreign securities. The Fund will

conduct its foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through forward contracts to purchase or sell foreign
currencies.

INVESTING IN FOREIGN CURRENCIES
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts in
order to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and a foreign currency
involved in an underlying transaction. However, forward foreign currency
exchange contracts may limit potential gains which could result from a
positive change in such currency relationships. The Fund's investment
adviser believes that it is important to have the flexibility to enter
into forward foreign currency exchange contracts whenever it determines
that it is in the Fund's best interest to do so. The Fund will not
speculate in foreign currency exchange.
There is no limitation as to the percentage of the Fund's assets that may
be committed to such contracts.
The Fund does not enter into forward foreign currency exchange contracts
or maintain a net exposure in such contracts when the Fund would be
obligated to deliver an amount of foreign currency in excess of the value
of the Fund's portfolio securities or other assets denominated in that
currency or, in the case of a "cross-hedge" denominated in a currency or
currencies that the Fund's adviser believes will tend to be closely
correlated with the currency with regard to price movements. Generally,

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e. less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. option markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying
markets that cannot be reflected in the options markets until they
reopen.
FEDERATED INTERNATIONAL EQUITY FUND II
Federated International Equity Fund II invests in a diversified portfolio of
equity securities issued by non-U.S. issuers. Federated International Equity
Fund II will invest at least 65%, and under normal market conditions,
substantially all of its total assets, in equity securities of issuers located
in at least three different countries outside of the United States. Federated
International Equity Fund II may also purchase sponsored or unsponsored
American Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and
European Depositary Receipts ("EDRs"); purchase investment grade corporate and
government fixed income securities of issuers outside the U.S.; enter into
forward commitments, repurchase agreements, and foreign currency transactions;
and maintain reserves in foreign or U.S. money market instruments.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of its shares, the
Fund may attempt to hedge all or a portion of its portfolio by buying and

selling futures contracts and options on futures contracts, and buying put and
call options on portfolio securities and securities indices. The Fund may also
write covered put and call options on portfolio securities to attempt to
increase its current income or to hedge a portion of its portfolio
investments. The Fund will maintain its positions in securities, option
rights, and segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position on a futures contract
may be closed out over-the-counter or on a nationally recognized exchange
which provides a secondary market for options of the same series. The Fund
will not engage in futures transactions for speculative purposes.
The following sub-sections which are described above under the main section
entitled "Types of Investments - Federated Growth Strategies Fund II," are
also applicable to the Fund: Futures Contracts, "Margin" in Futures
Transactions, Put Options on Financial and Stock Index Futures Contracts, Call
Options on Financial and Stock Index Futures Contracts, Purchasing Put Options
on Portfolio Securities and Stock Indices, and Writing Covered Call Options on
Portfolio Securities and Stock Indices.
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the Fund may
enter into forward foreign currency exchange contracts and foreign currency
futures contracts, as well as purchase put or call options on foreign
currencies, as described below. The Fund may also conduct its foreign currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") to attempt to minimize the risk to the Fund from adverse changes
in the relationship between the U.S. dollar and foreign currencies. A forward
contract is an obligation to purchase or sell a specific currency for an

agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency, or when the Fund
believes that the U.S. dollar may suffer a substantial decline against a
foreign currency, it may enter into a forward contract to buy that foreign
currency for a fixed dollar amount. This second investment practice is
generally referred to as "cross-hedging." Because in connection with the
Fund's forward foreign currency transactions an amount of the Fund's assets
equal to the amount of the purchase will be held aside or segregated to be
used to pay for the commitment, the Fund will always have cash, cash
equivalents or high quality debt securities available sufficient to cover any
commitments under these contracts or to limit any potential risk. The
segregated account will be marked to market on a daily basis. While these
contracts are not presently regulated by the CFTC, the CFTC may in the future
assert authority to regulate forward contracts. In such event, the Fund's
ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change
in the relationship between the U.S. dollar and foreign currencies.
Unanticipated changes in currency prices may result in poorer overall
performance for the Fund than if it had not engaged in such contracts.
The Fund may purchase and write put and call options on foreign currencies for
the purpose of protecting against declines in the dollar value of foreign

portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options,
however, the writing of an option on foreign currency will constitute only a
partial hedge, up to the amount of the premium received, and the Fund could be
required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may constitute an effective hedge against fluctuation in exchange rates,
although, in the event of rate movements adverse to the Fund's position, the
Fund may forfeit the entire amount of the premium plus related transaction
costs. Options on foreign currencies to be written or purchased by the Fund
will be traded on U.S. and foreign exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the purchase or sale for
future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of
foreign currency futures will usually depend on the ability of the adviser to
forecast currency exchange rate movements correctly. Should exchange rates
move in an unexpected manner, the Fund may not achieve the anticipated
benefits of foreign currency futures or may realize losses.
WARRANTS
The description of warrants which appears under the sub-section entitled
"Warrants" under the section entitled "Types of Investments - Federated
American Leaders Fund II" is also applicable to the Fund.
RISKS
When the Fund uses futures and options on futures as hedging devices, there is
a risk that the prices of the securities or foreign currency subject to the

futures contracts may not correlate perfectly with the prices of the
securities or currency in the Fund's portfolio. This may cause the futures
contract and any related options to react differently to market changes than
the portfolio securities or foreign currency. In addition, the adviser could
be incorrect in its expectations about the direction or extent of market
factors such as stock price movements or foreign currency exchange rate
fluctuations. In these events, the Fund may lose money on the futures contract
or option.
It is not certain that a secondary market for positions in futures contracts
or for options will exist at all times. Although the adviser will consider
liquidity before entering into these transactions, there is no assurance that
a liquid secondary market on an exchange or otherwise will exist for any
particular futures contract or option at any particular time. The Fund's
ability to establish and close out futures and options positions depends on
this secondary market. The inability to close out these positions could have
an adverse effect on the Fund's ability to effectively hedge its portfolio.
To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the value of the Fund's total assets after
taking into account the unrealized profits and losses on those contracts it
has entered into; and, provided further, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded
in computing such 5%. When the Fund purchases futures contracts, an amount of
cash and cash equivalents, equal to the underlying commodity value of the
futures contracts (less any related margin deposits), will be deposited in a
segregated account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure that the use of

such futures contract is unleveraged. When the Fund sells futures contracts,
it will either own or have the right to receive the underlying future or
security, or will make deposits to collateralize the position as discussed
above.

