FEDERATED INSURANCE SERIES, 485BPOS, 1997-07-31

FEDERATED INSURANCE SERIES
485BPOS, 1997-07-31

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

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

Post-Effective Amendment No. 15 ................................. X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 16 ......................................... X

FEDERATED INSURANCE SERIES

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

_ immediately upon filing pursuant to paragraph (b)
X on August 21, 1997, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph
(a) (i) 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

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

Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:

X filed the Notice required by that Rule on February 14, 1997; or intends to
file the Notice required by that Rule on or about _________________; or
during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to Rule
24f-2(b)(2), need not file the Notice.

Copies To:

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

<PAGE>

CROSS REFERENCE SHEET

This Amendment to the Registration Statement of Federated Insurance Series
(formerly, Insurance Management Series), which consists of eight portfolios: (1)
Federated American Leaders Fund II, (2) Federated Utility Fund II, (3) Federated
Fund for U.S. Government Securities II, (4) Federated High Income Bond Fund II,
(5) Federated Prime Money Fund II, (6) Federated International Equity Fund II,
(7) Federated Growth Stategies Fund II and (8) Federated Equity Income Fund II,
relates only to Federated Equity Income Fund II and is comprised of the
following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...................(1-8) Cover Page.
Item 2. Synopsis.....................Not applicable.
Item 3. Condensed Financial
Information.................(1-8) Financial Highlights; (1-8)
Performance Information.
Item 4. General Description of
Registrant..................(1-8) General Information; (1-8)
Investment Information; (1-8)
Investment Objectives; (1-8)
Investment Policies; (4,5)
Investment Risks; (1-8)
Investment Limitations.

Item 5. Management of the Fund.......(1-8) Fund Information; (1-8) Management
of the Fund; (1-8) Distribution of Fund
Shares; (8) Distribution Plan;(1-8)
Administration of the Fund; (3,4,5, 8)
Brokerage Transactions.
Item 6. Capital Stock and Other
Securities..................(1-8) Dividends; (1-8) Shareholder
Information; (1-8) Tax Information; (1-8)
Federal Taxes; (1-8) State and Local
Taxes; (1-8) Voting Rights.
Item 7. Purchase of Securities Being
Offered.....................(1-8) Net Asset Value; (1-8) Investing
in the Fund; (1-8) Purchases and
Redemptions; (1-8) What Shares Cost.
Item 8. Redemption or Repurchase.....(1-8) Purchases and Redemptions.
Item 9. Pending Legal Proceedings None.

<PAGE>

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page.....................(1-8) Cover Page.
Item 11. Table of Contents..............(1-8) Table of Contents.
Item 12. General Information and
History Not Applicable.
Item 13. Investment Objectives and
Policies......................(1-8) Investment Objectives and
Policies; (1-8) Investment
Limitations. (5) Regulatory
Compliance.
Item 14. Management of the Fund.........(1-8) Federated Insurance
Series Management; (1-8)
Trustees' Compensation;
Item 15. Control Persons and Principal
Holders of Securities (1-8) Fund Ownership.
Item 16. Investment Advisory and Other
Services......................(1-8) Investment
Advisory Services;
(8) Distribution
Plan;(1-8) Other
Services;(1-8)
Fund
Administration;
(1-8) Custodian
and Portfolio
Accountant;
(1-5,8) Transfer
Agent; (6,7)
Transfer Agent and
Dividend
Disbursing Agent;
(1-8) Independent
Auditors.
Item 17. Brokerage Allocation.............(1-8) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered.......(1-8) Purchasing Shares;
(1-8) Determining Net Asset
Value.
Item 20. Tax Status........................(1-8) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data.............................(1-8) Total Return; (1-8)
Yield; (5) Effective Yield;
(1-8) Performance
Comparisons.
Item 23. Financial Statements..............(1-7) Incorporated by
reference to the Annual
Report of Registrant dated
December 31, 1996 (File Nos.
33-69268 and 811-8042); (8)
Filed in Part A.

FEDERATED EQUITY INCOME FUND II

SEMI-ANNUAL REPORT AND SUPPLEMENT TO THE PROSPECTUS DATED APRIL 22, 1997

A. Please insert the following "Financial Highlights" table as page 1 of the
stand-alone prospectus and page 8 of the combined prospectus. In addition,
please add the headings "Financial Highlights" and "Financial Highlights --
Federated Equity Income Fund II" to the respective Table of Contents.

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
PERIOD
ENDED
(UNAUDITED)
JUNE 30, 1997(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.47
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.11
Net realized and unrealized gain (loss) on investments 1.16
Total from investment operations 1.27
LESS DISTRIBUTIONS
Distributions from net investment income (0.11)
NET ASSET VALUE, END OF PERIOD $11.63
TOTAL RETURN(B) 12.21%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.95%*
Net investment income 2.85%*
Expense waiver/reimbursement(c) 6.81%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $10,316
Average commission rate paid(d) $0.0330
Portfolio turnover 16.72%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from January 30, 1997 (date of initial
public investment) to June 30, 1997.

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

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.

(See Notes which are an integral part of the Financial Statements)

B. Please delete the third sentence of the first paragraph of the section
entitled "Voting Rights" on page 11 of the stand-alone prospectus and replace
with the following:

"As of July 7, 1997, Aetna Retirement Services Central Valuation Unit, Hartford,
Connecticut owned 100.00% of the voting securities of Federated Equity Income
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."

C. Please delete the tenth sentence of the first paragraph of the section
entitled "Voting Rights" on page 36 of the combined prospectus and replace
with the following:

D. Please insert the following Financial Statements after the section entitled
"Performance Information" on page 12 of the stand-alone prospectus and page 37
of the combined prospectus. In addition, please add the heading "Financial
Statements" to the respective Table of Contents after the heading "Performance
Information."

FEDERATED EQUITY INCOME FUND II
PORTFOLIO OF INVESTMENTS

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 69.5%
BASIC INDUSTRY -- 4.8%
6,500 Allegheny Teledyne, Inc. $ 175,500
2,000 Du Pont (E.I.) de Nemours & Co. 125,750
1,600 Eastman Chemical Co. 101,600
1,700 Imperial Chemical Industries, PLC, ADR 96,688
Total 499,538
CONSUMER DURABLES -- 1.1%
3,100 Ford Motor Co. 117,025
CONSUMER NON-DURABLES -- 13.1%
2,800 Avon Products, Inc. 197,575
4,400 General Mills, Inc. 286,550
3,900 Guinness PLC, ADR 190,829
6,400 Heinz (H.J.) Co. 295,200
3,400 Philip Morris Cos., Inc. 150,875
4,600 Tambrands, Inc. 229,425
Total 1,350,454
ENERGY MINERALS -- 6.4%
3,800 Exxon Corp. 233,700
3,400 Mobil Corp. 237,575
6,200 YPF Sociedad Anonima, ADR 190,650
Total 661,925
</TABLE>

FEDERATED EQUITY INCOME FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FINANCE -- 7.1%
3,400 First Union Corp. $ 314,500
6,400 Mellon Bank Corp. 288,800
2,000 NationsBank Corp. 129,000
Total 732,300
HEALTH CARE -- 7.1%
3,400 American Home Products Corp. 260,100
2,800 Bristol-Myers Squibb Co. 226,800
2,400 Merck & Co., Inc. 248,400
Total 735,300
PRODUCER MANUFACTURING -- 6.7%
7,300 Dresser Industries, Inc. 271,925
2,800 General Electric Co. 183,050
3,500 Textron, Inc. 232,313
Total 687,288
RETAIL TRADE -- 1.8%
3,500 Penney (J.C.) Co., Inc. 182,656
SERVICES -- 2.5%
4,500 Block (H&R), Inc. 145,125
3,300 Browning-Ferris Industries, Inc. 109,725
Total 254,850
TECHNOLOGY -- 10.4%
4,500 Avnet, Inc. 258,750
4,400 Electronic Data Systems Corp. 180,400
2,600 General Dynamics Corp. 195,000
2,800 International Business Machines Corp. 252,525
1,800 Lockheed Martin Corp. 186,413
Total 1,073,088
</TABLE>

FEDERATED EQUITY INCOME FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TRANSPORTATION -- 1.2%
1,700 Union Pacific Corp. $ 119,850
UTILITIES -- 7.3%
2,715 Duke Power Co. 130,171
1,600 Enron Corp. 65,300
2,100 NIPSCO Industries, Inc. 86,756
2,100 Portland General Corp. 83,344
2,500 SBC Communications, Inc. 154,688
3,300 Sprint Corp. 173,663
1,500 Williams Cos., Inc. (The) 65,625
Total 759,547
TOTAL COMMON STOCKS (IDENTIFIED COST $6,655,570) 7,173,821
PREFERRED STOCKS -- 18.9%
CONSUMER DURABLES -- 1.2%
9,100 Mattel, Inc., Conv. Pfd., Series C, $.41 128,537
ENERGY MINERALS -- 1.2%
2,200 (a)(b)Tosco Corp., Conv. Pfd. 122,485
FINANCE -- 8.1%
1,500 Frontier Insurance Group, Inc., Conv. Pfd., $3.13 113,250
600 (a)Frontier Insurance Group, Inc., Conv. Pfd., $3.13 45,300
800 Jefferson-Pilot Corp., Conv. Pfd., $5.26 91,800
1,800 Merrill Lynch & Co., Inc., STRYPES 67,500
2,100 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 173,250
5,400 National Australia Bank, Ltd., Melbourne, Exchangeable
Capital Unit, $1.97 150,862
3,300 SunAmerica, Inc., PERCS 143,963
400 SunAmerica, Inc., PERCS, Series E, $3.10 43,350
Total 829,275
</TABLE>

FEDERATED EQUITY INCOME FUND II
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS -- CONTINUED
HEALTH CARE -- 1.5%
1,600 Aetna, Inc., Conv. Pfd., $4.76 $ 150,000
PRODUCER MANUFACTURING -- 1.8%
1,150 Case Corp., Cumulative Conv. Pfd., Series A, $4.50 189,493
SERVICES -- 1.7%
1,800 Browning-Ferris Industries, Inc., ACES, $2.58 59,850
8,500 Hollinger International Publishing, Inc., Conv. Pfd., 97,750
$.95
300 Ikon Office Solutions, Inc., Conv. Pfd., Series BB, $5.04 19,312
Total 176,912
TECHNOLOGY -- 1.6%
1,900 Microsoft Corp., Cumulative Conv. Pfd., Series A, $2.20 165,300
UTILITIES -- 1.8%
1,500 (a)CalEnergy Co., Inc., Conv. Pfd. 85,087
100 CalEnergy Co., Inc., Conv. Pfd., $3.13 7,390
1,200 (b)Salomon, Inc., DECS, Series CSN, $3.48 76,650
200 Williams Cos., Inc. (The), Conv. Pfd., $3.50 20,610
Total 189,737
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,810,996) 1,951,739
CORPORATE BONDS -- 9.4%
CONSUMER DURABLES -- 1.1%
$ 95,000 Magna International, Inc., Conv. Bond, 5.00%, 10/15/2002 114,119
ENERGY MINERALS -- 1.5%
130,000 Diamond Offshore Drilling, Inc., Conv. Bond, 3.75%, 149,907
2/15/2007
HEALTH CARE -- 2.8%
300,000 (a)Roche Holdings, Inc., LYON, 5/6/2012 131,250
130,000 Tenet Healthcare Corp., Conv. Bond, 6.00%, 12/1/2005 162,314
Total 293,564
</TABLE>

FEDERATED EQUITY INCOME FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
RETAIL TRADE -- 1.8%
$ 100,000 Federated Department Stores, Inc., Conv. Bond, 5.00%, $ 119,631
10/1/2003
75,000 Saks Holdings, Inc., Conv. Bond, 5.50%, 9/15/2006 67,031
Total 186,662
TECHNOLOGY -- 2.2%
75,000 (a)EMC Corp. Mass, Sub. Note, 3.25%, 3/15/2002 82,717
115,000 (a)Solectron Corp., Conv. Bond, 6.00%, 3/1/2006 143,935
Total 226,652
TOTAL CORPORATE BONDS (IDENTIFIED COST $926,831) 970,904
(C)REPURCHASE AGREEMENT -- 9.2%
945,000 BT Securities Corporation, 6.00%, dated 6/30/1997, due
7/1/1997
(AT AMORTIZED COST) 945,000
TOTAL INVESTMENTS (IDENTIFIED COST $10,338,397)(D) $ 11,041,464
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1997, these securities amounted
to $199,135 which represents 1.9% of net assets.

(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.

(d) The cost of investments for federal tax purposes amounts to $10,338,397. The
net unrealized appreciation of investments on a federal tax basis amounts to
$703,067 which is comprised of $724,554 appreciation and $21,487
depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($10,315,955) at June 30, 1997.

The following acronyms are used throughout this portfolio:

ACES -- Adjustable Convertible Extendable Securities ADR -- American Depository
Receipt DECS -- Dividend Enhanced Convertible Stock LYON -- Liquid Yield Option
Note PERCS -- Preferred Equity Redemption Cumulative Stock PLC -- Public Limited
Company STRYPES -- Structured Yield Product Exchangeable for Stock

(See Notes which are an integral part of the Financial Statements)

FEDERATED EQUITY INCOME FUND II
STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $11,041,464
$10,338,397)
Cash 194,871
Income receivable 22,258
Total assets 11,258,593
LIABILITIES:
Payable for investments purchased $ 885,815
Accrued expenses 56,823
Total liabilities 942,638
NET ASSETS for 887,375 shares outstanding $10,315,955
NET ASSETS CONSIST OF:
Paid in capital $ 9,610,723
Net unrealized appreciation of investments 703,067
Accumulated net realized gain on investments 323
Undistributed net investment income 1,842
Total Net Assets $10,315,955
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$10,315,955 / 887,375 shares outstanding $11.63
</TABLE>

(See Notes which are an integral part of the Financial Statements)

FEDERATED EQUITY INCOME FUND II
STATEMENT OF OPERATIONS

PERIOD ENDED JUNE 30, 1997* (UNAUDITED)

<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 43,840
Interest 16,096
Total income 59,936
EXPENSES:
Investment advisory fee $ 11,822
Administrative personnel and services fee 50,343
Custodian fees 2,433
Transfer and dividend disbursing agent fees and expenses 8,566
Legal fees 1,075
Portfolio accounting fees 21,631
Share registration costs 8,148
Printing and postage 9,678
Insurance premiums 1,612
Miscellaneous 6,991
Total expenses 122,299
Waivers and reimbursements --
Waiver of investment advisory fee $ (11,822)
Reimbursement of other operating expenses (95,523)
Total waivers and reimbursements (107,345)
Net expenses 14,954
Net investment income 44,982
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 323
Net change in unrealized appreciation of investments 703,067
Net realized and unrealized gain on investments 703,390
Change in net assets resulting from operations $ 748,372
</TABLE>

* For the period from January 30, 1997 (date of initial public investment) to
June 30, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED EQUITY INCOME FUND II
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
PERIOD
ENDED
(UNAUDITED)
JUNE 30, 1997*
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 44,982
Net realized gain on investments ($323, as computed for federal tax purposes) 323
Net change in unrealized appreciation 703,067
Change in net assets resulting from operations 748,372
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (43,140)
SHARE TRANSACTIONS --
Proceeds from sale of shares 10,735,318
Net asset value of shares issued to shareholders in payment of
distributions declared 38,778
Cost of shares redeemed (1,163,373)
Change in net assets resulting from share transactions 9,610,723
Change in net assets 10,315,955
NET ASSETS:
Beginning of period --
End of period (including undistributed net investment income of $1,842) $ 10,315,955
</TABLE>

* For the period from January 30, 1997 (date of initial public investment) to
June 30, 1997.

(See Notes which are an integral part of the Financial Statements)

FEDERATED EQUITY INCOME FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Equity Income Fund II
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The Fund's investment objective is to provide above average income and
capital appreciation.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS -- U.S. government securities, listed corporate bonds,
(other fixed income and asset-backed securities), and unlisted securities and
private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Listed
equity securities are valued at the last sale price reported on a national
securities exchange. Short-term securities are valued at the prices provided
by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.

REPURCHASE AGREEMENTS -- It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to be
paid under the repurchase agreement transaction.

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 the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.

FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.

DEFERRED EXPENSES -- The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being amortized
over a period not to exceed five years from the Fund's commencement date.

