FEDERATED INSURANCE SERIES, 485BPOS, 1997-04-14

FEDERATED INSURANCE SERIES
485BPOS, 1997-04-14

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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. 14 .............. X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 15 ........................ 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 April 22, 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:

X 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

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 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.............(1-7) 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.

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) to be filed by
amendment.

FEDERATED AMERICAN LEADERS FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
PROSPECTUS

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

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

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

The Fund has also filed a Statement of Additional Information dated April
22, 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 FUNDING VEHICLES FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE
POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR SUCH
CONTRACTS.

Prospectus dated April 22, 1997

TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objectives 2
Investment Policies 2
Investment Limitations 6
NET ASSET VALUE 6
INVESTING IN THE FUND 7
Purchases and Redemptions 7
What Shares Cost 7
Dividends 7
FUND INFORMATION 8
Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 9
Brokerage Transactions 10
SHAREHOLDER INFORMATION 10
Voting Rights 10
TAX INFORMATION 10
Federal Taxes 10
State and Local Taxes 11
PERFORMANCE INFORMATION 11
ADDRESSES 12
</TABLE>

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 (loss) on investments 2.54 3.06 (0.26)
Total from investment operations 2.73 3.26 (0.07)
LESS DISTRIBUTIONS
Distributions from net investment income (0.18) (0.19) (0.19)
Distributions in excess of net investment income(b) -- (0.01) --
Distributions from net realized gain on investments (0.09) -- --
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 omitted) $142,216 $48,514 $2,400
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.

GENERAL INFORMATION

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

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

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.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVES

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

INVESTMENT POLICIES

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

* industry leader with proven management capabilities;

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

* strong balance sheet with pension liabilities funded;

* products with brand recognition and consumer acceptance;

* growing consumer-based demand with limited government sales;

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

* vigorous research effort with continuing new product flow;

* low external capital requirements; and

* not an import competitive company but possessing international
capabilities.

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

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

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

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.

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

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

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

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

BANK INSTRUMENTS. 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.

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

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

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers,
banks, or other institutional borrowers of securities. This is a fundamental
policy which may not be changed without the approval of shareholders. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the adviser has determined are creditworthy under
guidelines established by the Trustees, and will receive collateral in the
form of cash or U.S. government securities equal to at least 100% of the
value of the portfolio securities loaned at all times.

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

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

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

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

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

* repurchase agreements.

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

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

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

INVESTMENT LIMITATIONS

The Fund will not:

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

The above investment limitations cannot be changed without shareholder
approval.

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 annuity contracts and variable life
insurance policies. The use of Fund shares as investments for both variable
annuity contracts and variable life insurance policies is referred to as
"mixed funding." The use of Fund shares as investments by separate accounts
of unaffiliated life insurance companies is referred to as "shared funding."

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

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

WHAT SHARES COST

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

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

DIVIDENDS

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

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

FUND INFORMATION

MANAGEMENT OF THE FUND

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

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
Trust, investment decisions for the Fund are made by Federated Advisers, the
Fund's investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase or sale of portfolio instruments, for which it
receives an annual fee from the Fund.

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

ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to 0.75% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary waiver
and reimbursement of expenses at any time at its sole discretion.

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

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $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.

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 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 J. Donnelly is the Fund's portfolio manager effective May 1997. Mr.
Donnelly joined Federated Investors in 1993 as an Investment Analyst and has
been a Vice President of the Fund's investment adviser since January 1997.
Mr. Donnelly was an Assistant Vice President of the investment adviser from
1995 to 1996, and served as Assistant Manager at Korea First Bank from 1991
to 1993. Mr. Donnelly received his Masters Degree in Management with a
concentration in international business and finance from Northwestern
University.

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

DISTRIBUTION OF FUND SHARES

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

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

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of
Federated Investors, provides administrative personnel and services
(including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company provides these at an annual
rate as specified below:
<TABLE>
<CAPTION>

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
<S> <C>
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
</TABLE>

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

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

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

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

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

TAX INFORMATION

FEDERAL TAXES

The Fund will pay no federal income tax because the Fund expects to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such
companies. 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 the Fund, and therefore, may for certain purposes be deemed to control
the Fund and be able to affect the outcome of certain matters presented for
a vote of shareholders. Aetna Insurance Company of America and Aetna Life
Insurance & Annuity Co. are owned by Aetna Inc.