INVESTMENT PRACTICES OF THE FUNDS

The following investment practices are common to two or more of the Funds and,
unless indicated otherwise, may be changed without approval of shareholders.
REPURCHASE AGREEMENTS
All of the Funds will engage in repurchase agreements. Repurchase agreements
are arrangements in which banks, broker/dealers, and other organized financial
institutions sell U.S. government securities or other securities to the Fund
and agree at the time of sale to repurchase them at a mutually agreed upon
time and price. A Fund or its custodian will take possession of the securities
subject to repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from a Fund, a Fund could receive less than the repurchase price on
any sale of such securities. In the event that such a defaulting seller filed
for bankruptcy or became insolvent, disposition of such securities by a Fund
might be delayed pending court action. The Funds believe that under the
regular procedures normally in effect for custody of a Fund's portfolio
securities subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of such
securities. The Funds will only enter into repurchase agreements with banks
and other recognized financial institutions, such as broker/dealers, which are

deemed by the Funds' adviser to be creditworthy pursuant to guidelines
established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase agreement,
a Fund transfers possession of a portfolio instrument to another person, such
as a financial institution, broker, or dealer, in return for a percentage of
the instrument's market value in cash, and agrees that on a stipulated date in
the future a Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of a Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
CREDIT ENHANCEMENT
Federated Prime Money Fund II typically evaluates the credit quality and
ratings of credit-enhanced securities based upon the financial condition and
ratings of the party providing the credit enhancement (the "credit enhancer"),
rather than the issuer. However, credit-enhanced securities will not be
treated as having been issued by the credit enhancer for diversification
purposes, unless Federated Prime Money Fund II has invested more than 10% of
its assets in securities issued, guaranteed or otherwise credit enhanced by
the credit enhancer, in which case the securities will be treated as having
been issued by both the issuer and the credit enhancer.
Federated Prime Money Fund II may have more than 25% of its total assets
invested in securities credit enhanced by banks.

RESTRICTED AND ILLIQUID SECURITIES
The Funds may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as the
Funds, who agree that they are purchasing the paper for investment purposes
and not with a view to public distribution. Any resale by the purchaser must
be in an exempt transaction. Section 4(2) commercial paper is normally resold
to other institutional investors like the Funds through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission ("SEC")
Staff position set forth in the adopting release for Rule 144A under the
Securities Act of 1933 (the "Rule"). The Rule is a nonexclusive safe-harbor
for certain secondary market transactions involving securities subject to
restrictions on resale under federal securities laws. The Rule provides an
exemption from registration for resales of otherwise restricted securities to
qualified institutional buyers. The Rule was expected to further enhance the
liquidity of the secondary market for securities eligible for resale under the
Rule. The Funds believe that the Staff of the SEC has left the question of
determining the liquidity of all restricted securities to the Trustees. The
Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers;
o dealer undertakings to make a market in the security; and

o the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for a Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of a Fund sufficient
to make payment for the securities to be purchased are segregated on a Fund`s
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Funds do not intend to
engage in when-issued and delayed delivery transactions to an extent that
would cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, all of the Funds may lend their
portfolio securities, up to one-third of the value of each Fund's total
assets, to broker/dealers, banks, or other institutional borrowers of
securities. (Federated International Equity Fund II is not subject to this
one-third limitation).The collateral received when the Fund lends portfolio
securities must be valued daily and, should the market value of the loaned
securities increase, the borrower must furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject to
termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Fund does not have the right
to vote securities on loan, but would terminate the loan and regain the right
to vote if that were considered important with respect to the investment.

PORTFOLIO TURNOVER
Securities in the portfolios of Federated American Leaders Fund II, Federated
Growth Strategies Fund II, Federated Utility Fund II, Federated Fund for U.S.
Government Securities II, Federated High Income Bond Fund II, and Federated
International Equity Fund II will be sold whenever such Fund's investment
adviser believes it is appropriate to do so in light of such Fund's investment
objective, without regard to the length of time a particular security may have
been held. Federated Fund for U.S. Government Securities II's policy of
managing its portfolio of U.S. government securities, including the sale of
securities held for a short period of time, to achieve its investment
objective of current income may result in high portfolio turnover. Federated
Fund for U.S. Government Securities II and Federated International Equity Fund
II will not attempt to set or meet a portfolio turnover rate as any turnover
would be incidental to transactions undertaken in an attempt to achieve the
Funds' investment objectives.
For the fiscal year ended December 31, 1995, and for the period from February
10, 1994 (date of initial public investment) to December 31, 1994, the
portfolio turnover rates of Federated American Leaders Fund II were 43% and
32%, respectively. For the period from November 9, 1995 (date of initial
public investment) to December 31, 1995, the portfolio turnover rate of
Federated Growth Strategies Fund II was 4%. For the fiscal year ended December
31, 1995, and for the period from April 14, 1994 (date of initial public
investment) to December 31, 1994, the portfolio turnover rates of Federated
Utility Fund II were 62% and 73%, respectively. For the fiscal year ended
December 31, 1995, and for the period from March 29, 1994 (date of initial
public investment) to December 31, 1994, the portfolio turnover rates of
Federated Fund for U.S. Government Securities II were 65% and 0%,
respectively. For the fiscal year ended December 31, 1995, and for the period

from February 2, 1994 (date of initial public investment) to December 31,
1994, the portfolio turnover rates of Federated High Income Bond Fund II were
48% and 18%, respectively. For the period from May 5, 1995 (date of initial
public investment) to December 31, 1995, the portfolio turnover rate of
Federated International Equity Fund II was 34%.
INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities. The deposit or
payment by Federated Growth Strategies Fund II or Federated Utility Fund
II of initial or variation margin in connection with futures contracts or
related options transactions is not considered the purchase of a security
on margin. Federated International Equity Fund II may make margin
payments in connection with its use of financial futures contracts or
related options and transactions.
Federated International Equity Fund II will not sell securities short
unless (1) it owns, or has a right to acquire, an equal amount of such
securities, or (2) it has segregated an amount of its other assets equal
to the lesser of the market value of the securities sold short or the
amount required to acquire such securities. The segregated amount will
not exceed 10% of Federated International Equity Fund II's net assets.
While in a short position, Federated International Equity Fund II will
retain the securities, rights, or segregated assets.
To comply with registration requirements in certain states, Federated
International Equity Fund II (1) will limit short sales of securities of
any class of any one issuer to the lesser of 2% of Federated