RESTRICTED SECURITIES -- Restricted securities are securities that may only be
resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the issuer's
expense either upon demand by the Fund or in connection with another
registered offering of the securities. Many restricted securities may be
resold in the secondary market in transactions exempt from registration. Such
restricted securities may be determined to be liquid under criteria
established by the Trustees. The Fund will not incur any registration costs
upon such resales. The Fund's restricted securities are valued at the price
provided by dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing committee.

Additional information on each restricted security held at June 30, 1997, is
as follows:

FUND
SECURITY ACQUISITION DATE ACQUISITION COST
Salomon, Inc. 1/2/1997 - 6/9/1997 $ 72,118
Tosco Corp. 1/2/1997 - 7/2/1997 161,962

USE OF ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.

OTHER -- Investment transactions are accounted for on the trade date.

3. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).

Transactions in shares were as follows:

<TABLE>
<CAPTION>
PERIOD ENDED
JUNE 30, 1997*
<S> <C>
Shares sold 992,540
Shares issued to shareholders in payment of distributions declared 3,510
Shares redeemed (108,675)
Net change resulting from share transactions 887,375
</TABLE>

* For the period from January 30, 1997 (date of initial public investment) to
June 30, 1997.

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The Adviser may
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses. The Adviser can terminate this voluntary waiver at any
time at its sole discretion.

ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.

DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp., the principal distributor,
from the net assets of the Fund to finance activities intended to result in
the sale of the Fund's shares. The Plan provides that the Fund may incur
distribution expenses up to 0.25% of the average daily net assets of the Fund
shares, annually, to compensate Federated Securities Corp. For the period
ended June 30, 1997, the Fund did not incur a distribution services fee.

PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.

GENERAL -- Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1997, were as follows:

PURCHASES $9,976,271
SALES $ 583,954

TRUSTEES

John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts

OFFICERS
John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

John W. McGonigle
Executive Vice President, Treasurer, and Secretary

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves risk, including possible
loss of principal.

This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.

FEDERATED EQUITY INCOME FUND II

SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS
DATED APRIL 22, 1997

JUNE 30, 1997

[Graphic]
Federated Investors
Federated Securities Corp., Distributor

Cusip 313916801
G01305-01 (7/97)
[Graphic]

FEDERATED EQUITY INCOME FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

Prospectus

This prospectus offers shares of Federated Equity Income Fund II (the "Fund"),
which is a diversified investment portfolio of Federated Insurance Series (the
"Trust"), an open-end management investment company. The Fund's investment
objective is to provide above average income and 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 the 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 RISK,
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 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, 1997, with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 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, 1997

TABLE OF CONTENTS

GENERAL INFORMATION 1
INVESTMENT INFORMATION 1
Investment Objective 1
Investment Policies 1

Portfolio Turnover 6
Investment Limitations 6
Hub and Spoke" Option 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 Fund 8
Distribution of Fund Shares 9
Administration of the Fund 10
Brokerage Transactions 11
Expenses of the Fund 11
SHAREHOLDER INFORMATION 11
Voting Rights 11
TAX INFORMATION 12
Federal Income Tax 12
State and Local Taxes 12
PERFORMANCE INFORMATION 12
APPENDIX 13

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. 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 Board of Trustees ("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 OBJECTIVE

The investment objective of the Fund is to provide above average income and
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 investment
policies described in this prospectus.

INVESTMENT POLICIES

The investment policies described below 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 attempts to achieve its objectives by

investing at least 65% of its assets in income-producing equity securities.
Equity securities include common stocks, preferred stocks, and securities
(including debt securities) that are convertible into common stocks. The portion
of the Fund's total assets invested in common stocks, preferred stocks, and
convertible securities will vary according to the Fund's assessment of market
and economic conditions and outlook.

The Fund's stock selection emphasizes those common stocks in each sector that
have good value, attractive yield, and dividend growth potential. The Fund will
utilize convertible securities because such securities typically offer high
yields and good potential for capital appreciation.

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 Rating
Group ("Standard & Poor's"), 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 here 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.

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.

number of shares of the issuer's common stock. In addition, zero coupon
convertible securities usually have put features that provide the holder with
the opportunity to sell the bonds back to the issuer at a stated price before
maturity. Generally, the prices of zero coupon convertible securities may be
more sensitive to market interest rate fluctuations than conventional
convertible securities.

Federal income tax law requires the holder of a zero coupon convertible security
to recognize income from the security prior to the receipt of cash payments. To
maintain its qualification as a regulated investment company and avoid liability
of federal income taxes, the Fund will be required to distribute income accrued
from zero coupon convertible securities which it owns, and may have to sell
portfolio securities (perhaps at disadvantageous times) in order to generate
cash to satisfy these distribution requirements.

TEMPORARY INVESTMENTS. The Fund may also invest temporarily, in amounts of 35%
or less of the Fund's assets, in cash and cash items during times of unusual
market conditions to maintain liquidity. Cash items may include the following
short-term obligations:

* commercial paper and Europaper (dollar denominated commercial paper issued
outside the United States);

* instruments of domestic and foreign banks and savings associations (such as
certificates of deposit, demand and time deposits, savings shares, and bankers'
acceptances);

* obligations of the U.S. government or its agencies or instrumentalities;
repurchase agreements; and other short-term instruments.

REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
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 adviser to be creditworthy pursuant to
guidelines established by the Trustees.

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.

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.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities, on a short-term or a long-term basis, up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. This policy is a fundamental policy and
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.

The Fund may generally purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers

of the options since 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 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. The Fund will not buy call
options or write put options without further notification to shareholders.

FINANCIAL FUTURES AND OPTIONS ON FUTURES. The Fund may purchase and sell
financial futures contracts to hedge all or a portion of its portfolio against
changes in interest rates. Financial futures contracts call for the delivery of
particular debt instruments at a certain time in the future. The seller of the
contract agrees to make delivery of the type of instrument called for in the
contract and the buyer agrees to take delivery of the instrument at the
specified future time.

The Fund may also write call options and purchase put options on financial
futures contracts as a hedge to attempt to protect securities in its portfolio
against decreases in value. When the Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures contract at a
fixed price at any time during a specified period if the option is exercised.
Conversely, as purchaser of a put option on a futures contract, the Fund is
entitled (but not obligated) to sell a futures contract at the fixed price
during the life of the option.

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the Fund's
existing futures positions and premiums paid for related options would exceed 5%
of the market value of the Fund's total assets. When the Fund purchases futures
contracts, an amount of cash and U.S. Treasury securities, 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.

RISKS. When the Fund uses financial futures and options on financial futures as
hedging devices, much depends on the ability of the portfolio manager to predict
market conditions based upon certain economic analysis and factors. 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 portfolio
manager 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 portfolio manager will
consider liquidity before entering into options transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will exist
for any particular futures contract or option at any particular time.

The Fund's ability to establish and close out futures and options positions
depends on this secondary market.

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which are
subject to restriction on resale under federal securities law. However, the Fund
will limit investments in illiquid securities, including certain restricted
securities determined by the Trustees to be illiquid, non-negotiable time
deposits and repurchase agreements providing for settlement in more than seven
days after notice, to 15% of its net assets.

FOREIGN SECURITIES. The Fund reserves the right to invest in foreign securities
which are traded publicly in the United States. 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. The Fund will only purchase securities issued in U.S. dollar
denominations.

HIGH-YIELD CORPORATE DEBT OBLIGATIONS. The Fund may invest up to 35% of the
value of its total assets in corporate debt obligations that are not investment
grade bonds or are not rated but are determined by the adviser to be of
comparable quality. Securities which are rated BBB or lower by Standard & Poor's
or Baa or lower by Moody's either have speculative characteristics or are
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligations, however rated or unrated bonds are
commonly referred to as "junk 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.

Corporate debt obligations that are not determined to be investment grade are
high-yield, high-risk bonds, typically subject to greater market fluctuations
and greater risk of loss of income and principal due to an issuer's default. To
a greater extent than investment grade bonds, lower rated bonds tend to reflect
short-term corporate, economic and market developments, as well as investor
perceptions of the issuer's credit quality. In addition, lower rated bonds may
be more difficult to dispose of or to value than high-rated, lower-yielding
bonds. The Fund does not intend to invest more than 5% of its assets in
corporate debt obligations that are not investment-grade bonds (excluding
securities convertible into equity securities) during the current fiscal year.

The adviser attempts to reduce the risks described above through diversification
of the portfolio and by credit analysis of each issuer as well as by monitoring
broad economic trends and corporate and legislative developments.

PORTFOLIO TURNOVER

Securities in the Fund's portfolio will be sold whenever the 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. The
adviser to the Fund does not anticipate that portfolio turnover will result in
adverse tax consequences. Any such trading will increase the Fund's portfolio
turnover rate and transaction costs.

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 forgoing
diversification requirements.

STATE INSURANCE REGULATION. 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 that under certain circumstances the Fund may borrow up to one-third of
the value of its total assets and pledge up to 10% of the value of its total
assets to secure such borrowings;

* sell securities short except, under strict limitations, it may maintain open
short positions so long as not more than 10% of the value of its net assets is
held as collateral for those positions;

* invest more than 5% of the value of its total assets in securities of one
issuer (except cash and cash items, repurchase agreements, and U.S. government
obligations) or acquire more than 10% of any class of voting securities of any
issuer; or

* purchase portfolio instruments if, as a result of such purchase, 25% or more
of the value of its total assets would be invested in any one industry.

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:

* commit more than 5% of the value of its total assets to premiums on open put
option positions.

HUB AND SPOKE" OPTION
If the Trustees determine it to be in the best interest of the Fund and its
shareholders, the Fund may in the future seek to achieve its investment
objective by investing all of its assets in another investment company having
the same investment objective and substantially the same investment policies and
restrictions as those applicable to the Fund. It is expected that any such
investment company would be managed in substantially the same manner as the
Fund.

The initial shareholder of the Fund (which is an affiliate of Federated

Securities Corp.) voted to vest authority to use this investment structure
in the sole discretion of the Trustees. No further approval of shareholders
is required. Shareholders will receive at least 30 days prior notice of any
such investment.

In making its determination, the Trustees will consider, among other things, the
benefits to shareholders and/or the opportunity to reduce costs and achieve
operational efficiencies. Although it is expected that the Trustees will not
approve an arrangement that is likely to result in higher costs, no assurance is
given that costs will remain the same or be materially reduced if this
investment structure is implemented.

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'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.

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 at 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 during 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 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 monthly.

Shares of the Fund begin earning dividends if owned on the record date.
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

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 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 interests. 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 adviser receives an annual investment advisory fee equal to
0.75% of the Fund's average daily net assets. The adviser may voluntarily waive
a portion of its fee or reimburse the Fund for certain operating expenses. The
adviser can terminate this voluntary waiver 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 $110 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1996, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 2,000 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,500 financial institutions nationwide.

Linda A. Duessel has been the Fund's portfolio manager since February 1997.
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

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.

DISTRIBUTION PLAN. Under a distribution plan adopted in accordance with Rule

12b-1 under the Investment Company Act of 1940 (the "Plan"), the distributor may
be paid a fee by the Fund in an amount computed at an annual rate of up to 0.25%
of the average daily net asset value of the Fund. The distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales services or
distribution-related support services as agents for their clients or customers.
Financial institutions will receive fees based upon shares owned by their
clients or customers. The schedules of such fees will be determined from time to
time by the distributor. The Fund is not currently paying any 12b-1 fees under
the Plan. Should the Fund begin to pay these fees, shareholders will be
notified.

The Plan is a compensation-type Plan. As such, the Fund makes no payments to the
distributor except as described above. Therefore, the Fund does not pay for
unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plan.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp. from
its own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance may be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and

nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's investment
adviser or its affiliates.

ADMINISTRATION OF THE FUND

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 which relates to the
average aggregate daily net assets of all funds advised by affiliates of
Federated Investors as specified below:

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

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

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 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 the Fund
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.

EXPENSES OF THE FUND

Holders of shares of the Fund pay their allocable portion of Trust and Fund
expenses.

The Trust expenses for which holders of shares of the Fund pay their allocable
portion include, but are not limited to the cost of: organizing the Trust and
continuing its existence; registering the Trust with federal and state
securities authorities; Trustees' fees; auditors' fees; meetings of Trustees and
shareholders and proxy solicitations therefor; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise from time to time.

The Fund expenses for which holders of shares of the Fund pay their allocable
portion include, but are not limited to: registering the portfolio and shares of
the portfolio; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise from time to time.

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 24, 1997, Aetna Retirement Services Central Valuation Unit,
Hartford, Connecticut owned 99.98% of the voting securities of Federated Equity
Income 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. Aetna Retirement Services Central Valuation Unit is owned by
Aetna Inc.

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 the 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 INCOME TAX

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

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.

Total return represents the change, over a specific period of time, in the value
of an investment in each class of shares after reinvesting all income and
capital gains distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.

The yield of each class of shares is calculated by dividing the net investment
income per share (as defined by the SEC) earned by the Fund over a thirty-day
period by the maximum 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

STANDARD AND POOR'S RATINGS GROUP LONG-TERM DEBT RATINGS

AAA -- Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA -- Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A -- Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB -- Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

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 greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse

business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.

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

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

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

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 S&P 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 some time 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+.

A -- Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds and, therefore,
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.

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

B -- Bonds are considered highly speculative. While bonds in this class are

currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.

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

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

C -- Bonds are 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.

MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS

PRIME-1 -- Issuers rated Prime-1 (or related supporting institutions) have a

superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:

* Leading market positions in well established industries.

* High rates of return on funds employed.

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

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

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

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

STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-1 -- This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong

safety characteristics are denoted with a plus sign (+) designation.

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

FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS

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

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

ADDRESSES

Federated Equity Income 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
Transfer Agent and Dividend Disbursing
Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania
15222-5401

FEDERATED EQUITY INCOME FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

Prospectus

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

April 22, 1997

[Graphic]
Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.

Cusip 313916801
G01298-01 (4/97)

FEDERATED INSURANCE SERIES

PROSPECTUS

This prospectus offers shares of eight 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
eight separate investment portfolios, each having distinct investment objectives
and policies:

* 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;
* Federated International Equity Fund II; and
* Federated Equity Income Fund II.

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.

Federated High Income Bond Fund II may invest primarily in lower rated bonds,
commonly referred to as "junk bonds." Investments of this type are subject to a
greater risk of loss of principal and interest than investments in higher rated
securities. Purchasers should carefully assess the risks associated with an
investment in Federated High Income Bond Fund II.

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.

The Trust has also filed a Statement of Additional Information dated April 22,
1997, with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. To
obtain other information or to make inquiries about a Fund, contact the Trust at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Trust is maintained electronically with the SEC at
Internet web site (http://www.sec.gov).