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

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

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

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

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

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

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

ADDRESSES

Federated Insurance Series
Federated American Leaders Fund II Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

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

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

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

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
FEDERATED AMERICAN LEADERS 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.

[Graphic]

Cusip 313916405
3113010A (4/97)

FEDERATED AMERICAN LEADERS FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated American Leaders 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
FEDERTED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

Federated Securities Corp. is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 313916405
3113010B (4/97)

GENERAL INFORMATION 1

INVESTMENT OBJECTIVES AND POLICIES 1

Types of Investments 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 3

Reverse Repurchase Agreements 3
Restricted and Illiquid Securities 3
Portfolio Turnover 3
INVESTMENT LIMITATIONS 4

FEDERATED INSURANCE SERIES MANAGEMENT 6

Fund Ownership 9
Trustees' Compensation 10
Trustee Liability 11
INVESTMENT ADVISORY SERVICES 11

Adviser to the Fund 11
Advisory Fees 11
BROKERAGE TRANSACTIONS 11

OTHER SERVICES 11

Fund Administration 11
Custodian and Portfolio Accountant 12
Transfer Agent 12
Independent Auditors 12
PURCHASING SHARES 12

DETERMINING NET ASSET VALUE 12

Determining Market Value of Securities 12
MASSACHUSETTS PARTNERSHIP LAW 12

TAX STATUS 13

The Fund's Tax Status 13
Shareholders' Tax Status 13

TOTAL RETURN 13

YIELD 13

PERFORMANCE COMPARISONS 14

ABOUT FEDERATED INVESTORS 15

Mutual Fund Market 15
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 15
FINANCIAL STATEMENTS 15

APPENDIX 16

GENERAL INFORMATION

The Fund is a portfolio of the Trust, which was established as
Insurance Management Series, a Massachusetts business trust, under a
Declaration of Trust dated September 15, 1993. At a meeting of the
Board of Trustees (the `Trustees'') held on November 14, 1995, the
Trustees approved an amendment to the Declaration of Trust to change
the name of the Trust from Insurance Management Series to Federated
Insurance Series. At a meeting of the Trustees held on February 26,
1996, the Trustees approved an amendment to the Declaration of Trust
to change the name of the Fund from Equity Growth and Income Fund to
Federated American Leaders Fund II. The Declaration of Trust permits
the Trust to offer separate series of shares of beneficial interest in
separate portfolios of securities, including the Fund. The shares in
any one portfolio may be offered in separate classes. As of the date

of this prospectus, the Trustees have not established separate classes
of shares.
INVESTMENT OBJECTIVES AND POLICIES

The primary investment objective of the Fund is to achieve long-term
growth of capital. The Fund's secondary objective is to provide
income. The investment objectives cannot be changed without approval
of shareholders.
TYPES OF INVESTMENTS
The Fund invests, under normal circumstances, at least 65% of its
total assets in common stock of `blue-chip'' companies, as defined in
the prospectus. The Fund may also invest in other securities of these
companies, U.S. government securities, repurchase agreements, and bank
instruments. The following supplements the discussion of acceptable
investments in the prospectus.
CONVERTIBLE SECURITIES
As with all fixed-income securities, various market forces influence
the market value of convertible securities, including changes in the
level of interest rates. As interest rates increase, the market value
of convertible securities may decline and, conversely, as interest
rates decline, the market value of convertible securities may
increase. The unique investment characteristics of convertible
securities, the right to be exchanged for the issuer's common stock,
causes the market value of convertible securities to increase when the
underlying common stock increases. However, since securities prices
fluctuate, there can be no assurance of capital appreciation, and most
convertible securities will not reflect as much capital appreciation
as their underlying common stocks. When the underlying common stock is
experiencing a decline, the value of the convertible security tends to

decline to a level approximating the yield-to-maturity basis of
straight nonconvertible debt of similar quality, often called
`investment value,'' and may not experience the same decline as the
underlying common stock.
Many convertible securities sell at a premium over their conversion
values (i.e., the number of shares of common stock to be received upon
conversion multiplied by the current market price of the stock). This
premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of
capital appreciation due to the conversion privilege. If this
appreciation potential is not realized, the premium may not be
recovered.
WARRANTS
Warrants are basically options to purchase common stock at a
specific price (usually at a premium above the market value of
the optioned common stock at issuance) valid for a specific
period of time. Warrants may have 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.