International Equity Fund II's net assets or 2% of the securities of that
class, (2) will make short sales only on securities listed on recognized
stock exchanges. These restrictions do not apply to short sales of
securities the Fund holds or has a right to acquire without the payment
of any further consideration. (If state requirements change, these
restrictions may be revised without shareholder notification.)
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Funds will not issue senior securities except that each Fund may
borrow money directly or through reverse repurchase agreements (or, with
respect to Federated International Equity Fund II, as required by forward
commitments to purchase securities or currencies) as a temporary,
extraordinary, or emergency measure to facilitate management of the
portfolio by enabling such Fund to meet redemption requests when the
liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous, and then only in amounts not in excess of one-third of
the value of its total assets; provided that, while borrowings and
reverse repurchase agreements outstanding exceed 5% of each such Fund's
total assets, any such borrowings will be repaid before additional
investments are made. The Funds will not borrow money or engage in
reverse repurchase agreements for investment leverage purposes.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, each Fund may mortgage,
pledge or hypothecate assets having a market value not exceeding the
lesser of the dollar amounts borrowed or 15% of the value of total assets
at the time of borrowing. (Federated International Equity Fund II is not
subject to this 15% limitation.) For purposes of this limitation, the
following are not deemed to be pledges by Federated Growth Strategies

Fund II or Federated Utility Fund II: margin deposits for the purchase
and sale of futures contracts and related options, any segregation or
collateral arrangements made in connection with options activities or the
purchase of securities on a when-issued basis. For purposes of this
limitation, neither the deposit of underlying securities or other assets
in escrow in connection with the writing of put or call options or the
purchase of securities on a when-issued basis nor margin deposits for the
purchase and sale of financial futures contracts and related options are
deemed to be a pledge by Federated International Equity Fund II.
CONCENTRATION OF INVESTMENTS
Federated Utility Fund II will not purchase securities if, as a result of
such purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry other
than the utilities industry. However, Federated Utility Fund II may at
any time invest 25% or more of its total assets in cash or cash items and
securities issued and/or guaranteed by the U.S. government, its agencies
or instrumentalities.
Federated Prime Money Fund II will not purchase securities if, as a
result of such purchase, 25% or more of its total assets would be
invested in securities of companies engaged principally in any one
industry other than finance companies. However, Federated Prime Money
Fund II may at any time invest 25% or more of its total assets in cash or
cash items and securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities.
Federated International Equity Fund II will not invest 25% or more of its
total assets in securities of issuers having their principal business
activities in the same industry.

Federated American Leaders Fund II, Federated Growth Strategies Fund II,
Federated Fund for U.S. Government Securities II, and Federated High
Income Bond Fund II will not purchase securities if, as a result of such
purchase, 25% or more of their respective total assets would be invested
in any one industry. However, each Fund may at any time invest 25% or
more of its respective total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
INVESTING IN COMMODITIES
The Funds will not purchase or sell commodities, commodity contracts, or
commodity futures contracts, except that Federated Utility Fund II may
purchase and sell futures and stock index futures contracts and related
options; Federated Growth Strategies Fund II may purchase and sell
futures contracts and options on futures contracts, provided that the sum
of its initial margin deposits for futures contracts plus premiums paid
by it for open options on futures contracts, may not exceed 5% of the
fair market value of Federated Growth Strategies Fund II's total assets,
after taking into account the unrealized profits and losses on those
contracts; and Federated International Equity Fund II may purchase and
sell financial futures contracts and options on financial futures
contracts, provided that the sum of its initial margin deposits for
financial futures contracts plus premiums paid by it for open options on
financial futures contracts, may not exceed 5% of the fair market value
of Federated International Equity Fund II's total assets, after taking
into account the unrealized profits and losses on those contracts.
Further, Federated International Equity Fund II may engage in foreign
currency transactions and purchase or sell forward contracts with respect
to foreign currencies and related options.

INVESTING IN REAL ESTATE
The Funds will not purchase or sell real estate, including limited
partnership interests in real estate, although each Fund may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities secured by real estate or interests in real
estate.
LENDING CASH OR SECURITIES
No Fund will lend any of its assets, except portfolio securities up to
one-third of its total assets. (Federated International Equity Fund II is
not subject to this one-third limitation). This shall not prevent a Fund
from purchasing or holding money market instruments (with respect to
Federated Prime Money Fund II), corporate or U.S. government bonds,
debentures, notes, certificates of indebtedness or other debt securities
of an issuer, entering into repurchase agreements, or engaging in other
transactions which are permitted by the Fund's investment objective and
policies or the Trust's Declaration of Trust.
UNDERWRITING
No Fund will underwrite any issue of securities, except as such Fund may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its respective
investment objectives, policies, and limitations. Federated International
Equity Fund II will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, no Fund will purchase the
securities of any one issuer (other than cash, cash items, or securities

issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities, and with respect to all Funds except Federated
International Equity Fund II, repurchase agreements collateralized by
such securities) if, as a result, more than 5% of such Fund's total
assets would be invested in the securities of that issuer.
In addition, no Fund (with the exception of Federated Prime Money Fund
II) will purchase more than 10% of any class of the outstanding voting
securities of any one issuer. For these purposes, the Funds consider
common stock and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other differences.
ACQUIRING SECURITIES
Federated International Equity Fund II will not acquire more than 10% of
the outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material changes in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
No Fund will invest more than 15% (10% with respect to Federated Prime
Money Fund II) of its total assets in securities subject to restrictions
on resale under the Securities Act of 1933, except for commercial paper
issued under Section 4(2) of the Securities Act of 1933 and certain other
restricted securities which meet the criteria for liquidity as
established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
No Fund will invest more than 15% (10% with respect to Federated Prime
Money Fund II) of its net assets in illiquid securities, including, among
others, repurchase agreements providing for settlement more than seven