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, 1997

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
8
Investment Objective 8
Investment Policies 9
Investment Limitations 10
FEDERATED GROWTH STRATEGIES FUND II INVESTMENT INFORMATION
10
Investment Objective 10
Investment Policies 10
Investment Limitations 12
FEDERATED UTILITY FUND II INVESTMENT INFORMATION
12
Investment Objective 12
Investment Policies 12
Investment Limitations 14
FEDERATED PRIME MONEY FUND II INVESTMENT INFORMATION
14
Investment Objective 14
Investment Policies 14
Investment Risks 16
Investment Limitations 16
FEDERATED FUND FOR U.S. GOVERNMENT
SECURITIES II
INVESTMENT INFORMATION 16
Investment Objective 16
Investment Policies 17
Investment Limitations 18
FEDERATED HIGH INCOME BOND FUND II INVESTMENT INFORMATION
18
Investment Objective 18
Investment Policies 18
Investment Risks 19
Investment Limitations 20
FEDERATED INTERNATIONAL EQUITY FUND II INVESTMENT INFORMATION
21
Investment Objective 21
Investment Policies 21
Investment Limitations 25
FEDERATED EQUITY INCOME FUND II INVESTMENT INFORMATION
25
Investment Objective 25
Investment Policies 26
Portfolio Turnover 28
Investment Limitations 28
Hub and Spoke" Option (Federated Equity Income Fund II Only)

28
INVESTMENT POLICIES AND PRACTICES 29
Convertible Securities 29
Repurchase Agreements 30
Restricted and Illiquid Securities 30
When-Issued and Delayed Delivery Transactions
30
Lending of Portfolio Securities 30
Variable Asset Regulations 31
State Insurance Regulations 31
NET ASSET VALUE 31
INVESTING IN THE FUNDS 31
Purchases and Redemptions 31
What Shares Cost 32
Dividends 32
FEDERATED INSURANCE SERIES INFORMATION 32
Management of Federated
Insurance Series 32
Fund Managers 33
Distribution of Fund Shares 34
Administration of the Funds 35
Brokerage Transactions 35
Expenses of Federated Equity
Income Fund II 36
SHAREHOLDER INFORMATION 36
Voting Rights 36
TAX INFORMATION 37
Federal Taxes 37
State and Local Taxes 37
PERFORMANCE INFORMATION 37
APPENDIX 38
ADDRESSES Inside Back Cover

FEDERATED AMERICAN LEADERS FUND II
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, 1997, on the Fund's
Financial Statements for the year ended December 31, 1996, and on the following
table for each of the periods presented, is included in the Fund's Annual
Report, which is incorporated herein by reference. This table should be read in
conjunction with the Fund's Financial Statements and notes thereto, contained in
the Fund's Annual Report, which may be obtained from the Fund. <TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.80 $ 9.74 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.19 0.20 0.19
Net realized and unrealized gain 2.54 3.06 (0.26)
(loss) on investments
Total from investment operations 2.73 3.26 (0.07)
LESS DISTRIBUTIONS
Distributions from net investment (0.18) (0.19) (0.19)
income
Distributions in excess of net -- (0.01) --
investment income(b)
Distributions from net realized gain (0.09) -- --
on investments
Total distributions (0.27) (0.20) (0.19)
NET ASSET VALUE, END OF PERIOD $15.26 $12.80 $ 9.74
TOTAL RETURN(C) 21.58% 33.71% (0.70)%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.85% 0.54%*
Net investment income 1.54% 2.03% 2.58%*
Expense waiver/reimbursement(d) 0.22% 1.36% 25.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 $142,216 $48,514 $2,400
omitted)
Average commission rate paid(e) $0.0012 -- --
Portfolio turnover 90% 43% 32%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 1, 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 principals. 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.

(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1, 1995.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated December 31, 1996, which can be obtained free of charge.

FEDERATED GROWTH STRATEGIES FUND II
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, 1997, on the Fund's
Financial Statements for the year ended December 31, 1996, and on the following
table for each of the periods presented, is included in the Fund's Annual
Report, which is incorporated herein by reference. This table should be read in
conjunction with the Fund's Financial Statements and notes thereto, contained in
the Fund's Annual Report, which my be obtained from the Fund. <TABLE> <CAPTION>
YEAR ENDED
DECEMBER 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.30 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.03
Net realized and unrealized gain on investments 2.45 0.27
Total from investment operations 2.50 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.004) --
NET ASSET VALUE, END OF PERIOD $12.80 $10.30
TOTAL RETURN(B) 24.32% 3.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.85%*
Net investment income 0.55% 1.91%*
Expense waiver/reimbursement(c) 3.87% 76.95%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $16,985 $368
Average commission rate paid(d) $0.0376 --
Portfolio turnover 96% 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.

(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged. This
disclosure is required for fiscal years beginning on or after September 1, 1995.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated December 31, 1996, which can be obtained free of charge.

FEDERATED UTILITY FUND II
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, 1997, on the Fund's
Financial Statements for the year ended December 31, 1996, and on the following
table for each of the periods presented, is included in the Fund's Annual
Report, which is incorporated herein by reference. This table should be read in
conjunction with the Fund's Financial Statements and notes thereto, contained in
the Fund's Annual Report, which may be obtained from the Fund. <TABLE> <CAPTION>
YEAR ENDED DECEMBER
31,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.03 $ 9.29 $ 9.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.42 0.45 0.34
Net realized and unrealized gain (loss)
on investments
and foreign currency 0.82 1.74 (0.19)
Total from investment operations 1.24 2.19 0.15
LESS DISTRIBUTIONS
Distributions from net investment income (0.41) (0.45) (0.34)
Distributions from net realized gain on
investments
and foreign currency transactions (0.05) -- --
Total distributions (0.46) (0.45) (0.34)
NET ASSET VALUE, END OF PERIOD $11.81 $11.03 $ 9.29
TOTAL RETURN(B) 11.56% 24.18% 1.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85% 0.85% 0.60%*
Net investment income 3.92% 4.62% 4.77%*
Expense waiver/reimbursement(c) 0.51% 2.24% 54.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $63,558 $29,679 $974
Average commission rate paid(d) $.0402 -- --
Portfolio turnover 63% 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, 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, 1996, which can be obtained free of charge.

FEDERATED PRIME MONEY FUND II
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, 1997, on the Fund's
Financial Statements for the year ended December 31, 1996, and on the following
table for each of the periods presented, is included in the Fund's Annual
Report, which is incorporated herein by reference. This table should be read in
conjunction with the Fund's Financial Statements and notes thereto, contained in
the Fund's Annual Report, which may be obtained from the Fund. <TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.05) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 4.75% 5.20% 0.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.80%*
Net investment income 4.68% 5.12% 4.26%*
Expense waiver/reimbursement(c) 0.57% 2.69% 71.84%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $45,655 $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, 1996, which can be obtained free of charge.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.29 $ 9.99 $ 9.99
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.59 0.54 0.27
Net realized and unrealized gain (loss) (0.18) 0.30 --
on investments
Total from investment operations 0.41 0.84 0.27
LESS DISTRIBUTIONS
Distributions from net investment income (0.57) (0.54) (0.27)
Distributions from net realized gain on (0.04) -- --
investments
Total distributions (0.61) (0.54) (0.27)
NET ASSET VALUE, END OF PERIOD $10.09 $10.29 $ 9.99
TOTAL RETURN(B) 4.20% 8.77% 2.62%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.48%*
Net investment income 6.00% 6.00% 3.99%*
Expense waiver/reimbursement(c) 1.01% 4.81% 32.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $34,965 $12,264 $1,244
Portfolio turnover 97% 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, 1996, which can be obtained free of charge.

FEDERATED HIGH INCOME BOND FUND II
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, 1997, on the Fund's
Financial Statements for the year ended December 31, 1996, and on the following
table for each of the periods presented, is included in the Fund's Annual
Report, which is incorporated herein by reference. This table should be read in
conjunction with the Fund's Financial Statements and notes thereto, contained in
the Fund's Annual Report, which may be obtained from the Fund. <TABLE> <CAPTION>
YEAR ENDED DECEMBER 31,
1996 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.79 $ 8.87 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.88 0.85 0.75
Net realized and unrealized gain (loss) 0.45 0.89 (1.12)
on investments
Total from investment operations 1.33 1.74 (0.37)
LESS DISTRIBUTIONS
Distributions from net investment income (0.88) (0.82) (0.75)
Distributions in excess of net -- -- (0.01)
investment income(d)
Total distributions (0.88) (0.82) (0.76)
NET ASSET VALUE, END OF PERIOD $10.24 $ 9.79 $ 8.87
TOTAL RETURN(B) 14.31% 20.38% (3.73%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.41%*
Net investment income 9.23% 9.27% 9.11%*
Expense waiver/reimbursement(c) 0.59% 3.40% 10.01%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $66,043 $20,165 $1,457
Portfolio turnover 51% 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, 1996, which can be obtained free of charge.

FEDERATED INTERNATIONAL EQUITY FUND II
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, 1997, on the Fund's
Financial Statements for the year ended December 31, 1996, and on the following
table for each of the periods presented, is included in the Fund's Annual
Report, which is incorporated herein by reference. This table should be read in
conjunction with the Fund's Financial Statements and notes thereto, contained in
the Fund's Annual Report, which my be obtained from the Fund.
<TABLE>
<CAPTION>
YEAR ENDED PERIOD
ENDED
DECEMBER 31, DECEMBER
31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.11** 0.07
Net realized and unrealized gain (loss) on
investments and
foreign currency 0.75 0.28
Total from investment operations 0.86 0.35
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) --
NET ASSET VALUE, END OF PERIOD $11.16 $10.35
TOTAL RETURN(B) 8.32% 3.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.25% 1.22%*
Net investment income 0.89% 1.63%*
Expense waiver/reimbursement(c) 3.05% 11.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $17,752 $4,760
Average commission rate paid(d) $0.0030 --
Portfolio turnover 103% 34%
</TABLE>

* Computed on an annualized basis.

** Per share information presented is based upon the monthly average number of
shares outstanding.

(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, 1996, 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. 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 Board of Trustees
("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.

For purposes of this prospectus, "Federated Funds" shall mean two or more funds
for which affiliates of Federated Investors serve as investment adviser and
principal underwriter.

The Trust, which is designed to meet a variety of investment objectives, offers
shares of beneficial interest in the following eight 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;

* 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; and

* Federated Equity Income Fund II -- a portfolio seeking above average income
and capital appreciation by investing at least 65% of its assets in
income-producing equity securities.

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 considered this when approving the use of a single 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

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.

AMERICAN DEPOSITARY RECEIPTS. The Fund may invest in American Depositary
Receipts ("ADRs") of foreign-domiciled blue-chip companies. ADRs are trust
receipts issued by U.S. banks or trust companies representing ownership
interests in the equity securities of these companies. ADRs are U.S.
dollar-denominated and traded on U.S. securities exchanges or
over-the-counter. The value of ADRs could be affected by changes in foreign
currency exchange rates.

BANK INSTRUMENTS. 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.

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. 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
Federated Funds.

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 Standard & Poor's Ratings Group
("S&P"), Prime-1 or Prime-2 by Moody's Investor Service, Inc. ("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.

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 Policies and Practices."

FEDERATED GROWTH STRATEGIES FUND II 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 invest in put
and call options, futures, and options on futures.

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 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.

* 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.

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 Policies and Practices."

FEDERATED UTILITY FUND II
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 Fund may
invest in convertible securities of 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.

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.

The Fund will take advantage of the unusual opportunities for higher returns
available from investing in developing countries and may invest up to 10% of its
total assets in the utility securities of such countries. These investments
carry considerably more volatility and risk because they are associated with
less mature economies and less stable political systems.

RISK CONSIDERATIONS IN DEVELOPING COUNTRIES. Securities prices in developing
countries can be significantly more volatile than in developed countries,
reflecting the greater uncertainties of investing in lesser developed markets
and economies. In particular, developing countries may have relatively unstable
governments, and may present the risk of nationalization of businesses,
expropriation, confiscatory taxation or, in certain instances, reversion to
closed market, centrally planned economies. Such countries may also have
restrictions on foreign ownership or prohibitions on the repatriation of assets,
and may have less protection of property rights than developed countries.

The economies of developing countries may be predominantly based on only a few
industries or dependent on revenues from particular commodities or on
international aid or development assistance, may be highly vulnerable to changes
in local or global trade conditions, and may suffer from extreme and volatile
debt burdens or inflation rates. In addition, securities markets in developing
countries may trade a small number of securities and may be unable to respond
effectively to increase in trading volume, potentially resulting in a lack of
liquidity and in volatility in the price of securities traded on those markets.
Also, securities markets in developing countries typically offer less regulatory
protection for investors.

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.

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 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.

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 Policies and Practices."

FEDERATED PRIME MONEY FUND II 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 diversification and other 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.

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.

CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may be credit
enhanced by a guaranty, letter of credit or insurance. Any bankruptcy,
receivership, default or change in the credit quality of the party providing the
credit enhancement will adversely affect the quality and marketability of the
underlying security and could cause losses to the Fund and affect its share
price.

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.

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

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

INVESTMENT RISKS

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 limitation cannot be changed without shareholder approval.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Policies and Practices."

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II 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 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 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;

* notes, bonds and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;

* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

* notes, bonds and discount notes of other U.S. government instrumentalities
supported only by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government 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 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 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 Policies and Practices."

FEDERATED HIGH INCOME BOND FUND II 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
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 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" below.

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

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

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 are regarded as having predominately 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 and may include bonds in default. 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.

AS A PERCENTAGE OF TOTAL
MARKET VALUE OF BOND
HOLDINGS AS OF
DECEMBER 31, 1996
CREDIT RATING RATED
BB & BBB 17.0%
B 73.0%
CCC 4.0%
D 0.1%
Not Rated 5.9%
Total 100.0%

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 its total assets to secure such borrowings.

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

The Fund will not:

* invest more than 15% of its net asset in illiquid securities.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Policies and Practices."

FEDERATED INTERNATIONAL EQUITY FUND II 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,
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 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.

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.

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.

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.

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 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.

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 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.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Policies and Practices."

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.

FEDERATED EQUITY INCOME FUND II INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The investment policies described below 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 attempts to achieve its objectives by investing
at least 65% of its assets in income-producing equity securities. Equity
securities include common stocks, preferred stocks, and securities (including
debt securities) that are convertible into common stocks. The portion of the
Fund's total assets invested in common stocks, preferred stocks, and convertible
securities will vary according to the Fund's assessment of market and economic
conditions and outlook.

ZERO COUPON CONVERTIBLE SECURITIES. Zero coupon convertible securities are debt
securities which are issued at a discount to their face amount and do not
entitle the holder to any periodic payments of interest prior to maturity.
Rather, interest earned on zero coupon convertible securities accretes at a
stated yield until the security reaches its face amount at maturity. Zero coupon
convertible securities are convertible into a specific number of shares of the
issuer's common stock. In addition, zero coupon convertible securities usually
have put features that provide the holder with the opportunity to sell the bonds
back to the issuer at a stated price before maturity. Generally, the prices of
zero coupon convertible securities may be more sensitive to market interest rate
fluctuations than conventional convertible securities.

* commercial paper and Europaper (dollar denominated commercial paper issued
outside the United States);

* instruments of domestic and foreign banks and savings associations (such as
certificates of deposit, demand and time deposits, savings shares, and bankers'
acceptances); or

* obligations of the U.S. government or its agencies or instrumentalities;
repurchase agreements; and other short-term instruments.

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 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 Fund may generally purchase and write
over-the-counter options on portfolio securities in negotiated transactions with
the buyers or writers of the options since 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 adviser.

PORTFOLIO TURNOVER

INVESTMENT LIMITATIONS

The Fund will not:

* sell securities short except, under strict limitations, it may maintain open
short positions so long as not more than 10% of the value of its net assets is
held as collateral for those positions;

* purchase portfolio instruments if, as a result of such purchase, 25% or more
of the value of its total assets would be invested in any one industry.

The Fund will not:

* commit more than 5% of the value of its total assets to premiums on open put
option positions.

In addition, the Fund may purchase the investments and engage in the investment
techniques described below under "Investment Policies and Practices."

HUB AND SPOKE" OPTION (FEDERATED EQUITY INCOME FUND II ONLY)

If the Trustees determine it to be in the best interest of the Federated Equity
Income Fund II and its shareholders, the Fund may in the future seek to achieve
its investment objective by investing all of its assets in another investment
company having the same investment objective and substantially the same
investment policies and restrictions as those applicable to the Fund. It is
expected that any such investment company would be managed in substantially the
same manner as the Fund.

The initial shareholder of the Fund (which is an affiliate of Federated
Securities Corp.) voted to vest authority to use this investment structure in
the sole discretion of the Trustees. No further approval of shareholders is
required. Shareholders will receive at least 30 days prior notice of any such
investment.

INVESTMENT POLICIES AND PRACTICES

The following investment policies and practices, unless indicated otherwise, may
be changed without approval of shareholders.

CONVERTIBLE SECURITIES

Federated American Leaders Fund II, Federated Growth Strategies Fund II,
Federated Utility Fund II, Federated International Equity Fund II and Federated
Equity Income Fund II may invest in 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 Funds (with the exception of Federated
International Equity Fund II) invest 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 a Fund has purchased it, the Fund is not required to drop
the convertible bond from the portfolio but will consider appropriate action.
With respect to Federated International Equity Fund II, the Fund will invest in
convertible securities that are rated, at the time of purchase, investment grade
by a nationally recognized statistical rating organization or, if unrated, of
comparable quality as determined by the investment adviser. 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.

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. A 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, a
Fund will hold or trade the convertible securities. In selecting convertible
securities for a 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 security's investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

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 in restricted securities. This policy 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, the 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). Federated High Income Bond Fund II will limit investments
in illiquid securities, including certain restricted securities not determined
by the Trustees to be liquid and repurchase agreements providing for settlement
in more than seven days after notice, to 15% of the value of its total assets.

