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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(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:
"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."
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)
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)
- --------------------------------------------------------------------------------
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)