days after notice, over-the-counter options (with respect to Federated
Growth Strategies Fund II, Federated Utility Fund II and Federated
International Equity Fund II) and certain restricted securities not
determined by the Trustees to be liquid.
Federated Prime Money Fund II will not invest more than 10% of its net
assets in illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after notice and
certain restricted securities not determined by the Trustees to be
liquid.
DEALING IN PUTS AND CALLS
Federated International Equity Fund II will not write call options on
securities unless the securities are held in the Fund's portfolio or the
Fund is entitled to them in deliverable form without further payment or
the Fund has segregated cash in the amount of any further payments.
Federated International Equity Fund II will not purchase put options on
securities unless the securities or an offsetting call option is held in
the Fund's portfolio. Federated International Equity Fund II may also
purchase, hold or sell (i) contracts for future delivery of securities or
currencies and (ii) warrants granted by the issuer of the underlying
securities.
INVESTING IN PUT OPTIONS
Federated Growth Strategies Fund II, Federated Utility Fund II and
Federated International Equity Fund II will not purchase put options on
securities, unless the securities are held in the Fund's portfolio and,
with respect to Federated Growth Strategies Fund II and Federated Utility
Fund II, not more than 5% of their respective total assets would be
invested in premiums on open put options.

WRITING COVERED CALL OPTIONS
Federated Growth Strategies Fund II, Federated Utility Fund II and
Federated International Equity Fund II will not write call options on
securities unless the securities are held in the Fund's portfolio or
unless the Fund is entitled to them in deliverable form without further
payment or after segregating cash in the amount of any further payment.
PURCHASING SECURITIES TO EXERCISE CONTROL
Federated Growth Strategies Fund II and Federated International Equity
Fund II will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN WARRANTS
Federated Growth Strategies Fund II and Federated International Equity
Fund II will not invest more than 5% of their respective net assets in
warrants. No more than 2% of a Fund's respective net assets, to be
included within the overall 5% limit on investments in warrants, may be
warrants which are not listed on the New York Stock Exchange or the
American Stock Exchange. (If state restrictions change, this latter
restriction may be revised without notice to shareholders.) For purposes
of this investment restriction, warrants acquired by Federated Growth
Strategies Fund II and Federated International Equity Fund II in units or
attached to securities may be deemed to be without value.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Federated Growth Strategies Fund II will limit its investment in other
investment companies to no more than 3% of the total outstanding voting
stock of any investment company, will invest no more than 5% of its total
assets in any one investment company, and will invest no more than 10% of
its total assets in investment companies in general. Federated Growth
Strategies Fund II will purchase securities of closed-end investment

companies only in open market transactions involving only customary
broker's commissions. However, these limitations are not applicable if
the securities are acquired in a merger, consolidation, reorganization,
or acquisition of assets.
Federated International Equity Fund II will not purchase securities of
other investment companies, except by purchase in the open market
involving only customary brokerage commissions and as a result of which
not more than 10% of the value of its total assets would be invested in
such securities, or except as part of a merger, consolidation or other
acquisition.
INVESTING IN NEW ISSUERS
Federated Growth Strategies Fund II and Federated International Equity
Fund II will not invest more than 5% of the value of their respective
total assets in securities of issuers which have records of less than
three years of continuous operations, including the operation of any
predecessor.
INVESTING IN MINERALS
Federated International Equity Fund II will not invest in interests in
oil, gas, or other mineral exploration or development programs, other
than debentures or equity stock interests.
Federated Growth Strategies Fund II will not purchase interests in oil,
gas, or other mineral exploration or development programs, or leases,
except it may invest in the securities of issuers which invest in or
sponsor such programs.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
Federated Growth Strategies Fund II and Federated International Equity
Fund II will not purchase or retain the securities of any issuer if the

Officers and Trustees of the Trust or the Funds' investment adviser
owning individually more than 1/2 of 1% of the issuer's securities
together own more than 5% of the issuer's securities.
ARBITRAGE TRANSACTIONS
To comply with certain state restrictions, Federated International Equity
Fund II will not enter into transactions for the purpose of engaging in
arbitrage. If state requirements change, this restriction may be revised
without shareholder notification.
With respect to all of the Funds, 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 of total
or net assets will not result in a violation of such restriction.
No Fund has any present intention to borrow money in excess of 5% of the value
of its net assets during the coming fiscal year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch
of a domestic bank or savings association having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment to be
"cash items."
To comply with registration requirements in certain states, Federated Growth
Strategies Fund II (1) will limit the margin deposits on futures contracts
entered into by it to 5% of its net assets, (2) will limit the aggregate value
of the assets underlying covered call options or put options written by it to
not more than 25% of its net assets, and (3) will limit the premiums paid for
options purchased by it to 5% of its net assets. (If state requirements
change, these restrictions may be revised without shareholder notification).

REGULATORY COMPLIANCE
Federated Prime Money Fund II may follow non-fundamental operational policies
that are more restrictive than its fundamental investment limitations, as set
forth in the prospectus and this Statement of Additional Information, in order
to comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. In particular,
Federated Prime Money Fund II will comply with the various requirements of
Rule 2a-7 which regulates money market mutual funds. Federated Prime Money
Fund II will also determine the effective maturity of its investments, as well
as its ability to consider a security as having received the requisite short-
term ratings by NRSROs, according to Rule 2a-7. Federated Prime Money Fund II
may change these operational policies to reflect changes in the laws and
regulations without the approval of its shareholders.

FEDERATED INSURANCE SERIES MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Insurance Series, and principal occupations.

Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is
the father of J. Christopher Donahue, President and Trustee of the Trust .

William J. Copeland

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government
Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund; 3-5
Years; Federated U.S. Government Securities Fund; 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Term Trust, Inc. - 1999; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;