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.

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. (Federated International Equity Fund II is not subject
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.

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 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, Federated
International Equity Fund II, and Federated Equity Income 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."

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
Funds.

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 Growth Strategies Fund II and Federated
International Equity Fund II are declared and paid annually. Dividends on shares
of Federated American Leaders 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, Federated High Income Bond Fund II, and Federated
Equity Income 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, Federated
International Equity Fund II, and Federated Equity Income 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

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, Federated High Income Bond
Fund II and Federated Equity Income 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, 0.75% of the average daily net assets for Federated American Leaders
Fund II, Federated Growth Strategies Fund II, Federated Utility Fund II, and
Federated Equity Income Fund II, 0.60% of the average daily net assets for
Federated Fund for U.S. Government Securities II and Federated High Income Bond
Fund II, and 0.50% 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 $110
billion invested across more than 300 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated Investors
is one of the largest mutual fund investment managers in the United States. With
more than 2,000 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,500 financial institutions nationwide.

FUND MANAGERS

FEDERATED AMERICAN LEADERS FUND II. Scott B. Schermerhorn has been the
Fund's portfolio manager since July 1996. Mr. Schermerhorn joined Federated
Investors in 1996 as a Vice President of the Fund's investment adviser. From
1990 through 1996, Mr. Schermerhorn was a Senior Vice President and Senior
Investment Officer at J W Seligman & Co., Inc. Mr. Schermerhorn received his
M.B.A. in Finance and International Business from Seton Hall University.

Michael P. Donnelly has been the Fund's portfolio manager since April 1997.
Mr. Donnelly joined Federated in 1989 as an Investment Analyst
and has been a Vice President of the Fund's adviser since 1994. He served as
an Assistant Vice President of the Fund's adviser from 1992 to
1994. Mr. Donnelly is a Chartered Financial Analyst and received his M.B.A.
from the University of Virginia.

Peter R. Anderson has been the Fund's portfolio manager since the Fund's
inception. 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 a Vice President of the Fund's
investment adviser since 1996. From 1994 until 1996, Mr. Grefenstette acted
as an Assistant Vice President of the Fund's investment adviser, and served
as an Investment Analyst of the investment advisor from 1992 to 1994. 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.

FEDERATED UTILITY FUND II AND FEDERATED EQUITY INCOME FUND II. Linda A.
Duessel has been Federated Utility Fund II's portfolio manager since April
1995. Ms. Duessel has been Federated Equity Income Fund II's portfolio
manager since February 1997. 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's inception. 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.

Todd A. Abraham has been the Fund's portfolio manager since April 1997. Mr.
Abraham joined Federated Investors in 1993 as an Investment Analyst and has
been an Assistant Vice President of the Fund's investment adviser since
1995. Mr. Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from
1992 to 1993. Mr. Abraham received his M.B.A. in finance from Loyola
College.

FEDERATED HIGH INCOME BOND FUND II. Mark E. Durbiano has been the Fund's
portfolio manager since the Fund's inception. 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.

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 until 1995.

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 Vice
President/Portfolio Manager of international equity portfolios at Arnhold
and Bleichroeder, Inc. from 1994 to 1995. He served as an Assistant Vice
President/Portfolio Manager for international equities at the College
Retirement Equities Fund from 1986 to 1994. Mr. Collins is a Chartered
Financial Analyst and received his M.B.A. in finance from the Wharton School
of The University of Pennsylvania.

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 a Portfolio Manager/Associate
Director 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.

DISTRIBUTION PLAN (FEDERATED EQUITY INCOME FUND II ONLY). Under a distribution
plan adopted in accordance with Rule 12b-1 under the Investment Company Act of
1940 (the "Plan"), the distributor may be paid a fee by the Fund in an amount
computed at an annual rate of up to 0.25% of the average daily net asset value
of the Fund. The distributor may select financial institutions such as banks,
fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales services or distribution-related support
services as agents for their clients or customers. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees will be determined from time to time by the distributor.
The Fund is not currently paying any 12b-1 fees under the Plan. Should the Fund
begin to pay these fees, shareholders will be notified. The Plan is a
compensation-type Plan. As such, the Fund makes no payments to the distributor
except as described above. Therefore, the Fund does not pay for unreimbursed
expenses of the distributor, including amounts expended by the distributor in
excess of amounts received by it from the Fund, interest, carrying or other
financing charges in connection with excess amounts expended, or the
distributor's overhead expenses. However, the distributor may be able to recover
such amounts or may earn a profit from future payments made by the Fund under
the Plan.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. Federated Securities Corp.,
from its own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Funds. Such assistance may be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by each Fund's investment
adviser or its affiliates.

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 Funds.
Federated Services Company provides these at an annual rate which relates to the
average aggregate daily net assets of all funds advised by affiliates of
Federated Investors as specified below:

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

BROKERAGE TRANSACTIONS

EXPENSES OF FEDERATED EQUITY INCOME FUND II

Holders of shares of Federated Equity Income Fund II pay their allocable portion
of Trust and Fund expenses.

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 24, 1997, Aetna Insurance Company of America,
Hartford, Connecticut and Aetna Life Insurance & Annuity Co., Hartford
Connecticut, owned 41.32% and 41.79%, 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 24, 1997, Aetna Retirement
Plan Services Central Valuation Unit, Hartford, Connecticut, owned 100% 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 24, 1997,
Life of Virginia, Richmond, Virginia and Aetna Retirement Services Central
Valuation Unit, Hartford, Connecticut, owned 34.19% and 48.62%, 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 24, 1997,
United of Omaha Life Insurance Co., Omaha, Nebraska, owned 42.85% 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 24, 1997,
United of Omaha Life Insurance Co., Omaha, Nebraska, and Aetna Retirement
Services Central Valuation Unit, Hartford, Connecticut owned 34.52% and 31.83%,
respectively, of the voting securities of Federated U.S. Government Securities
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 24, 1997, Aetna Retirement Plan Services Central
Valuation Unit, Hartford, Connecticut, owned 60.83% 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 24, 1997, Aetna Retirement
Plan Services Central Valuation Unit, Hartford, Connecticut, owned 95.47% 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. As of March 24,
1997, Aetna Retirement Plan Services Central Valuation Unit, Hartford,
Connecticut, owned 99.98% of the voting securities of Federated Equity Income
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. Aetna Insurance Company of America, Aetna Life Insurance & Annuity
Co., and Aetna Retirement Plan Services Central Valuation Unit are owned by
Aetna Inc. United of Omaha Life Insurance Co. is owned by Mutual of Omaha
Insurance Company. Life of Virginia is owned by General Electric Capital
Assurance Company.

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

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 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, Federated
International Equity Fund II and Federated Equity Income Fund II advertise total
return and yield. From time to time Federated Prime Money Fund II advertises its
total return, yield and effective 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 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, Federated International
Equity Fund II and Federated Equity Income Fund II are calculated by dividing
the net investment income per share (as defined by the SEC) earned by the Fund
over a thirty-day period by the maximum 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.

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.

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

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.

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.

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.

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:
* 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

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

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

ADDRESSES

Federated 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

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

Independent Auditors

Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania
15222-5401

FEDERATED INSURANCE SERIES

PROSPECTUS

An Open-End Management
Investment Company

* Federated American Leaders Fund II
* Federated Growth Strategies Fund II
* Federated Utility Fund II
* Federated Prime Money Fund II
* Federated High Income Bond Fund II
* Federated Fund for U.S. Government Securities II
* Federated International Equity Fund II
* Federated Equity Income Fund II

April 22, 1997

[Graphic]

Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the funds
and is a subsidiary of Federated Investors.

Cusip 313916306 Cusip 313916702 Cusip 313916108 Cusip 313916504 Cusip 313916603
Cusip 313916405 Cusip 313916207 Cusip 313916801 4011006A (4/97)

FEDERATED EQUITY INCOME FUND II

(A Portfolio of Federated Insurance Series)
Supplement to Statement of Additional Information dated April 22, 1997

A. Please delete the final sentence of the section entitled "Portfolio
Turnover" on page 4 of the stand-alone Statement of Additional Information
("SAI") and replace with the following:
"The Fund's portfolio turnover rate for the period from January 30, 1997
(date of initial public investment) to June 30, 1997, was 16.72%." B. Please
delete the final sentence of the second paragraph of the section entitled
"Portfolio Turnover" on page 15 of the
combined SAI and replace with the following:
"The portfolio turnover rate of Federated Equity Income Fund II for the
period from January 30, 1997 (date of initial public investment) to June 30,
1997, was 16.72%." C. Please delete the second paragraph of the section entitled
"Fund Ownership" on page 10 of the stand-alone SAI and
replace with the following:
"As of July 7, 1997, the following shareholder of record owned 5% or more
of the outstanding shares of Federated Equity Income Fund II: Aetna
Retirement Services Central Valuation Unit, Hartford, Connecticut owned
1,010,174 shares (100.00%)."
D. Please delete the ninth paragraph of the section entitled "Fund Ownership"
which begins on page 23 of the combined SAI and replace with the following:
"As of July 7, 1997, the following shareholder of record owned 5% or more
of the outstanding shares of Federated Equity Income Fund II: Aetna
Retirement Services Central Valuation Unit, Hartford, Connecticut owned
1,010,174 shares (100.00%)."
E. Please insert the following as the second paragraph of the section entitled
"Advisory Fees" on page 12 of the stand-
alone SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, Federated Advisers earned advisory fees from the Fund of
$11,822, all of which was voluntarily waived." F. Please insert the following as
the final sentence of the second paragraph of the section entitled "Advisory
Fees" on
page 26 of the combined SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, Federated Advisers earned advisory fees from
Federated Equity Income Fund II of $11,822, all of which was voluntarily
waived."
G. Please insert the following as the final sentence of the second paragraph
of the section entitled "Brokerage
Transactions" on page 12 of the stand-alone SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, the Fund paid $6,583 in brokerage commissions on brokerage
transactions." H. Please insert the following as the final sentence of the
second paragraph of the section entitled "Brokerage
Transactions" which begins on page 26 of the combined SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, Federated Equity Income Fund II paid $6,583 in brokerage
commissions on brokerage transactions." I. Please insert the following as the
second sentence of the section entitled "Fund Administration" on page 12 of the
stand-alone SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, Federated Services Company earned $50,343 from the Fund." J.
Please insert the following as the final sentence of the section entitled "Fund
Administration" on page 27 of the
combined SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, Federated Services Company earned $50,343 from Federated
Equity Income Fund II." K. Please delete the section entitled "Total Return" on
page 14 of the stand-alone SAI and replace with the following:
"Total Return
The Fund's cumulative total return for the period from January 30, 1997
(date of initial public investment) to June 30, 1997, was 12.21%.
Cumulative total return reflects the Fund's total performance over a
specific period of time. The Fund's total return is representative of
approximately six months of investment activity since the Fund's
effective date."
L. Please insert the following as the final three sentences of the first
paragraph of the section entitled "Total Return" on
page 31 of the combined SAI:
"For the period from January 30, 1997 (date of initial public investment)
to June 30, 1997, the cumulative total return of Federated Equity Income
Fund II was 12.21%. Cumulative total return reflects the total performance
of Federated Equity Income Fund II over a specific period of time. This
total return is representative of approximately six months of investment
activity since the effective date of Federated Equity Income Fund II."
M. Please insert the following as the first paragraph of the section entitled
"Yield" on page 14 of the stand-alone SAI: The Fund's yield for the period
from January 30, 1997 (date of initial public investment) to June 30,
1997, was 2.01%.
N. Please insert the following as the final sentence of the first paragraph of
the section entitled "Yield" on page 31 of the combined SAI:
The yield of Federated Equity Income Fund II for the thirty-day period
ended June 30, 1997, was 2.01%.

[GRAPHIC OMITTED]

Cusip 313916801
G01305-13 (7/97)

FEDERATED EQUITY INCOME FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
STATEMENT OF ADDITIONAL INFORMATION This Statement of
Additional Information should be read with the prospectus of the Federated
Equity Income Fund II (the `Fund"), a portfolio of Federated Insurance
Series (the `Trust") dated April 22, 1997. This Statement is not a
prospectus. 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
1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated April 22, 1997

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 313916801
G01298-02 (4/97)
GENERAL INFORMATION ABOUT THE FUND 1

INVESTMENT OBJECTIVES AND POLICIES 1

Convertible Securities 1
Temporary Investments 1
Warrants 2
When-Issued and Delayed Delivery Transactions 2
Repurchase Agreements 2
Futures and Options Transactions 2
Restricted and Illiquid Securities 4
Lending of Portfolio Securities 5
Reverse Repurchase Agreements 5
Portfolio Turnover 5
INVESTMENT LIMITATIONS 5

FEDERATED INSURANCE SERIES MANAGEMENT 8

Fund Ownership 12
Trustees Compensation 12
Trustees Liability 13
INVESTMENT ADVISORY SERVICES 13

Adviser to the Fund 13
Advisory Fees 13
BROKERAGE TRANSACTIONS 13

OTHER SERVICES 13

Fund Administration 13
Custodian and Portfolio Accountant 14
Transfer Agent 14
Independent Auditors 14
PURCHASES AND REDEMPTIONS 14

Distribution Plan 14

Table of Contents

DETERMINING NET ASSET VALUE 14

Determining Market Value of Securities 15
MASSACHUSETTS PARTNERSHIP LAW 15

TAX STATUS 15

The Fund's Tax Status 15
Shareholders' Tax Status 15
TOTAL RETURN 16

YIELD 16

PERFORMANCE COMPARISONS 16

Economic and Market Information 17
ABOUT FEDERATED INVESTORS 17

Mutual Fund Market 18
Institutional Clients 18
Bank Marketing 18
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 18

I
GENERAL INFORMATION ABOUT THE FUND

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." 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 OBJECTIVES AND POLICIES

The Fund's investment objective is to provide above average income and capital
appreciation. The investment objective cannot be changed without approval of
shareholders. 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 the level of interest rates
increases, 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.
TEMPORARY INVESTMENTS
The temporary investments in which the Fund may invest include, but are not
limited to:
ocommercial paper rated A-1 or A-2 by Standard & Poor's Ratings Group,
Prime-1 or Prime-2 by Moody's Investors Service, Inc., or F-1 or F-2 by
Fitch Investors Service, Inc., and Europaper rated A-1, A- 2, Prime-1, or
Prime-2. In the case where commercial paper or Europaper has received
different ratings from different rating services, such commercial paper or
Europaper is an acceptable temporary investment so long as at least one
rating is one of the preceding high-quality ratings and provided the
Fund's investment adviser has determined that such investment presents
minimal credit risks;
oinstruments of domestic and foreign banks and savings associations 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 Federal Deposit
Insurance Corporation. These instruments may include Eurodollar
Certificates of Deposits ("ECDs"), Yankee Certificates of Deposit ("Yankee
CDs'), and Eurodollar Time Deposits ("ETDs");

oobligations of the U.S. government or its agencies or
instrumentalities;
orepurchase agreements; and
oother short-term instruments which are not rated but are determined by the
adviser to be of comparable quality to the other temporary obligations in
which the Fund may invest.

INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. 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 entity, 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,
recordkeeping, and the public availability of information. These factors
will be carefully considered by the adviser in selecting investments for
the Fund.
WARRANTS
Warrants basically are 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,
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. 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. 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. 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 adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees (the "rustees").
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts, buying put options on portfolio securities
and listed put options on futures contracts, and writing call options on futures
contracts. The Fund may also write covered call options on portfolio securities
to attempt to increase its current income.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in the
contract (`going short") and the buyer who agrees to take delivery of the
security ("oing long") at a certain time in the future.

In the fixed-income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed-income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., `go
short") to protect itself against the possibility that the prices of its
fixed-income securities may decline during the Fund's anticipated holding
period. The Fund would "o long"(agree to purchase securities in the future
at a predetermined price) to hedge against a decline in market interest
rates.

PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price,
the purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. The Fund would purchase put
options on futures contracts to protect portfolio securities against
decreases in value resulting from an anticipated increase in market
interest rates. Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an event,
the Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the sale
of the second option will be large enough to offset both the premium paid
by the Fund for the original option plus the decrease in value of the
hedged securities. Alternatively, the Fund may exercise its put option. To
do so, it would simultaneously enter into a futures contract of the type
underlying the option (for a price less than the strike price of the
option) and exercise the option. The Fund would then deliver the futures
contract in return for payment of the strike price. If the Fund neither
closes out nor exercises an option, the option will expire on the date
provided in the option contract, and the premium paid for the contract will
be lost.

CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write listed
call options on futures contracts to hedge its portfolio against an
increase in market interest rates. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed strike price at
any time during the life of the option if the option is exercised. As
market interest rates rise, causing the prices of futures to go down, the
Fund's obligation under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Fund's call
option position to increase. In other words, as the underlying futures
price goes down below the strike price, the buyer of the option has no
reason to exercise the call, so that the Fund keeps the premium received
for the option. This premium can offset the drop in value of the Fund's
fixed-income portfolio which is occurring as interest rates rise. Prior to
the expiration of a call written by the Fund, or exercise of it by the
buyer, the Fund may close out the option by buying an identical option. If
the hedge is successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The net premium
income of the Fund will then offset the decrease in value of the hedged
securities. The Fund will not maintain open positions in futures contracts
it has sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the

Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.

"MARGIN"IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of `initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of margin
in securities transactions in that futures contract initial margin does not
involve the borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good-faith deposit
on the contract which is returned to the Fund upon termination of the
futures contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called `variation margin," equal to the daily change
in value of the futures contract. This process is known as `marking to
market." Variation margin does not represent a borrowing or loan by the
Fund but is instead settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market its open
futures positions. The Fund is also required to deposit and maintain margin
when it writes call options on futures contracts.

PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. A put
option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES The Fund may also write
covered call options to generate income. As writer of a call option, the
Fund has the obligation upon exercise of the option during the option
period to deliver the underlying security upon payment of the exercise
price. The Fund may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment
of further consideration (or has segregated cash in the amount of any
additional consideration).
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 Trustees may consider the following criteria in
determining the liquidity of certain restricted securities:
othe frequency of trades and quotes for the security;

othe number of dealers willing to purchase or sell the security and
the number of other potential buyers;
odealer undertakings to make a market in the security; and othe nature of
the security and the nature of the marketplace trades.

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. 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. REVERSE REPURCHASE AGREEMENTS The Fund
may also enter into reverse repurchase agreements. This transaction is similar
to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be

deemed to be disadvantageous, but the ability to enter into reverse repurchase
agreements does not ensure that the Fund will be able to avoid selling portfolio
instruments at a disadvantageous time. When effecting reverse repurchase
agreements, liquid assets of the Fund, in a dollar amount sufficient to make
payment for the obligations to be purchased, are segregated at the trade date.
These securities are marked to market daily and maintained until the transaction
is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. Securities in the Fund's portfolio will be sold
whenever the 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. The adviser does not anticipate that portfolio turnover will
result in adverse tax consequences. Any such trading will increase the Fund's
portfolio turnover rate and transaction costs. Portfolio turnover rates are not
yet available for this Fund. INVESTMENT LIMITATIONS

The following limitations are fundamental [except that no investment limitation
of the Fund shall prevent the Fund from investing substantially all of its
assets (except for assets which are not considered "nvestment securities"under
the Investment Company Act of 1940, or assets exempted by the Securities and
Exchange Commission) in an open-end investment company with substantially the
same investment objectives]:
BUYING ON MARGIN
The Fund will not purchase any securities on margin but may obtain such
short-term credits as are necessary for clearance of

transactions. The deposit or payment by the Fund of initial or variation
margin in connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
SELLING SHORT
The Fund will not sell securities short unless during the time the short
position is open, it owns an equal amount of the securities sold or
securities readily and freely convertible into or exchangeable, without
payment of additional consideration, for securities of the same issue as,
and equal in amount to, the securities sold short; and not more than 10% of
the Fund's net assets (taken at current value) is held as collateral for
such sales at any one time.

ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while any borrowings are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets

having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of total assets at the time of the borrowing.
Margin deposits for the purchase and sale of financial futures contracts
and related options are not deemed to be a pledge.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, although it may invest in
securities of issuers whose business involves the purchase or sale of real
estate or in securities which are secured by real estate or interest in
real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, except that the Fund may
purchase and sell financial futures contracts and related options.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of restricted securities which the Fund may purchase pursuant
to its investment objectives, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the
purchase or holding of corporate bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, repurchase agreements,
or other transactions which are permitted by the Fund's investment
objectives and policies and limitations or the Trust's Declaration of
Trust.

CONCENTRATION OF INVESTMENTS
The Fund will not purchase portfolio instruments if, as a result of such
purchase, 25% or more of the value of its total assets would be invested in
any one industry.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of the value of its total assets in
securities of one issuer (except cash and cash items, repurchase
agreements, and U.S. government obligations) or acquire more than 10% of
any class of voting securities of any issuer. For these purposes, the Fund
takes all common stock and all preferred stock of an issuer each as a
single class, regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trusteess without
shareholder approval [except that no investment limitation of the Fund shall
prevent the Fund from investing substantially all of its assets (except for
assets which are not considered

`investment securities" under the Investment Company Act of 1940, or assets
exempted by the Securities and Exchange Commision) in an open-end investment
company with substantially the same investment objectives]. Shareholders will be
notified before any material change in these limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Fund will not
purchase securities of other investment companies except as part of a
merger, consolidation, or other acquisition.
ARBITRAGE TRANSACTIONS
The Fund will not engage in arbitrage transactions.
ACQUIRING SECURITIES

The Fund will not purchase securities of a company for the purpose of
exercising control or management. However, the Fund may purchase up to 10%
of the voting securities of any one issuer and may exercise its voting
powers consistent with the best interests of the Fund. In addition, the
Fund, other companies advised by the adviser, and other affiliated
companies may together buy and hold substantial amounts of voting stock of
a company and may vote together in regard to such company's affairs. In
some cases, the Fund and its affiliates might collectively be considered to
be in control of such company. In some cases, Trustees and other persons
associated with the Fund and its affiliates might possibly become directors
of companies in which the Fund holds stock.
WRITING COVERED CALL OPTIONS AND PURCHASING PUT OPTIONS The Fund will not
write call options on securities unless the securities are held in the
Fund's portfolio or unless the Fund is entitled to them in deliverable form
without further payment or after segregating cash in the amount of any
further payment. The Fund will not purchase put options on securities
unless the securities are held in the Fund's portfolio. The Fund will not
commit more than 5% of the value of its total assets to premiums on open
option positions.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including certain restricted securities (except for Section
4(2) commercial paper and certain other restricted securities which meet
the criteria for liquidity as established by the Trustees), non-negotiable
time deposits, and repurchase agreements providing for settlement in more
than seven days after notice.
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 intention to borrow
money, invest in reverse repurchase agreements, pledge securities, or sell
securities short in excess of 5% of the value of its total assets during the
current fiscal year. 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.

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.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee and Member
of the Executive Committee, University of Pittsburgh; Director or Trustee of the
Funds.

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; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

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 Company.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, 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.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way

Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Boca Grande Club
Boca Grande, FL
Birthdate: October 6, 1926
Trustee
Attorney, Retired Member of Miller, Ament, Henny & Kochuba; 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; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; 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 , Secretary and Treasurer 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; 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.

*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 between meetings of the
Board.
As used in the table above, "he Funds" and "Funds" mean the following investment
companies: 111 Corcoran Funds; 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 Insurance
Series; Federated Investment Portfolios; Federated Investment 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: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities,

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; Wesmark Funds; and World Investment Series,
Inc. FUND OWNERSHIP Officers and Trustees own less than 1% of the Fund's
outstanding shares. As of March 24, 1997, the following shareholders of record
owned 5% or more of the outstanding shares of Federated Equity Income Fund II:
Aetna Retirement Services Central Valuation Unit, Hartford, Connecticut owned
181,420 shares (99.98%). 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 56 other investment companies in the
Fund Complex
Thomas G. Bigley $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John T. Conroy, Jr. $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
William J. Copeland $1,270 $119,615 for the Trust and
Trustee 56 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 $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $1,154
$108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $1,270
$119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Peter E. Madden $1,154 $108,725 for the Trust and

Trustee 56 other investment companies in the
Fund Complex
Gregor F. Meyer $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John E. Murray, Jr., $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Wesley W. Posvar $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Marjorie P. Smuts $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex

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

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.
PURCHASES AND REDEMPTIONS

Shares are sold at their net asset value on days the New York Stock Exchange is
open for business. The procedure for purchasing and redeeming shares of the Fund
is explained in the prospectus under "urchases and Redemptions"and "What Shares
Cost." DISTRIBUTION PLAN The Plan permits the payment of fees to financial
institutions and the distributor to stimulate distribution activities and to
cause services to be provided to shareholders by a representative who has
knowledge of the shareholder's particular circumstances and goals. These
activities may include, but are not limited to: marketing efforts; providing
office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses. By adopting the Plan, the
Trustees expects that the Fund will be able to achieve a more predictable flow
of cash for investment purposes and to meet redemptions. This will facilitate
more efficient portfolio management and

assist the Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objective, and properly servicing
these accounts, the Fund may be able to curb sharp fluctuations in rates of
redemptions and sales. Other benefits include: (1) an efficient and effective
administrative system; (2) a more efficient use of shareholder assets by having
them rapidly invested with a minimum of delay and administrative detail; and
efficient and reliable shareholder records system and prompt responses to
shareholder requests and inquiries concerning their accounts. The fund is not
currently paying any 12b-1 fees under the Plan. Should the Fund begin to pay
these fees, shareholders would be notified. DETERMINING NET ASSET VALUE

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 values of the Fund's portfolio securities are determined as follows:
oaccording to the last sale price on a national 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 60 days or
less 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.
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

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:
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.
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 regualtions, contracts
invested in the Fund shall not be treated as annuity, endowment or life
insurance contracts uner 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 a 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 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 maximum 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.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any
class of Shares, the performance will be reduced for those shareholders
paying those fees.
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 and market value of portfolio securities;
ochanges in the Fund's or a class of Shares' 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 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:
oLIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
by making comparative calculations using total return.

Total return assumes the reinvestment of all capital gains distributions
and income dividends and takes into account any change in net asset value
over a specific period of time. From time to time, the Fund will quote its
Lipper ranking in the convertible securities and fixed income funds
categories in advertising and sales literature.

oDOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of selected
blue-chip industrial corporations as well as public utility and
transportation companies. The DJIA indicates daily changes in the average
price of stocks in any of its categories. It also reports total sales for
each group of industries. Because it represents the top corporations of
America, the DJIA index is a leading economic indicator for the stock
market as a whole.
oSTANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500 COMMON
STOCKS is a composite index of common stocks in industry, transportation,
and financial and public utility companies which compares total returns of
funds whose portfolios are invested primarily in common stocks. In
addition, the Standard & Poor's index assumes reinvestment of all
dividends paid by stocks listed on the index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated, in the Standard & Poor's figures.
oMORNINGSTAR, 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.

In addition, the Fund will, from time to time, use the following standard
convertible securities indices against which it will compare its performance:
Goldman Sachs Convertible 100; Kidder Peabody Convertible Bond Index; Value Line
Convertible Bond Index; and Dow Jones Utility Index. Advertisements and other
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 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. In addition,
advertising and sales literature for the Fund may use charts and graphs to
illustrate the principals of dollar-cost averaging and may disclose the amount
of dividends paid by the Fund over certain periods of time. Advertising and
other promotional literature may include charts, graphs and other illustrations
using the Fund's returns, or returns in general, that demonstrate basic
investment concepts such as tax-deferred compounding, dollar-cost averaging and
systematic investment. In addition, the Fund can compare its performance, or
performance for the types of securities in which it invests, to a variety of
other investments, such as bank savings accounts, certificates of deposit, and
Treasury bills. ECONOMIC AND MARKET INFORMATION Advertising and sales literature
for the Fund may include discussions of economic, financial and political
developments and their effect on the securities market. Such discussions may
take the form of commentary on these developments by Fund portfolio managers and
their views and analysis

on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information
about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
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. These traders handle
trillions of dollars in annual trading volume.

In the equity sector, Federated Investors has more than 26 years' experience. As
of December 31, 1996, Federated managed 31 equity funds totaling approximately
$7.6 billion in assets across growth, value, equity income, international, index
and sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s. In
the corporate bond sector, as of December 31, 1996, Federated managed 12 money
market funds and 17 bonds funds with assets approximating $17.2 billion and $4.0
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 21

years of experience in the corporate bond sector. In 1972, Federated introduced
one of the first high-yield bond funds in the industry. In 1983, Federated was
one of the first fund managers to participate in the asset- backed securities
market, a market totaling more than $200 billion. 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 and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 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.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients'

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

*source: Investment Company Institute

FEDERATED INSURANCE SERIES
consisting of eight portfolios:
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
FEDERATED INTERNATIONAL EQUITY FUND II
FEDERATED EQUITY INCOME FUND II
STATEMENT OF ADDITIONAL INFORMATION This Statement of
Additional Information should be read with the prospectus of Federated
Insurance Series dated April 22, 1997. 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
1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated April 22, 1997

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 313916702 Cusip 313916108 Cusip 313916504 Cusip 313916603 Cusip 313916405
Cusip 313916207 Cusip 313916801 Cusip 313916306 4011006B (4/97)

GENERAL INFORMATION 1

INVESTMENT INFORMATION 1

Investment Objectives 1
Types of Investments 2
INVESTMENT PRACTICES OF THE FUNDS 15

Repurchase Agreements 15
Reverse Repurchase Agreements 15
Credit Enhancement 15
Restricted and Illiquid Securities 15
When-Issued and Delayed Delivery Transactions 16
Lending of Portfolio Securities 16
Portfolio Turnover 16
INVESTMENT LIMITATIONS 17

Selling Short and Buying on Margin 17
Issuing Senior Securities and Borrowing Money 17
Pledging Assets 17
Concentration of Investments 18
Investing in Commodities 18
Investing in Real Estate 18
Lending Cash or Securities 19
Underwriting 19
Diversification of Investments 19
Acquiring Securities 19
Investing in Illiquid Securities 19
Dealing in Puts and Calls 20
Investing in Put Options 20

Writing Covered Call Options 20
Purchasing Securities to Exercise Control 20
Investing in Securities of Other Investment Companies 20
Arbitrage Transactions 20
Investing in Securities of Foreign Issuers 20
Regulatory Compliance 21
FEDERATED INSURANCE SERIES MANAGEMENT 21

Fund Ownership 25
Trustees' Compensation 26
Trustee Liability 26
INVESTMENT ADVISORY SERVICES 27

Advisers to the Funds 27
Advisory Fees 27
BROKERAGE TRANSACTIONS 27

OTHER SERVICES 28

Fund Administration 28
Custodian and Portfolio Accountant 28
Independent Auditors 29
PURCHASES AND REDEMPTIONS 29

DETERMINING NET ASSET VALUE 29

Determining Market Value of Securities 29
Trading in Foreign Securities 30
Use of the Amortized Cost Method 30
MASSACHUSETTS PARTNERSHIP LAW 31

TAX STATUS 32

The Funds' Tax Status 32
Shareholders' Tax Status 32
Foreign Taxes 32
TOTAL RETURN 32

YIELD 33

EFFECTIVE YIELD 33

PERFORMANCE COMPARISONS 34

Economic and Market Information 36
ABOUT FEDERATED INVESTORS 36

Mutual Fund Market 37
Institutional Clients 37
Bank Marketing 37
Broker/Dealers and Bank Broker/Dealer Subsidiaries37
FINANCIAL STATEMENTS 39

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. Federated Equity Income Fund II was added as a new
portfolio of the Trust on December 16, 1996. 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
eight portfolios (individually referred to as a `Fund" and collectively as the
"Funds"):
oFederated American Leaders Fund II;
oFederated Growth Strategies Fund II;
oFederated Utility Fund II;
oFederated Prime Money Fund II;

oFederated Fund for U.S. Government Securities II;
oFederated High Income Bond Fund II;
oFederated International Equity Fund II; and
oFederated Equity Income 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.
FEDERATED EQUITY INCOME FUND II
Federated Equity Income Fund II's investment objective is to provide above
average income and capital appreciation.
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:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the 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; o Federal 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
subsection 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: o Eurodollar Certificates of Deposit issued by foreign
branches of
U.S. or foreign banks;
o Eurodollar Time Deposits, which are U.S. dollar-denominated deposits
in foreign branches of U.S. or foreign banks;
o Canadian Time Deposits, which are U.S. dollar-denominated deposits
issued by branches of major Canadian banks located in the U.S.; and
o 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 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.

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 associations 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, 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.
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.
FEDERATED EQUITY INCOME FUND II
Federated Equity Income Fund II invests at least 65% of its assets in
income-producing equity securities including common stocks, preferred stocks and
securities (including debt securities) that are convertible into common stocks.
CONVERTIBLE SECURITIES
The description of convertible securities which appears under the
subsection entitled `Convertible Securities" under the section entitled
`Types of Investments - Federated American Leaders Fund II" is also
applicable to the Fund.
TEMPORARY INVESTMENTS
The temporary investments in which the Fund may invest include, but are not
limited to:

o commercial paper rated A-1 or A-2 by Standard & Poor's Ratings Group,
Prime-1 or Prime-2 by Moody's Investors Service, Inc., or F-1 or F-2 by
Fitch Investors Service, Inc., and Europaper rated A-1, A-2, Prime-1, or
Prime-2. In the case where commercial paper or Europaper has received
different ratings from different rating services, such commercial paper or
Europaper is an acceptable temporary investment so long as at least one
rating is one of the preceding high-quality ratings and provided the Fund's
investment adviser has determined that such investment presents minimal
credit risks;

oinstruments of domestic and foreign banks and savings associations 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 Federal Deposit
Insurance Corporation. These instruments may include Eurodollar
Certificates of Deposits (`ECDs"), Yankee Certificates of Deposit (`Yankee
CDs"), and Eurodollar Time Deposits (`ETDs"); oobligations of the U.S.
government or its agencies or instrumentalities; orepurchase agreements;
and oother short-term instruments which are not rated but are determined by
the adviser to be of comparable quality to the other temporary obligations
in which the Fund may invest.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, and Europaper are subject to different risks than
domestic obligations of domestic banks or corporations. 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 entity, 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,
recordkeeping, and the public availability of information. These factors
will be carefully considered by the adviser in selecting investments for
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
The Fund may attempt to hedge all or a portion of its portfolio by buying
and selling financial futures contracts, buying put options on portfolio
securities and listed put options on futures contracts, and writing call
options on futures contracts. The Fund may also write covered call options
on portfolio securities to attempt to increase its current income.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in

the contract (`going short") and the buyer who agrees to take delivery of
the security (`going long") at a certain time in the future. In the
fixed-income securities market, price moves inversely to interest rates. A
rise in rates means a drop in price. Conversely, a drop in rates means a
rise in price. In order to hedge its holdings of fixed-income securities
against a rise in market interest rates, the Fund could enter into
contracts to deliver securities at a predetermined price (i.e., `go short")
to protect itself against the possibility that the prices of its
fixed-income securities may decline during the Fund's anticipated holding
period. The Fund would `go long"(agree to purchase securities in the future
at a predetermined price) to hedge against a decline in market interest
rates.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified price,
the purchase of a put option on a futures contract entitles (but does not
obligate) its purchaser to decide on or before a future date whether to
assume a short position at the specified price. The Fund would purchase put
options on futures contracts to protect portfolio securities against
decreases in value resulting from an anticipated increase in market
interest rates. Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an event,
the Fund will normally close out its option by selling an identical option.
If the

hedge is successful, the proceeds received by the Fund upon the sale of the
second option will be large enough to offset both the premium paid by the
Fund for the original option plus the decrease in value of the hedged
securities.

Alternatively, the Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the
option (for a price less than the strike price of the option) and exercise
the option. The Fund would then deliver the futures contract in return for
payment of the strike price. If the Fund neither closes out nor exercises
an option, the option will expire on the date provided in the option
contract, and the premium paid for the contract will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write listed
call options on futures contracts to hedge its portfolio against an
increase in market interest rates. When the Fund writes a call option on a
futures contract, it is undertaking the obligation of assuming a short
futures position (selling a futures contract) at the fixed strike price at
any time during the life of the option if the option is exercised. As
market interest rates rise, causing the prices of futures to go down, the
Fund's obligation under a call option on a future (to sell a futures
contract) costs less to fulfill, causing the value of the Fund's call
option position to increase. In other words, as the underlying futures
price goes down below the strike price, the buyer of the option has no
reason to exercise the call, so that the Fund keeps the premium received
for the option. This

premium can offset the drop in value of the Fund's fixed-income portfolio
which is occurring as interest rates rise. Prior to the expiration of a
call written by the Fund, or exercise of it by the buyer, the Fund may
close out the option by buying an identical option. If the hedge is
successful, the cost of the second option will be less than the premium
received by the Fund for the initial option. The net premium income of the
Fund will then offset the decrease in value of the hedged securities. The
Fund will not maintain open positions in futures contracts it has sold or
call options it has written on futures contracts if, in the aggregate, the
value of the open positions (marked to market) exceeds the current market
value of its securities portfolio plus or minus the unrealized gain or loss
on those open positions, adjusted for the correlation of volatility between
the hedged securities and the futures contracts. If this limitation is
exceeded at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and options
positions within this limitation.
"MARGIN"IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of `initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of margin
in securities transactions in that futures contract initial margin does not
involve the borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good-faith

deposit on the contract which is returned to the Fund upon termination of
the futures contract, assuming all contractual obligations have been
satisfied. A futures contract held by the Fund is valued daily at the
official settlement price of the exchange on which it is traded. Each day
the Fund pays or receives cash, called `variation margin," equal to the
daily change in value of the futures contract. This process is known as
`marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the broker
of the amount one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market its open
futures positions. The Fund is also required to deposit and maintain margin
when it writes call options on futures contracts.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Fund may purchase put options on portfolio securities to protect
against price movements in particular securities in its portfolio. A put
option gives the Fund, in return for a premium, the right to sell the
underlying security to the writer (seller) at a specified price during the
term of the option.

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES The Fund may also write
covered call options to generate income. As writer of a call option, the
Fund has the obligation upon exercise of the option during the option
period to deliver the underlying security upon payment of the exercise
price. The Fund may only sell call options either on securities held in its
portfolio or on securities

which it has the right to obtain without payment of further consideration
(or has segregated cash in the amount of any additional consideration).
INVESTMENT PRACTICES OF THE FUNDS

The following investment practices, 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. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time. When
effecting reverse repurchase agreements, liquid assets of 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.

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 Trustees may consider the following criteria in determining the liquidity of
certain restricted securities:
othe frequency of trades and quotes for the security;
othe number of dealers willing to purchase or sell the security and
the number of other potential buyers; odealer undertakings to make a
market in the security; and othe 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, Federated
International Equity Fund II and Federated Equity Income 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, Federated International Equity Fund II and Federated Equity
Income 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. The adviser does not anticipate that portfolio
turnover will result in adverse tax consequences. Any such trading will increase
the portfolio turnover rates and transaction costs. For the fiscal years ended
December 31, 1996 and 1995, the portfolio turnover rates of Federated American
Leaders Fund II were 90% and 43%, respectively. For the fiscal year ended
December 31, 1996, and for the period from November 9, 1995 (date of initial
public investment) to December 31, 1995, the portfolio turnover rates of
Federated Growth Strategies Fund II were 96% and 4%, respectively. For the
fiscal years ended December 31, 1996 and 1995, the portfolio turnover rates of
Federated Utility Fund II were 63% and 62%, respectively. For the fiscal years
ended December 31, 1996 and 1995, the portfolio turnover rates of Federated Fund
for U.S. Government Securities II were 97% and 65%, respectively. For the fiscal
years ended December 31, 1996 and 1995, the portfolio turnover rates of
Federated High Income Bond Fund II were 51% and 48%, respectively. For the
fiscal year ended December 31, 1996 and for the period from May 5, 1995 (date of
initial public investment) to December 31, 1995, the portfolio turnover rates of
Federated International Equity Fund II were 103% and 34%, respectively.
Portfolio turnover rates for Federated Equity Income Fund II are not yet
available.

INVESTMENT LIMITATIONS

The following limitations are fundamental [except that no investment
limitation of Federated Equity Income Fund II shall prevent the Fund from
investing substantially all of its assets (except for assets which are not
considered to be `investment securities" under the Investment Company Act
of 1940, or assets exempted by the Securities and Exchange Commission
(`SEC")) in an open-end management investment company with substantially
the same investment objectives]:
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, Federated Utility Fund II
or Federated Equity Income 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.) Federated Equity Income Fund II will not sell securities
short unless during the time the short position is open, it owns an equal
amount of the securities sold or securities readily and freely convertible
into or exchangeable, without payment of additional consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short; and not more than 10% of the Fund's net assets (taken at
current value) is held as collateral for such sales at any one time.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The 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, including the amount borrowed.
With the exception of Federated Equity Income Fund II, 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. With respect to Federated Equity Income Fund II, the
Fund will not purchase any securities while any borrowings are outstanding.
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 (with the exception
of Federated Equity Income Fund II) 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.) Federated Equity Income Fund II may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 10%
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 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. For purposes of this
limitation, margin deposits for the purchase and sale of financial futures
contracts and related options are not deemed to be pledges by Federated
Equity Income 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.
Federated Equity Income Fund II 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.
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. Federated
Equity Income Fund II will not purchase or sell commodities, except that it
may purchase and sell financial futures contracts and related options.
INVESTING IN REAL ESTATE
The Funds will not purchase or sell real estate, including (with the
exception of Federated Equity Income Fund II) limited partnership interests
in real estate, although each Fund (including Federated Equity Income 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 only
Federated Prime Money Fund II), corporate bonds, U.S. government bonds
(with the exception of only Federated Equity Income Fund II), 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. Federated Equity Income Fund II will not underwrite any issue
or securities, except that it may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of restricted securities
which the Fund may purchase pursuant to its investment objectives, policies
and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, no Fund (except Federated Equity
Income Fund II) 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 only 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. Federated Equity Income Fund II will not invest more than 5%
of the value of its total assets in securities of one issuer (except cash
and cash items, repurchase agreements, and U.S. government obligations) or
acquire more than 10% of any class of voting securities of any issuer. For
these purposes, the Fund takes all common stock and all preferred stock of
an issuer each as a single class, regardless of priorities, series,
designations, or other differences.
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 [except that no investment limitation of Federated Equity
Income Fund II shall prevent the Fund from investing substantially all of its
assets (except for assets which are not considered to be `investment securities"
under the Investment Company Act of 1940, or assets exempted by the SEC) in an
open-end investment company with substantially the same investment objectives].
Shareholders will be notified before any material changes in these limitations
becomes effective. INVESTING IN ILLIQUID SECURITIES
Federated American Leaders Fund II, Federated Growth Strategies Fund II,
Federated Utility Fund II, Federated Fund for U.S. Government Securities II
and Federated International Equity Fund II will not invest more than 15% of
their respective 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 only 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.
Federated High Income Bond Fund II will not invest more than 15% of its
total assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice and certain
restricted securities not determined by the Trustees to be liquid.
Federated Equity Income Fund II will not invest more than 15% of its net
assets in illiquid securities, including certain restricted securities
(except for Section 4(2) commercial paper and certain other restricted
securities which meet the criteria for liquidity as established by the
Trustees), non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice.
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, Federated
International Equity Fund II and Federated Equity Income 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,
Federated Utility Fund II and Federated Equity Income 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, Federated
International Equity Fund II and Federated Equity Income 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, Federated International Equity Fund II
and Federated Equity Income Fund II will not purchase securities of a
company for the purpose of exercising control or management.

Federated Equity Income Fund II may purchase up to 10% of the voting
securities of any one issuer and may exercise its voting powers consistent
with the best interests of the Fund. In addition, the Fund, other companies
advised by the adviser, and other affiliated companies may together buy and
hold substantial amounts of voting stock of a company and may vote together
in regard to such company's affairs. In some cases, the Fund and its
affiliates might collectively be considered to be in control of such
company. In some cases, Trustees and other persons associated with the Fund
and its affiliates might possibly become directors of companies in which
the Fund holds stock.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Federated Equity Income Fund II will not purchase securities of other
investment companies except as part of a merger, consolidation or other
acquisition.
ARBITRAGE TRANSACTIONS
Federated Equity Income Fund II will not engage in arbitrage transactions.
INVESTING IN SECURITIES OF FOREIGN ISSUERS
Federated Utility Fund II may invest up to 10% of its total assets in the
utility securities of developing countries.

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. Federated American
Leaders Fund II, Federated Growth Strategies Fund II, Federated Utility Fund II,
Federated Prime Money Market Fund II, Federated

Fund for U.S. Government Securities II, Federated High Income Bond Fund II and
Federated International Equity Fund II have no present intention to borrow money
in excess of 5% of the value of their respective net assets during the coming
fiscal year. Federated Equity Income Fund has no present intention to borrow
money, invest in reverse repurchase agreements, pledge securities, or sell
securities short in excess of 5% of the value of its total assets during the
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." 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 diversification and other 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.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

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 Company.

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, 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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Boca Grande Club

Boca Grande, FL
Birthdate: October 6, 1926
Trustee
Attorney, Retired Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; 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; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., National Defense University, U.S. Space Foundation
and Czech Management Center; President Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory Council for Environmental Policy and

Technology, Federal Emergency Management Advisory Board and Czech Management
Center; 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.

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.

*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 between meetings of the
Board.

As used in the table above, `The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; 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 Insurance Series; Federated
Investment Portfolios; Federated Investment 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: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, 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;
Wesmark Funds; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares. As of
March 24, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of Federated American Leaders Fund II: Transamerica
Occidental Life Insurance Co., Charlotte, North Carolina owned 729,000 shares
(6.95%); Aetna Insurance Company of American, Hartford Connecticut owned
4,332,009 shares (41.32%); and Aetna Life Insurance & Annuity Co. Central
Valuation Unit, Hartford, Connecticut owned 4,380,677 shares (41.79%). As of
March 24, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of Federated Growth Strategies Fund II: Aetna Retirement
Services Central Valuation Unit, Hartford, Connecticut owned 1,672,697 shares
(100%). As of March 24, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of Federated Utility Fund II: Life of Virginia,
Richmond, Virginia owned 1,948,269 shares (34.19%); Lincoln Benefit Life Co.,
Lincoln, Nebraska owned 351,937 shares (6.18%); and Aetna Retirement Services
Central Valuation Unit, Hartford, Connecticut owned 2,770,027 shares (48.62%).

As of March 24, 1997, the following shareholders of record owned 5% or more of
the outstanding shares of Federated Prime Money Fund II: First Variable Life
Cash Management, Kansas City, Missouri owned 10,856,439 shares (17.87%); United
Omaha Life Insurance Co., Omaha, Nebraska owned 26,031,155 shares (42.85%);
Providian Life & Health Insurance Co., Louisville, Kentucky owned 7,027,565
shares (11.57%); Aetna Retirement Services Central Valuation Unit, Hartford,
Connecticut owned 10,902,467 shares (17.95%); and Glenbrook Life and Annuity
Company, Palatine, Illinois owned 4,048,704 shares (6.67%). As of March 24,
1997, the following shareholders of record owned 5% or more of the outstanding
shares of Federated Fund for U.S. Government Securities II: Provident Mutual,
Valley Forge, Pennsylvania owned 210,447 shares (5.34%); United of Omaha Life
Insurance Co., Omaha, Nebraska owned 1,361,165 shares (34.52%); Transamerica
Occidental Life Insurance Co., Charlotte, North Carolina owned 441,046 shares
(11.18%); Lincoln Benefit Life Co., Lincoln, Nebraska owned 263,646 shares
(6.69%); and Aetna Retirement Services Central Valuation Unit, Hartford,
Connecticut owned 1,255,021 shares (31.83%). As of March 24, 1997, the following
shareholders of record owned 5% or more of the outstanding shares of Federated
High Income Bond Fund II: Life of Virginia, Richmond, Virginia owned 1,328,893
shares (18.42%); Lincoln Benefit Life Co., Lincoln, Nebraska owned 560,500
shares (7.77%); and Aetna Retirement Services Central Valuation Unit, Hartford,
Connecticut owned 4,388,070 shares (60.83%).