Trust for Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of March 11, 1996, the following shareholders of record owned 5% or more of
the outstanding shares of Federated American Leaders Fund II: Transamerica
Occidental Life Insurance Co., Los Angelos, California, 11%, Aetna Insurance
Co. of America, Hartford, Connecticut, 35%, and Aetna Life Insurance & Annuity
Co., Hartford, Connecticut, 53%. As of March 11, 1996, the following
shareholders of record owned 5% or more of the outstanding shares of Federated
Growth Strategies Fund II: Aetna Insurance Co. of America, Hartford,
Connecticut, 42%, and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, 58%. As of March 11, 1996, the following shareholders of record
owned 5% or more of the outstanding shares of Federated Utility Fund II: Life
of Virginia, Richmond, Virginia, 41%, Lincoln Benefit Life Co., Lincoln,
Nebraska, 8%, Aetna Insurance Co. of America, Hartford, Connecticut, 17%, and
Aetna Life Insurance & Annuity Co., Hartford, Connecticut, 29%. As of March
11, 1996, the following shareholders of record owned 5% or more of the
outstanding shares of Federated Prime Money Fund II: United of Omaha Life
Insurance Co., Omaha, Nebraska, 43%, Providian Life & Health Insurance Co.,
Louisville, Kentucky, 14%, Aetna Insurance Co. of America, Hartford,
Connecticut, 14%, Glenbrook Life And Annuity Company, Northbrook, Illinois,
8%, and Aetna Life Insurance & Annuity Co., Hartford, Connecticut, 20%. As of
March 11, 1996, the following shareholders of record owned 5% or more of the
outstanding shares of Federated Fund for U.S. Government Securities II:
United of Omaha Life Insurance Co., Omaha, Nebraska, 20%, Transamerica
Occidental Life Insurance Co., Los Angelos, California, 21%, Lincoln Benefit

Life Co., Lincoln, Nebraska, 8%, Aetna Insurance Co. of America, Hartford,
Connecticut, 11%, and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, 32%. As of March 11, 1996 , the following shareholders of record
owned 5% or more of the outstanding shares of Federated High Income Bond Fund
II: Lincoln Benefit Life Co., Lincoln, Nebraska, 12.41%, Life of Virginia,
Richmond, Virginia, 13.09%, Aetna Insurance Co. of America, Hartford,
Connecticut, 15.65% and Aetna Life Insurance & Annuity Co., Hartford,
Connecticut, 54.19%. As of March 11, 1996, the following shareholders of
record owned 5% or more of the outstanding shares of Federated International
Equity Fund II: Aetna Life Insurance & Annuity Co., Hartford, Connecticut,
33.14% and Aetna Insurance Co. of America, Hartford, Connecticut, 64.97%.

TRUSTEES COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

Trustee 54 other investment companies in the Fund
Complex
William J. Copeland $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
J. Christopher Donahue, $0 $0 for the Trust and
President and Trustee 15 other investment companies in the Fund
Complex
James E. Dowd $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D. $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr. $1,116 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Peter E. Madden $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar $1,016 $104,898 for the Trust and

Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts $1,016 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

ADVISERS TO THE FUNDS
Federated Advisers is the investment adviser to Federated American Leaders
Fund II, Federated Growth Strategies Fund II, Federated Utility Fund II,
Federated Prime Money Fund II, Federated Fund for U.S. Government Securities
II and Federated High Income Bond Fund II. Federated Global Research Corp. is
the investment adviser to Federated International Equity Fund II. Federated
Advisers and Federated Global Research Corp. are subsidiaries of Federated

Investors. All voting securities of Federated Investors are owned by a trust,
the trustees of which are John F. Donahue, his wife and his son, J.
Christopher Donahue.
The advisers shall not be liable to the Funds or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For their advisory services, Federated Advisers and Federated Global Research
Corp. receive an annual investment advisory fee as described in the
prospectus.
For the fiscal year ended December 31, 1995, and for the period from December
9, 1993 (start of business) to December 31, 1994, Federated Advisers earned
advisory fees from Federated American Leaders Fund II of $142,579 and $4,397,
respectively, all of which were voluntarily waived. For the period from
November 9, 1995 (date of initial public investment) to December 31, 1995,
Federated Advisers earned advisory fees from Federated Growth Strategies Fund
II of $231, all of which were voluntarily waived. For the fiscal year ended
December 31, 1995, and for the period from December 9, 1993 (start of
business) to December 31, 1994, Federated Advisers earned advisory fees from
Federated Utility Fund II of $89,752 and $2,077, respectively, all of which
were voluntarily waived. For the fiscal year ended December 31, 1995, and for
the period from December 10, 1993 (start of business) to December 31, 1994,
Federated Advisers earned advisory fees from Federated Prime Money Fund II of
$40,601 and $287, respectively, all of which were voluntarily waived. For the
fiscal year ended December 31, 1995, and for the period from December 8, 1993
(start of business) to December 31, 1994, Federated Advisers earned advisory

fees from Federated Fund for U.S. Government Securities II of $30,465 and
$2,605, respectively, all of which were voluntarily waived. For the fiscal
year ended December 31, 1995, and for the period from December 9, 1993 (start
of business) to December 31, 1994, Federated Advisers earned advisory fees
from Federated High Income Bond Fund II of $46,425 and $7,966, respectively,
all of which were voluntarily waived. For the period from May 5, 1995 (date of
initial public investment) to December 31, 1995, Federated Global Research
Corp. earned advisory fees from Federated International Equity Fund II of
$12,476, all of which were voluntarily waived.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the advisers look for prompt execution of the order at
a favorable price. In working with dealers, the advisers 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
advisers make decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Trustees. The advisers may
select brokers and dealers who offer brokerage and research services. These
services may be furnished directly to the Funds or to the advisers and 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
provided by brokers and dealers may be used by the advisers or by affiliates
in advising the Funds and other accounts. To the extent that receipt of these
services may supplant services for which the advisers or their affiliates
might otherwise have paid, it would tend to reduce their expenses. The
advisers and their affiliates exercise reasonable business judgment in

selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided. For the fiscal year ended December 31, 1995,
and for the period from December 9, 1993 (start of business) to December 31,
1994, Federated American Leaders Fund II paid $49,713 and $3,714,
respectively, in brokerage commissions on brokerage transactions. For the
period from November 9, 1995 (date of initial public investment) to December
31, 1995, Federated Growth Strategies Fund II paid $322 in brokerage
commissions on brokerage transactions. For the fiscal year ended December 31,
1995, and for the period from December 9, 1993 (start of business) to December
31, 1994, Federated Utility Fund II paid $59,746 and $476, respectively, in
brokerage commissions on brokerage transactions. For the fiscal year ended
December 31, 1995, and for the period from December 10, 1993 (start of
business) to December 31, 1994, Federated Prime Money Fund II paid $0 and $0,
respectively, in brokerage commissions on brokerage transactions. For the
fiscal year ended December 31, 1995, and for the period from December 8, 1993
(start of business) to December 31, 1994, Federated Fund for U.S. Government
Securities II paid $322 and $0, respectively, in brokerage commissions on
brokerage transactions. For the fiscal year ended December 31, 1995, and for
the period from December 9, 1993 (start of business) to December 31, 1994,
Federated High Income Bond Fund II paid $0 and $0, respectively, in brokerage
commissions on brokerage transactions. For the period from May 5, 1995 (date
of initial public investment) to December 31, 1995, Federated International
Equity Fund II paid $15,076 in brokerage commissions on brokerage
transactions.
Although investment decisions for the Funds are made independently from those
of the other accounts managed by the advisers, investments of the type the