As of March 24, 1997, the following shareholders of record owned 5% or more
of the outstanding shares of Federated International Equity Fund II: Aetna

Retirement Services Central Valuation Unit, Hartford, Connecticut owned
1,787,050 shares (95.47%).
As of March 24, 1997, the following shareholders of record owned 5% or more
of the outstanding shares of Federated Equity Income Fund II: Aetna
Retirement Services Central Valuation Unit, Hartford, Connecticut owned
181,420 shares (99.98%).
TRUSTEES' COMPENSATION

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

President and Trustee 15 other investment companies in
the Fund Complex
James E. Dowd $1,270 $119,615 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Lawrence D. Ellis, M.D. $1,154 $108,725 for the Trust
and
Trustee 56 other investment companies in
the Fund Complex
Edward L. Flaherty, Jr. $1,270 $119,615 for the Trust
and
Trustee 56 other investment companies in
the Fund Complex
Peter E. Madden $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Gregor F. Meyer $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
John E. Murray, Jr., $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Wesley W. Posvar $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex
Marjorie P. Smuts $1,154 $108,725 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

*Information is furnished for the fiscal year ended December 31, 1996. #The
aggregate compensation is provided for the Trust which is comprised of eight
portfolios. +The information is provided for the last calendar year. 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

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, Federated High Income Bond Fund II and Federated Equity
Income 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 years ended December 31, 1996 and 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 $693,045,
$142,579 and $4,397, respectively, of which $203,603, $142,579, and $4,397 were
voluntarily waived. For the fiscal year ended December 31, 1996, and 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 $51,083 and $231, all of which were voluntarily waived. For the
fiscal years ended December 31, 1996 and 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 $361,797, $89,752 and $2,077,
respectively, of which $248,058, $89,752 and $2077 were voluntarily waived. For
the fiscal years ended December 31, 1996 and 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 $154,455, $40,601 and
$287, respectively, all of which were voluntarily waived. For the fiscal years
ended December 31, 1996 and 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 $141,092, $30,456
and $2,605, respectively, all of which were voluntarily waived. For the fiscal
years ended December 31, 1996 and 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
$240,233, $46,425 and $7,966, respectively, of which $203,132, $46,425 and
$7,966 were voluntarily waived. For the fiscal year ended December 31, 1996 and
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 $106,851 and $12,476, respectively, 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 years ended December 31, 1996 and 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, Federated American
Leaders Fund II paid $234,623, $49,713 and $3,714, respectively, in brokerage
commissions on brokerage transactions. For the fiscal year ended December 31,
1996 and for the period from November 9, 1995 (date of initial public
investment) to December 31, 1995, Federated Growth Strategies Fund II paid
$26,305 and $322, respectively, in brokerage commissions on brokerage
transactions. For the fiscal years ended December 31, 1996 and 1995, and for the
period from December 9, 1993 (start of business) to December 31, 1994, Federated
Utility Fund II paid $81,701, $59,746 and $476, respectively, in brokerage
commissions on brokerage transactions. For the fiscal years ended December 31,
1996 and 1995, and for the period from December 10, 1993 (start of business) to
December 31, 1994, Federated Prime Money Fund II did not pay brokerage
commissions. For the fiscal years ended December 31, 1996 and 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 $0, $322 and $), respectively, in
brokerage commissions on brokerage transactions. For the fiscal years ended
December 31, 1996 and 1995, and for the period from December 9, 1993 (start of
business) to December 31, 1994, Federated High Income Bond Fund II did not pay
brokerage commissions. For the fiscal year ended December 31, 1996 and for the
period from May 5, 1995 (date of initial public investment) to December 31,
1995, Federated International Equity Fund II paid $104,437 and $15,076,
respectively, 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
years ended December 31, 1996 and 1995, and for the period from December 9, 1993
(start of business) to December 31, 1994, the Administrators earned $125,000,
$125,000 and $73,288, respectively, from Federated American Leaders Fund II. For
the fiscal year ended December 31, 1996 and for the period from November 9, 1995
(date of initial public investment) to December 31, 1995, the

Administrators earned $125,000 and $17,808, respectively, from Federated Growth
Strategies Fund II. For the fiscal years ended December 31, 1996 and 1995, and
for the period from December 9, 1993 (start of business) to December 31, 1994,
the Administrators earned $125,000, $125,000 and $73,289, respectively, from
Federated Utility Fund II. For the fiscal years ended December 31, 1996 and
1995, and for the period from December 10, 1993 (start of business) to December
31, 1994, the Administrators earned $125,000, $125,000 and $14,041,
respectively, from Federated Prime Money Fund II. For the fiscal years ended
December 31, 1996 and 1995, and for the period from December 8, 1993 (start of
business) to December 31, 1994, the Administrators earned $125,000, $125,000 and
$63,015, respectively, from Federated Fund for U.S. Government Securities II.
For the fiscal years ended December 31, 1996 and 1995, and for the period from
December 9, 1993 (start of business) to December 31, 1994, the Administrators
earned $125,000, $125,000 and $52,398, respectively, from Federated High Income
Bond Fund II. For the fiscal year ended December 31, 1996 and for the period
from May 5, 1995 (date of initial public investment) to December 31, 1995, the
Administrators earned $125,000 and $81,165, respectively, from Federated
International Equity Fund II. 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 AUDITORS
The independent auditors for the Funds are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASES AND REDEMPTIONS

Shares of the Funds are sold at their net asset value on days the New York Stock
Exchange is open for business. The procedure for purchasing and redeeming shares
of the Funds is explained in the prospectus under `Purchases and Redemptions"
and "What Shares Cost." DISTRIBUTION PLAN (FEDERATED EQUITY INCOME FUND II ONLY)
The Plan permits the payment of fees to financial institutions and the
distributor to stimulate distribution activities and to cause services to be
provided to shareholders by a representative who has knowledge of the
shareholder's particular circumstances and goals. These activities may include,
but are not limited to: marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.

By adopting the Plan, the Trustees expect that the Fund will be able to achieve
a more predictable flow of cash for investment purposes and to meet redemptions.
This will facilitate more efficient portfolio management and assist the Fund in
pursuing its investment objectives. By identifying potential investors whose
needs are served by the Fund's objective, and properly servicing these accounts,
the Fund may be able to curb sharp fluctuations in rates of redemptions and
sales. Other benefits include: (1) an efficient and effective administrative
system; (2) a more efficient use of shareholder assets by having them rapidly
invested with a minimum of delay and administrative detail; and efficient and
reliable shareholder records system and prompt responses to shareholder requests
and inquiries concerning their accounts. Federated Equity Income Fund Ii is not
currently paying any 12b-1 fees under the Plan. Should the Fund begin to pay
these fees, shareholders would be notified 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, Federated
International Equity Fund II and Federated Equity Income 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 and Federated Equity Income 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 the Funds are informed
of the ex-dividend date.

DETERMINING MARKET 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 are
determined as follows:
ofor equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange, if
available;
oin the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;

ofor 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;
ofor unlisted equity securities, the latest mean prices;
ofor short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service; or ofor 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
and Federated Equity Income Fund II 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 Fund's adviser is used.);

o(with respect to Federated Equity Income Fund II) 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(with respect to Federated International Equity Fund II) according to the
mean between the last closing bid and asked prices, 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 reflect: 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,
Federated International Equity Fund II 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.
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 0.50%
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

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:
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, 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. SHAREHOLDERS' 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 one-year period ended December 31, 1996, and for the period from
February 1, 1994 (date of initial public investment) to December 31, 1996, the
average annual total returns for Federated American Leaders Fund II were 21.58%
and 18.03%, respectively. For the one year period ended December 31, 1996 and
for the period from November 9, 1995 (date of initial public investment) to
December 31, 1996, the average annual total returns of Federated Growth
Strategies Fund II were 24.32% and 24.04%, respectively. For the one-year period
ended December 31, 1996, and for the period from April 14, 1994 (date of initial
public investment) to December 31, 1996, the average annual total returns for
Federated Utility Fund II were 11.56% and 10.63%, respectively. For the one-year
period ended December 31, 1996, and for the period from November 18, 1994 (date
of initial public investment) to December 31, 1996, the average annual total
returns for Federated Prime Money Fund II were 4.75% and 4.95%, respectively.
For the one-year period ended December 31, 1996, and for the

period from March 29, 1994 (date of initial public investment) to December 31,
1996, the average annual total returns for Federated Fund for U.S. Government
Securities II were 4.20% and 5.62%, respectively. For the one-year period ended
December 31, 1996, and for the period from February 2, 1994 (date of initial
public investment) to December 31, 1996, the average annual total returns for
Federated High Income Bond Fund II were 14.31% and 10.48%, respectively. For the
one-year period ended December 31, 1996 and for the period from May 5, 1995
(date of initial public investment) to December 31, 1996, the average annual
total returns of Federated International Equity Fund II were 8.32% and 7.17%,
respectively.

The average annual total returns for the Funds 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 II for the
thirty-day period ended December 31, 1996, were 1.33%, 0.39%, 3.29%, 5.96% and
8.87%, respectively. Federated International Equity Fund II did not calculate a
yield for the thirty-day period ended December 31, 1996. 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, 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. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of Shares, the performance will be reduced for those shareholders paying those
fees. The yield for Federated Prime Money Fund II for the seven-day period ended
December 31, 1996, was 4.77%.

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:
odetermining 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;
odividing 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
omultiplying 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, 1996, was 4.88%. Federated Prime Money Fund II's effective
yield is computed by compounding the unannualized base period return by:
oadding 1 to the base period return; oraising the sum to the 365/7th power;
and osubtracting 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:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates and market value of portfolio securities;
ochanges in Fund expenses; and othe 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:
oDOW 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.
oSTANDARD & 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.
oLIPPER 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.
OLIPPER 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.
OLIPPER 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.
oLEHMAN 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.

oLEHMAN 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.
oLEHMAN 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.
oLEHMAN 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.
oMORNINGSTAR, 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.
oBANK 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.
oMONEY, 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.
oSTANDARD & 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.
oDOW 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.
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.
oSTANDARD & 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.
oSTANDARD & 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.
oLIPPER 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.

oLIPPER 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.
oLEHMAN BROTHERS HIGH YIELD INDEX and its sub-indices are based on credit
quality and/or duration. The Lehman Brothers High Yield Index covers the
universe of fixed rate, publicly issued, non-investment grade debt
registered with the SEC. All bonds included in the High

Yield Index must be dollar-denominated and non-convertible and have at
least one year remaining to maturity and an outstanding par value of at
least $100 million. Generally securities must be rated Ba1 or lower by
Moody's Investors Service, including defaulted issues. If no Moody's
rating is available, bonds must be rated BB+ or lower by S&P; and if no
S&P rating is available, bonds must be rated below investment grade by
Fitch Investors Service. A small number of unrated bonds is included in
the index; to be eligible they must have previously held a high yield
rating or have been associated with a high yield issuer, and must trade
accordingly.
In addition, Federated Equity Income Fund II will, from time to time, use the
following standard convertible securities indices against which it will compare
its performance: Goldman Sachs Convertible 100; Kidder Peabody Convertible Bond
Index; Value Line Convertible Bond Index; and Dow Jones
Utility Index.
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. In addition, advertising and sales literature for the
Funds may use charts and graphs to illustrate the principals of dollar-cost
averaging and may disclose the amount of dividends paid by the Funds over
certain periods of time.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Funds can
compare their performance, or performance for the types of securities in which
it invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
funds industry, including the growth of the industry, from sources such as the
Investment Company Institute. ABOUT FEDERATED INVESTORS

In the equity sector, Federated Investors has more than 26 years experience. As
of December 31, 1996, Federated managed 31 equity funds totaling approximately
$7.6 billion in assets across growth, value, equity income, international, index
and sector (i.e. utility) styles. Federated's value-oriented management style
combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

In the corporate bond sector, as of December 31, 1996, Federated managed 12
money market funds and 17 bonds funds with assets approximating $17.2 billion
and $4.0 billion, respectively. Federated's corporate bond decision
making--based on intensive, diligent credit analysis--is backed by over 21 years
of experience in the corporate bond sector. In 1972, Federated introduced one of
the first high-yield bond funds in the industry. In 1983, Federated was one of
the first fund managers to participate in the asset- backed securities market, a
market totaling more than $200 billion. In the government sector, as of December
31, 1996, Federated managed 9 mortgage-backed, 5 government/agency and 17
government money market mutual funds, with assets approximating $6.3 billion,
$1.7 billion and $23.6 billion, respectively. Federated trades approximately
$309 million in U.S. government and mortgage-backed securities daily and places
$17 billion in repurchase agreements each day. Federated introduced the first
U.S. government fund to invest in U.S. government bond securities in 1969.
Federated has been a major force in the short- and intermediate-term government
markets since 1982 and currently manages nearly $30 billion in government funds
within these maturity ranges.

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market mutual funds, a principal means
used by money managers today to value money market fund shares. Other
innovations include the first institutional tax-free money market fund. As of
December 31, 1996, Federated managed more than $50.3 billion in assets across 50
money market funds, including 18 government, 11 prime and 21 municipal with
assets approximating $28.0 billion, $12.8 billion and $9.5 billion,
respectively. 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 and global portfolios. MUTUAL
FUND MARKET Thirty-seven percent of American households are pursuing their
financial goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000 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.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by 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--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial professionals
and institutions has earned it high ratings in several surveys performed by
DALBAR, Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

*Source: Investment Company Institute

FINANCIAL STATEMENTS

The Funds' Financial Statements for the fiscal year ended December 31, 1996, are
incorporated herein by reference to the Annual Reports of the

Funds dated December 31, 1996 (File Nos. 33-69268 and 811-8042). Copies of
the Reports may be obtained without charge by contacting the respective
Fund.

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:
(a) Financial Statements: (1-7) incorporated by reference to the Funds' annual
reports dated December 31, 1996 (File Nos. 33-69268 and 811-8042) (8)
Filed in Part A.
(b) Exhibits:
(1) Conformed copy of Amended and Restated Declaration of Trust; (3)
(i) Conformed copy of Amendment #5 to the Declaration of Trust;
(10)
(ii) Conformed copy of Amendment #6 to the Declaration of Trust;
(11)
(2) Copy of By-Laws; (2)
(3) Not Applicable;
(4) (i) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated American Leaders Fund II; +
(ii) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated Utility Fund II; +
(iii) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated Fund for U.S. Government Securities
II; +
(iv) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated High Income Bond Fund II; +
(v) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated Prime Money Fund II; +
(vi) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated International Equity Fund II; (4)
(vii) Copy of Specimen Certificate for Shares of Beneficial
Interest of Federated Growth Strategies Fund II; +
(viii)Copy of Specimen Certificate for Shares of Beneficial Interest
of Federated Equity Income Fund II; +
(5) Conformed copy of Investment Advisory Contract;(3)
(i) Conformed copy of Exhibit A to Investment Advisory
Contract; (3)
(ii) Conformed copy of Exhibit B to Investment Advisory
Contract; (3)
(iii) Conformed copy of Exhibit C to Investment Advisory
Contract; (3)
(iv) Conformed copy of Exhibit D to Investment Adivsory
Contract; (3)
(v) Conformed copy of Exhibit E to Investment Adivsory
Contract; (3)
(vi) Conformed copy of Exhibit F to Investment Advisory
Contract; (6)

+ All exhibits have been filed electronically.
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 29, 1994. (File Nos. 33-69268
and 811-8042).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed August 23, 1994. (File Nos. 33-69268
and 811-8042).
(6) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed April 3, 1995. (File Nos. 33-69268
and 811-80420).
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed February 16, 1996. (File Nos.
33-69268 and 811-8042O).
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed March 28, 1996. (File Nos.
33-69268 and 811-8042O).

<PAGE>

(vii) Conformed copy of Exhibit G to the
Trust's present investment advisory contract
to add Federated Growth Strategies Fund II
(formerly, Growth Stock Fund); (10)
(viii)Conformed copy of Exhibit H to the
Trust's present investment advisory contract
to add Federated Growth Strategies Fund II
(formerly, Growth Stock Fund); (12)
(5a) Conformed copy of Investment Advisory
Contract; (10)
(i) Conformed copy of Exhibit A to Investment Advisory
Contract; (10)
(6) Conformed copy of Distributor's Contract; (3)
(i) Conformed copy of Exhibit A to
Distributor's Contract; (3) (ii) Conformed
copy of Exhibit B to Distributor's Contract;
(3) (iii) Conformed copy of Exhibit C to
Distributor's Contract; (3) (iv) Conformed
copy of Exhibit D to Distributor's Contract;
(3) (v) Conformed copy of Exhibit E to
Distributor's Contract; (3) (vi) Conformed
copy of Exhibit F to Distributor's Contract;
(7) (vii) Conformed copy of Exhibit G to
Distributor's Contract; (10) (viii)Conformed
copy of Exhibit H to Distributor's Contract;
(12)
(7) Not Applicable;
(8) Conformed copy of Custodian Contract; (7)
(9) (i) Conformed copy of Administrative Services Agreement;
(7)
(ii) Conformed copy of Agreement for Fund Accounting
Services, Aministrative Services, Transfer Agency
Services, and Custody Services Procurement; (11)
(10) Conformed copy of Opinion and Consent of Counsel as to legality
of shares being registered; (2)
(11) Consent of Independent Auditors; (14)
(12) Not Applicable;
(13) Conformed copy of Initial Capital Understanding;(2)
(14) Not Applicable;
(15) Conformed Copy of Distribution Plan; (12)
(16) (i) Copy of Federated American Leaders Fund II (formerly,
Equity Growth and Income Fund) Schedule for
Computation of Fund Performance Data; (3)

+ All exhibits have been filed electronically.
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 29, 1994. (File Nos. 33-69268
and 811-8042).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed August 23, 1994. (File Nos.
33-69268 and 811-8042).
(7) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed April 21, 1995. (File Nos. 33-69268
and 811-80420).
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed February 16, 1996. (File Nos.
33-69268 and 811-8042O).
(11) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 10 on Form N-1A filed March 28, 1996. (File Nos.
33-69268 and 811-8042O).
(12) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed February 10, 1997. (File Nos.
33-69268 and 811-8042O).
(14) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 14 on Form N-1A filed April 14, 1997. (File Nos.
33-69268 and 811-8042O).

<PAGE>

(ii) Copy of Federated Utility Fund II (formerly, Utility
Fund) Schedule for Computation of Fund Performance Data; (3)
(iii) Copy of Federated Fund for U.S.
Government Securities II (formerly, U.S.
Government Bond Fund) Schedule for
Computation of Fund Performance Data;(3)
(iv) Copy of Federated High Income Bond Fund
II (formerly, Corporate Bond Fund) Schedule
for Computation of Fund Performance Data;
(2) (v) Copy of Federated Prime Money Fund
II (formerly, Prime Money Fund) Schedule for
Computation of Fund Performance Data; (9)
(vi) Copy of Federated International Equity
Fund II (formerly, International Stock Fund)
Schedule for Computation of Fund Performance
Data; (10) (vii) Copy of Federated Growtht
Strategies Fund II (formerly, Growth Stock
Fund) Schedule for Computation of Fund
Performance Data; (10) (vii) Copy of
Federated Equity Income Fund II Schedule for
Computation of Fund Performance Data; +
(17) Copy of Financial Data Schedules; + (18) Not
applicable (19) Conformed copy of Power of Attorney; +

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of July 7, 1997

Shares of beneficial interest
(no par value)

Federated American Leaders Fund II 16
Federated Growth Strategies Fund II 7
Federated Utility Fund II 19
Federated Prime Money Fund II 17
Federated Fund for U.S. Government 22
Securities II
Federated High Income Bond Fund II 20
Federated International Equity Fund II 9
Federated Equity Income Fund II 9

Item 27. Indemnification: (1)

+ All exhibits have been filed electronically.

(1) Response is incorported by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 10, 1993. (File Nos.
33-69268 and 811-80420).
(2) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 29, 1994. (File Nos. 33-69268
and 811-8042).
(3) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed August 23, 1994. (File Nos.
33-69268 and 811-8042).
(9) Response is incorported by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed August 28, 1995. (File Nos.
33-69268 and 811-80420).
(10) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed February 16, 1996. (File Nos.
33-69268 and 811-8042O).

<PAGE>

Item 28. Business and Other Connections of Investment Adviser:

For a description of the other business of Federated Advisers,
the investment adviser to all of the investment portfolios of
the Trust, except for Federated International Equity Fund II,
see the section entitled "Fund Information - Management of the
Fund" in Part A. The affiliations with the Registrant of three
of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement
under "Federated Insurance Series Management." The remaining
Trustee of the investment adviser, his position with the
investment adviser, and, in parentheses, his principal
occupation is: Mark D.
Olson (Partner, Wilson, Holbrook and Bayard), 107 W. Market
Street, Georgetown, Delaware 19447.

The remaining Officers of the investment adviser are:
William D.Dawson, III, Henry A.Frantzen, and J.Thomas Madden,
Executive Vice Presidents; Peter R. Anderson, Drew
J.Collins, Jonathan C.Conley, Deborah A. Cunningham, Mark E.
Durbiano, J. Alan Minteer, Susan M. Nason, and Mary Jo
Ochson, Senior Vice Presidents; J. Scott Albrecht, Joseph M.
Balestrino, Randall S. Bauer, David F. Belton, Christine A.
Bosio, David A. Briggs, Kenneth J. Cody, Alexandre de
Bethmann, Michael P. Donnelly, Linda A. Duessel, Donald T.
Ellenberger, Kathleen M. Foody-Malus, Thomas M. Franks,
Edward C. Gonzales, James E. Grefenstette, Susan R. Hill,
Stephen A. Keen, Robert K. Kinsey, Robert M. Kowit, Jeff A.
Kozemchak, Marian R. Marinack, Sandra L. McInerney, Robert
J. Ostrowski, Charles A. Ritter, Scott B. Schermerhorn,
Frank Semack, Aash M. Shah, William F. Stolz, Tracy P.
Stouffer, Edward J. Tiedge, Paige M. Wilhelm, and Jolanta M.
Wysocka, Vice Presidents; Thomas R. Donahue, Treasurer; and
Stephen A. Keen, Secretary. The business address of each of
the Officers of the investment adviser is Federated
Investors Tower, Pittsburgh, PA 15222-3779. These
individuals are also officers of a majority of the
investment advisers to the Funds listed in Part B of this
Registration Statement.

For information as to the business, profession, vocation, and
employment of a substantial nature of directors and officers
of Federated Globl Research Corp., the investment adviser to
Federated International Equity Fund II, reference is made to
Federated Globl Research Corp's current Form ADV (File No.
801-49470) filed under the Investment Advisers Act of 1940, as
amended, which is incorporated herein by reference.

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of
the Registrant, also acts as principal underwriter for the
following open-end investment companies: 111 Corcoran Funds;
Arrow Funds; Automated Government Money Trust; BayFunds;
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 Insurance Series; Federated
Investment Portfolios; Federated Investment 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: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; High Yield Cash Trust; Independence
One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust; Money
Market Obligations Trust II; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds;
RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The
Biltmore Funds; The Biltmore Municipal Funds; The Monitor
Funds; The Planters Funds; The Starburst Funds; The Starburst
Funds II; The Virtus Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; Vision Group of Funds, Inc.;
WesMark Funds; and World Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
<TABLE>
<CAPTION>

(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.

Thomas R. Donahue Director, Assistant Secretary,
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

George D. Riedel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Matthew S. Propelka Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
</TABLE>

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promulgated thereunder are maintained at one of the following locations:

Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779

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

Federated Services Federated Investors Tower
Company Pittsburgh, PA 15222-3779
Administrator

<PAGE>

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

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

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

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of Trustees and the
calling of special shareholder meetings by shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered, a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INSURANCE SERIES,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
31st day of July, 1997.

FEDERATED INSURANCE SERIES

BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
July 31, 1997

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/ Matthew S. Hardin
Matthew S. Hardin Attorney In Fact July 31, 1997
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

J. Christopher Donahue* President and Trustee

John W. McGonigle* Executive Vice President,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr.* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

Exhibit 4(i) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED AMERICAN LEADERS FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916405

Fully
Paid and
Non-Assessable
Shares of
Beneficial
Interest of
the
FEDERATED
UTILITY FUND
II Portfolio
of FEDERATED
INSURANCE
SERIES
hereafter called the "Trust," transferable on the books of the Trust by the
owner, in person or by duly authorized attorney, upon surrender of this
certificate properly endorsed.

The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust, and all
amendments thereto, to all of which the holder by acceptance hereof assents.

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the right under Uniform Gifts to of
survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

of the beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________________________________
_____________________________________________________________ Attorney to
transfer the said shares on the books of the within named Trust with full power
of substitution in the premises.

Dated______________________
NOTICE:______________________________
THE SIGNATURE TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.

ALL PERSONS DEALING WITH FEDERATED INSURANCE SERIES, A MASSACHUSETTS BUSINESS
TRUST, MUST LOOK SOLELY TO THE TRUST PROPERTY FOR THE ENFORCEMENT OF ANY CLAIM
AGAINST THE TRUST, AS THE TRUSTEES, OFFICERS, AGENTS OR SHAREHOLDERS OF THE
TRUST ASSUME NO PERSONAL LIABILITY WHATSOEVER FOR OBLIGATIONS ENTERED INTO ON
BEHALF OF THE TRUST.

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a purple one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(ii) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED UTILITY FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916108

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a brown one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(iii) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED FUND FOR
U.S. GOVERNMENT SECURITIES II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916207

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the rightunder Uniform Gifts to
of survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a blue one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(iv) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED HIGH INCOME BOND FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916306

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the right under Uniform Gifts to
of survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a green one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(v) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED PRIME MONEY FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916504

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the right under Uniform Gifts to
of survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a blue one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(vi) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED INTERNATIONAL EQUITY FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916603

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the right under Uniform Gifts to
of survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a purple one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(vii) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED GROWTH STRATEGIES FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916702

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the right under Uniform Gifts to
of survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a blue one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 4(viii) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INSURANCE SERIES
FEDERATED EQUITY INCOME FUND II

NUMBER SHARES
_____ PORTFOLIO _____

ACCOUNT NO. ALPHA CODE ORGANIZED UNDER THE SEE REVERSE SIDE FOR
LAWS OF THE CERTAIN DEFINITIONS
COMMONWEALTH OF
MASSACHUSETTS

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313916801

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its Seal.

Dated: FEDERATED INSURANCE SERIES
Corporate Seal
1993
Massachusetts

/s/ David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder Services Company (Pittsburgh)
Transfer Agent
By:
Authorized Signature

<PAGE>

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations; TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entirety (Cust) (Minor)
JT TEN - as joint tenants with the right under Uniform Gifts to
of survivorship and not as Minors Act
tenants in common (State)

Additional abbreviations may also be used though not in the above list.

For value received__________ hereby sell, assign, and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

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

- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

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

______________________________________________________________________ shares

THIS SPACE MUST NOT BE COVERED IN ANY WAY

<PAGE>

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a green one-half inch border.

B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED INSURANCE SERIES and
the Deputy General Counsel of Federated Services Company, and each of them,
their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and stead, in
any and all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means
of the Securities and Exchange Commission's electronic disclosure system known
as EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

/s/John F. Donahue Chairman and Trustee July 1, 1997
John F. Donahue (Chief Executive Officer)

/s/J. Christopher Donahue President and Trustee July 1, 1997
J. Christopher Donahue

/s/John W. McGonigle Treasurer, Executive July 1, 1997
John W. McGonigle Vice President and
Secretary (Principal
Financial and Accounting
Officer)

/s/Thomas G. Bigley Trustee July 1, 1997
Thomas G. Bigley

/s/John T. Conroy, Jr. Trustee July 1, 1997
John T. Conroy, Jr.

<PAGE>

SIGNATURES TITLE DATE

/s/William J. Copeland Trustee July 1, 1997
William J. Copeland

/s/James E. Dowd Trustee July 1, 1997
James E. Dowd

/s/Lawrence D. Ellis, M.D. Trustee July 1, 1997
Lawrence D. Ellis, M.D.

/s/Edward L. Flaherty, Jr. Trustee July 1, 1997
Edward L. Flaherty, Jr.

/s/Peter E. Madden Trustee July 1, 1997
Peter E. Madden

/s/Gregor F. Meyer Trustee July 1, 1997
Gregor F. Meyer

/s/John E. Murray, Jr. Trustee July 1, 1997
John E. Murray, Jr.

Wesley W. Posvar Trustee July 1, 1997
Wesley W. Posvar

Marjorie P. Smuts Trustee July 1, 1997
Marjorie P. Smuts

Sworn to and subscribed before me this 1st day of July, 1997

/s/Marie M. Hamm
Marie M. Hamm

Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000

Member, Pennsylvania Association of Notaries

Exhibit 16(vii) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

<S> <C> <C> <C> <C>
Federated Equity Income Fund II

Yield = 2{( $20,926.23 - $6,163.89 )+1)^6-1}=

Computation of SEC Yield 761,938 *( $11.63 - 0.00000)
As of: June 30, 1997
SEC Yield = 2.01%

</TABLE>

Dividend and/or Interest
Inc for the 30 days ended $20,926.23

Net Expenses for $6,163.89
the Period

Avg Daily Shares
Outstanding and entitled
to receive dividends 761,938

Maximum offering price $11.63
per share as of 6/30/97

Undistributed net income 0.00000

Exhibit 16 (vii) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

Schedule for Computation of Initial
Fund Performance Data Invest of: $1,000
Offering
Federated Equity Income Fund II Price/Share= $10.47

Return Since Inception 1/30/97 NAV= $11.63
ending 6/30/97

FYE: December 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Beginning Capital Reinvest Ending Total
DECLARED: Monthly Reinvest Period Dividend Gain Price Period Ending Investment
PAID: Monthly Dates Shares /Share /Share /Share Shares Price Value

1/31/97 95.511 0.000000000 0.00000 $10.57 95.511 $10.57 $1,009.55
2/21/97 95.511 0.025000000 0.00000 $10.67 95.735 $10.67 $1,021.49
2/28/97 95.735 0.000000000 0.00000 $10.56 95.735 $10.56 $1,010.96
3/21/97 95.735 0.021000000 0.00000 $10.43 95.928 $10.43 $1,000.52
3/31/97 95.928 0.000000000 0.00000 $10.20 95.928 $10.20 $978.46
4/21/97 95.928 0.021000000 0.00000 $10.28 96.123 $10.28 $988.15
4/30/97 96.123 0.000000000 0.00000 $10.60 96.123 $10.60 $1,018.91
5/21/97 96.123 0.021000000 0.00000 $11.03 96.306 $11.03 $1,062.26
5/31/97 96.306 0.000000000 0.00000 $11.17 96.306 $11.17 $1,075.74
6/23/97 96.306 0.021000000 0.00000 $11.54 96.482 $11.54 $1,113.40
6/30/97 96.482 0.000000000 0.00000 $11.63 96.482 $11.63 $1,122.08

$1,000 (1+T) = Ending Value
T = 12.21%

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> Federated Insurance Series
Federated International Equity Fund II

<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Jun-30-1997
<INVESTMENTS-AT-COST> 24,666,774
<INVESTMENTS-AT-VALUE> 28,075,394
<RECEIVABLES> 563,100
<ASSETS-OTHER> 5,493
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,643,987
<PAYABLE-FOR-SECURITIES> 742,916
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,550
<TOTAL-LIABILITIES> 812,466
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 24,063,257
<SHARES-COMMON-STOCK> 2,230,237
<SHARES-COMMON-PRIOR> 1,590,287
<ACCUMULATED-NII-CURRENT> 152,130
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 208,015
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,408,116
<NET-ASSETS> 27,831,518
<DIVIDEND-INCOME> 241,971
<INTEREST-INCOME> 46,673
<OTHER-INCOME> 0
<EXPENSES-NET> 133,997
<NET-INVESTMENT-INCOME> 154,647
<REALIZED-GAINS-CURRENT> 389,308
<APPREC-INCREASE-CURRENT> 2,283,548
<NET-CHANGE-FROM-OPS> 2,827,503
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25,486
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 748,682
<NUMBER-OF-SHARES-REDEEMED> 111,081
<SHARES-REINVESTED> 2,349
<NET-CHANGE-IN-ASSETS> 10,079,802
<ACCUMULATED-NII-PRIOR> 22,969
<ACCUMULATED-GAINS-PRIOR> (181,293)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 106,760
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 289,707
<AVERAGE-NET-ASSETS> 21,648,294
<PER-SHARE-NAV-BEGIN> 11.160
<PER-SHARE-NII> 0.060
<PER-SHARE-GAIN-APPREC> 1.270
<PER-SHARE-DIVIDEND> 0.010
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.480
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>