Funds may make may also be made by those other accounts. When the Funds and
one or more other accounts managed by the advisers are prepared to invest in,
or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the advisers
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Funds or the size of the position obtained
or disposed of by the Funds. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Funds.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Funds for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated Administrative
Services served as the Fund's Administrator. Prior to March 1, 1994, Federated
Administrative Services, Inc. served as the Funds' Administrator. Both former
Administrators are subsidiaries of Federated Investors. For purposes of this
Statement of Additional Information, Federated Services Company, Federated
Administrative Services and Federated Administrative Services, Inc. may
hereinafter collectively be referred to as the "Administrators." For the
fiscal year ended December 31, 1995, and for the period from December 9, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000
and $73,288, respectively, from Federated American Leaders Fund II. For the
period from November 9, 1995 (date of initial public investment) to December
31, 1995, the Administrators earned $17,808 from Federated Growth Strategies
Fund II. For the fiscal year ended December 31, 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the Administrators

earned $125,000 and $73,289, respectively, from Federated Utility Fund II. For
the fiscal year ended December 31, 1995, and for the period from December 10,
1993 (start of business) to December 31, 1994, the Administrators earned
$125,000 and $14,041, respectively, from Federated Prime Money Fund II. For
the fiscal year ended December 31, 1995, and for the period from December 8,
1993 (start of business) to December 31, 1994, the Administrators earned
$125,000 and $63,015, respectively, from Federated Fund for U.S. Government
Securities II. For the fiscal year ended December 31, 1995, and for the period
from December 9, 1993 (start of business) to December 31, 1994, the
Administrators earned $125,000 and $52,398, respectively, from Federated High
Income Bond Fund II. For the period from May 5, 1995 (date of initial public
investment) to December 31, 1995, the Administrators earned $81,165 from
Federated International Equity Fund II. Dr. Henry J. Gailliot, an officer of
Federated Advisers, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Funds. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to each
Fund's portfolio investments. The fee paid for this service is based upon the
level of each Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For

its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT PUBLIC AUDITORS
The independent auditors for the Funds are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASING SHARES

Shares of the Funds are sold at their net asset value without a sales charge
on days the New York Stock Exchange is open for business. The procedure for
purchasing shares of the Funds is explained in the prospectus under "Purchases
and Redemptions" and "What Shares Cost."
DETERMINING NET ASSET VALUE

The net asset value of Federated American Leaders Fund II, Federated Growth
Strategies Fund II, Federated Utility Fund II, Federated Fund for U.S.
Government Securities II, Federated High Income Bond Fund II, and Federated
International Equity Fund II generally changes each day. The days on which net
asset value is calculated by the Funds are described in the prospectus.
Dividend income of Federated International Equity Fund II is recorded on the
ex-dividend date, except certain dividends from foreign securities where the
ex-dividend date may have passed, are recorded as soon as Federated
International Equity Fund II is informed of the ex-dividend date.
DETERMINING VALUE OF SECURITIES
The values of the portfolio securities in Federated American Leaders Fund II,
Federated Growth Strategies Fund II, Federated Utility Fund II, Federated Fund
for U.S. Government Securities II, and Federated High Income Bond Fund II and
are determined as follows:

o for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, 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 for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise as determined by an
independent pricing service;
o for unlisted equity securities, the latest mean prices;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service; or
o for all other securities, at fair value as determined in good faith by
the Trustees.
The values of the portfolio securities in Federated International Equity Fund
II are determined as follows:
o according to the last reported sale price on a recognized securities
exchange, if available. (If a security is traded on more than one
exchange, the price on the primary market for that security, as
determined by Federated Global Research Corp., is used.);
o according to the last reported bid price, if no sale on the recognized
exchange is reported or if the security is traded over-the-counter;
o at fair value as determined in good faith by the Trustees; or
o for short-term obligations with remaining maturities of less than 60 days
at the time of purchase, at amortized cost, which approximates value.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value, the
Fund values foreign securities at the latest closing price on the exchange on

which they are traded immediately prior to the closing of the New York Stock
Exchange. Certain foreign currency exchange rates may also be determined at
the latest rate prior to the closing of the New York Stock Exchange. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange
rates may occur between the times at which they are determined and the closing
of the New York Stock Exchange. If such events materially affect the value of
portfolio securities, these securities may be valued at their fair value as
determined in good faith by the Trustees, although the actual calculation may
be done by others.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments for Federated Prime Money Fund II is amortized cost.
Under this method, portfolio instruments are valued at the acquisition cost as
adjusted for amortization of premium or accumulation of discount rather than
at current market value.
Federated Prime Money Fund II's use of the amortized cost method of valuing
portfolio instruments depends on its compliance with certain conditions in
Rule 2a-7 (the "Rule") promulgated by the Securities and Exchange Commission
under the Investment Company Act of 1940. Under the Rule, the Trustees must
establish procedures reasonably designed to stabilize the net asset value per
share, as computed for purposes of distribution and redemption, at $1.00 per
share, taking into account current market conditions and the Prime Money
Fund's investment objective. Under the Rule, Federated Prime Money Fund II is

permitted to purchase instruments which are subject to demand features or
standby commitments. As defined by the Rule, a demand feature entitles
Federated Prime Money Fund II to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days'
notice or (2) at specified intervals not exceeding 397 calendar days on no
more than 30 days' notice. A standby commitment entitles Federated Prime Money
Fund II to achieve same-day settlement and to receive an exercise price equal
to the amortized cost of the underlying instrument plus accrued interest at
the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
0.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that Federated Prime Money Fund II limit its
investments to instruments that, in the opinion of the Trustees, present
minimal credit risks and have received the requisite rating from one or
more nationally recognized statistical rating organizations. If the
instruments are not rated, the Trustees must determine that they are of
comparable quality. The Rule also requires Federated Prime Money Fund II
to maintain a dollar-weighted average portfolio maturity (not more than
90 days) appropriate to the objective of maintaining a stable net asset

value of $1.00 per share. In addition, no instrument with a remaining
maturity of more than thirteen months can be purchased by Federated Prime
Money Fund II.
Should the disposition of a portfolio security result in a dollar-
weighted average portfolio maturity of more than 90 days, Federated Prime
Money Fund II will invest its available cash to reduce the average
maturity to 90 days or less as soon as possible.
Federated Prime Money Fund II may attempt to increase yield by trading
portfolio securities to take advantage of short-term market variations. This
policy may, from time to time, result in high portfolio turnover. Under the
amortized cost method of valuation, neither the amount of daily income nor the
net asset value is affected by any unrealized appreciation or depreciation of
the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
Federated Prime Money Fund II computed by dividing the annualized daily income
on Federated Prime Money Fund II's portfolio by the net asset value computed
as above may tend to be higher than a similar computation made by using a
method of valuation based upon market prices and estimates.
In periods of rising interest rates, the indicated daily yield on shares of
Federated Prime Money Fund II computed the same way may tend to be lower than
a similar computation made by using a method of calculation based upon market
prices and estimates.

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. These documents require notice of this disclaimer to be given in
each agreement, obligation, or instrument the Trust or its Trustees enter into
or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act
or 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.
TAX STATUS

However, Federated International Equity Fund II may invest in the stock of
certain foreign corporations which would constitute a Passive Foreign
Investment Company ("PFIC"). Federal income taxes may be imposed on Federated
International Equity Fund II upon disposition of PFIC investments.
SHAREHOLDER'S TAX STATUS
Each Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and this Statement. If a
Fund fails to comply with these regulations, contracts invested in that fund
shall not be treated as annuity, endowment, or life insurance contracts under
the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from each Fund to the separate accounts.
FOREIGN TAXES
Investment income on certain foreign securities in which Federated
International Equity Fund II may invest may be subject to foreign withholding
or other taxes that could reduce the return on these securities. Tax treaties
between the United States and foreign countries, however, may reduce or
eliminate the amount of foreign taxes to which Federated International Equity
Fund II would be subject.
TOTAL RETURN

For the fiscal year ended December 31, 1995, and for the period from February
10, 1994 (date of initial public investment) to December 31, 1995, the average
annual total returns for Federated American Leaders Fund II were 33.71% and
(0.70%), respectively. For the period from November 9, 1995 (date of initial
public investment) to December 31, 1995, the cumulative total return of
Federated Growth Strategies Fund II was 3.00%. For the fiscal year ended

December 31, 1995, and for the period from April 14, 1994 (date of initial
public investment) to December 31, 1995, the average annual total returns for
Federated Utility Fund II were 24.18% and 1.12%, respectively. For the fiscal
year December 31, 1995, and for the period from November 18, 1994 (date of
initial public investment) to December 31, 1995, the average annual total
returns for Federated Prime Money Fund II were 5.20% and 5.13%, respectively.
For the fiscal year ended December 31, 1995, and for the period from March 29,
1994 (date of initial public investment) to December 31, 1995, the average
annual total returns for Federated Fund for U.S. Government Securities II were
8.77% and 2.62%, respectively. For the fiscal year ended December 31, 1995,
and for the period from February 2, 1994 (date of initial public investment)
to December 31, 1995, the average annual total returns for Federated High
Income Bond Fund II were 20.38% and 8.45%, respectively. For the period from
May 5, 1995 (date of initial public investment) to December 31, 1995, the
cumulative total return of Federated International Equity Fund II was 3.50%.
Cumulative total return reflects a Fund's total performance over a specific
period of time. Federated Growth Strategies Fund II's and Federated
International Equity Fund II's cumulative total returns are representative of
two and seven months of Fund activity, respectively.
The average annual total returns for Federated American Leaders Fund II,
Federated Growth Strategies Fund II, Federated Utility Fund II, Federated
Prime Money Fund II, Federated Fund for U.S. Government Securities II,
Federated High Income Bond Fund II and Federated International Equity Fund II
are the average compounded rates 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 net asset value per share at
the end of the period. The number of shares owned at the end of the period is

based on the number of shares purchased at the beginning of the period with
$1,000, adjusted over the period by any additional shares, assuming the
monthly, quarterly, or annual, as applicable, reinvestment of all dividends
and distributions. You should review the performance figures for your
insurance contract, which figures reflect the applicable charges and expenses
of the contract. Such performance figures will accompany any advertisement of
a Fund's performance.
YIELD

The yields for Federated American Leaders Fund II, Federated Growth Strategies
Fund II, Federated Utility Fund II, Federated Fund for U.S. Government
Securities II and Federated High Income Bond Fund for the thirty-day period
ended December 31, 1995, were 1.81%, 1.26%, 3.84%, 5.89% and 9.15%,
respectively. Federated International Equity Fund II did not calculate a yield
for the thirty-day period ended December 31, 1995.
The yields for Federated American Leaders Fund II, Federated Growth Strategies
Fund II, Federated Utility Fund II, Federated Fund for U.S. Government
Securities II, Federated High Income Bond Fund II and Federated International
Equity Fund II are determined by dividing the net investment income per share
(as defined by the Securities and Exchange Commission) earned by a Fund over a
thirty-day period by the offering price per share of a Fund on the last day of
the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by a Fund because of certain adjustments required by the
Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders. Also the yield does not

reflect the charges and expenses of an insurance contract. You should review
the performance figures for your contract, which figures reflect the
applicable charges and expenses of the contract. Such performance figures will
accompany any advertisement of a Fund's performance.
The yield for Federated Prime Money Fund II for the seven-day period ended
December 31, 1995, was 4.95%.
Federated Prime Money Fund II calculates its yield daily, based upon the seven
days ending on the day of the calculation, called the "base period." This
yield is computed by:
o determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original one
share and all dividends declared on the original and any purchased
shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base period
return; and
o multiplying the base period return by 365/7.
EFFECTIVE YIELD

The effective yield for Federated Prime Money Fund II for the seven-day period
ended December 31, 1995, was 5.07%.
Federated Prime Money Fund II's effective yield is computed by compounding the
unannualized base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.

Effective yield does not reflect the charges and expense of a variable annuity
contract. You should review the performance figures for your insurance
contract, which figures reflect the applicable charges and expenses of the
contract. Such performance figures will accompany any advertisement of a
Fund's performance.
PERFORMANCE COMPARISONS

Each Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in Fund expenses; and
o the relative amount of the Fund's cash flow.
A Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share (except with respect to Federated Prime Money
Fund II) fluctuate daily. Both net earnings and offering price per share are
factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Funds use in advertising may
include:
o DOW JONES INDUSTRIAL AVERAGE is an unmanaged index representing share
prices of major industrial corporations, public utilities, and

transportation companies. Produced by the Dow Jones & Company, it is
cited as a principal indicator of market conditions.
o STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a
composite index of common stocks in industrial, transportation, and
financial and public utility companies, can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's index assumes reinvestments of
all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in the Standard & Poor's figures.
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return. Total return
assumes the reinvestment of all income dividends and capital gains
distributions, if any. From time to time, the Trust may quote its Lipper
ranking in various fund categories in advertising and sales literature.
O LIPPER HIGH CURRENT YIELD AVERAGE is composed of approximately 141 funds
which invest at least 65% of their assets in investment grade debt issues
(rated in top four grades) with dollar-weighted average maturities of
five to ten years. From time to time, Federated High Income Bond Fund II
will compare its total return to the average total return of the funds
comprising the average for the same calculation period.
O LIPPER UTILITY FUND AVERAGE is composed of approximately 87 funds which
invest 65% of their equity portfolio in utility stocks. From time to
time, Federated Utility Fund II will compare its total return to the
average total return of the funds comprising the average for the same
calculation period.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised of
approximately 5,000 issues which include: nonconvertible bonds publicly

issued by the U.S. government or its agencies; corporate bonds guaranteed
by the U.S. government and quasi-federal corporations; and publicly
issued, fixed-rate, non-convertible domestic bonds of companies in
industry, public utilities and finance. The average maturity of these
bonds approximates nine years. Tracked by Lehman Brothers , Inc., the
index calculates total returns for one month, three month, twelve month,
and ten year periods and year-to-date.
o LEHMAN BROTHERS GOVERNMENT/CORPORATE (LONG-TERM) INDEX is composed of the
same types of issues as defined above. However, the average maturity of
the bonds included in this index approximates 22 years.
o LEHMAN BROTHERS GOVERNMENT INDEX is an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation and of corporate
debt guaranteed by the U.S. government. Only notes and bonds with a
minimum outstanding principal of $1 million and a minimum maturity of one
year are included.
o LEHMAN BROTHERS CORPORATE B INDEX is an index composed of all bonds
covered by Lehman Brothers High Yield Index rated "B" by Moody's
Investors Service. Bonds have a minimum amount outstanding of $100
million and at least one year to maturity. Total return comprises price
appreciation/depreciation and income as a percentage of the original
investment. Indexes are rebalanced monthly by market capitalization.
o LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX includes 15- and 30-year
fixed-rated securities backed by mortgage pools of the Government
National Mortgage Association, Federal Home Loan Mortgage Corporation,
and Federal National Mortgage Corporation. Graduated payment mortgages
and balloons are included in the index.

o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading bank
and thrift institution money market deposit accounts. The rates published
in the index are an average of the personal account rates offered on the
Wednesday prior to the date of publication by ten of the largest banks
and thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution, and
compounding methods vary. If more than one rate is offered, the lowest
rate is used. Rates are subject to change at any time specified by the
institution.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day compound (effective)
yield. From time to time, the Fund will quote its MONEY ranking in
advertising and sales literature.
o STANDARD & POOR'S UTILITY INDEX is an unmanaged index of common stocks
from forty different utilities. This index indicates daily changes in the
price of the stocks. The index also provides figures for changes in price
from the beginning of the year to date, and for a twelve month period.
o DOW JONES UTILITY INDEX is an unmanaged index comprised of fifteen
utility stocks that tracks changes in price daily and over a six month
period. The index also provides the highs and lows for each of the past
five years.

o MORGAN STANLEY EUROPE, AUSTRALIA, AND FAR EAST (EAFE) Index is a market
capitalization weighted foreign securities index, which is widely used to
measure the performance of European, Australian, New Zealand and Far
Eastern stock markets. The index covers approximately 1,020 companies
drawn from 18 countries in the above regions. The index values its
securities daily in both U.S. dollars and local currency and calculates
total returns monthly. EAFE U.S. dollar total return is a net dividend
figure less Luxembourg withholding tax. The EAFE is monitored by Capital
International, S.A., Geneva, Switzerland.
o SALOMON BROTHERS WORLD EQUITY INDEX EX U.S. is a capitalization-weighted
index comprised of equities from 22 countries excluding the United
States.
o FT ACTUARIES WORLD - EX U.S. index is comprised of 1,740 stocks,
excluding U.S. stocks, jointly compiled by the Financial Times Ltd.,
Goldman, Sachs & Co., and NatWest Securities Ltd. in conjunction with the
Institute of Actuaries and the Faculty of Actuaries.
o STANDARD & POOR'S LOW-PRICED INDEX compares a group of approximately
twenty actively traded stocks priced under $25 for one month periods and
year-to-date.
o STANDARD & POOR'S 500 ("S&P 500") is an unmanaged index of common stocks
in industry, transportation, finance, and public utilities denoting
general market performance, as monitored by Standard & Poor's Ratings
Group.
o LIPPER GROWTH FUND AVERAGE is an average of the total returns for 251
growth funds tracked by Lipper Analytical Services, Inc., an independent
mutual fund rating service.

o LIPPER GROWTH FUND INDEX is an average of the net asset-valuated total
returns for the top 30 growth funds tracked by Lipper Analytical
Services, Inc.
Advertisements and other sales literature for the Funds may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
the Funds based on monthly, quarterly, or yearly, as applicable, reinvestment
of dividends over a specific period of time.
From time to time as it deems appropriate, the Funds may advertise their
performance using charts, graphs and descriptions compared to federally
insured bank products, including certificates of deposit and time deposits,
and to money market funds using the Lipper Analytical Services money market
instrument average.
ABOUT FEDERATED INVESTORS

*Source: Investment Company Institute

FINANCIAL STATEMENTS

Cusip 458043502
Cusip 458043205
Cusip 458043106
Cusip 458043304
Cusip 458043403
Cusip 458043601
Cusip 458043700
4011006B (4/96)