U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may
invest generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and obligations
issued and/or guaranteed by the U.S. government agencies or
instrumentalities. These securities are backed by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are:
oFarm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association; and
oStudent Loan Marketing Association.
BANK INSTRUMENTS
The Fund only invests in bank instruments (as defined in the
prospectus) either issued by an institution having capital,
surplus, and undivided profits over $100 million or insured by
the Bank Insurance Fund (`BIF'') or the Savings Association
Insurance Fund (`SAIF''), both of which are administered by the
Federal Deposit Insurance Corporation. Bank instruments may

include Eurodollar Certificates of Deposit, Yankee Certificates
of Deposit, and Eurodollar Time Deposits. Institutions issuing
Eurodollar instruments are not necessarily subject to the same
regulatory requirements that apply to domestic banks, such as
reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping and the public availability of
information.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Fund sufficient to make payment for the securities to be
purchased are segregated on a Fund's records at the trade date. These
assets are marked to market daily and are maintained until the
transaction has been settled. The Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its
assets.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its
portfolio securities, up to one-third of the value of its total
assets, to broker/dealers, banks, or other institutional borrowers of
securities. The collateral received when the Fund lends portfolio
securities must be valued daily and, should the market value of the
loaned securities increase, the borrower must furnish additional
collateral to the Fund. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on
such securities. Loans are subject to termination at the option of the
Fund or the borrower. The Fund may pay reasonable administrative and

custodial fees in connection with a loan and may pay a negotiated
portion of the interest earned on the cash or equivalent collateral to
the borrower or placing broker. The Fund does not have the right to
vote securities on loan, but would terminate the loan and regain the
right to vote if that were considered important with respect to the
investment.

REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked
to market daily. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the
Fund might be delayed pending court action. The Fund believes that
under regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are found by the Fund's
investment adviser to be creditworthy pursuant to guidelines
established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will

repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
securities are marked to market daily and maintained until the
transaction is settled.
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.

INVESTMENT LIMITATIONS

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

PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in
any one industry. However, the Fund may at any time invest 25% or
more of its total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted

by the Fund's investment objectives and policies or the Trust's
Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as
it may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objectives, policies, and limitations.

INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in
illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after
notice, and certain restricted securities not determined by the
Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of
the value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital,
surplus, and undivided profits in excess of $100,000,000 at the time
of investment to be `cash items.''
FEDERATED INSURANCE SERIES MANAGEMENT

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

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.;
Director, Member of 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.; 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.

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.

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 the Fund: 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%).

TRUSTEES' COMPENSATION

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

J. Christopher Donahue, $0 $0 for the Trust and
President and Trustee 15 other investment companies
in the Fund Complex
James E. Dowd $1,270 $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

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

ADVISORY FEES
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the fiscal year ended December 31, 1996 and 1995, and for the
period from December 9, 1993 (start of business) to December 31, 1994,
the adviser earned advisory fees of $693,045, $142,579 and $4,397,
respectively, of which $203,603, $142,579 and $4,397, respectively,
were voluntarily waived.
BROKERAGE TRANSACTIONS

The Adviser may select brokers and dealers who offer brokerage and
research services. These services may be furnished directly to the
Fund or to the Adviser and may include: advice as to the advisability
of investing in securities; security analysis and reports; economic
studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by
brokers and dealers may be used by the Adviser or its affiliates in
advising the Fund and other accounts. To the extent that receipt of
these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their
expenses. The Adviser and its affiliates exercise reasonable business
judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in
relationship to the value of the brokerage and research services
provided. For the fiscal years ended December 31, 1996 and 1995, and
for the period from December 9, 1993 (start of business) to December
31, 1994, the Fund paid $234,623, $49,713 and $3,714, respectively, in
brokerage commissions on brokerage transactions.

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

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

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

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.
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 this Statement.
If the Fund fails to comply with these regulations, contracts invested
in the Fund shall not be treated as annuity, endowment, or life
insurance contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.

TOTAL RETURN

For the fiscal year ended December 31, 1996, and for the period
from February 1, 1994 (date of initial public investment) to December
31, 1996, the average annual total returns for the Fund were 21.58%
and 18.03%, respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the offering price per share
at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of
the period with $1,000, adjusted over the period by any additional
shares, assuming the quarterly reinvestment of all dividends and
distributions. You should review the performance figures for your
insurance contract, which figures reflect the applicable charges and
expenses of the contract. Such performance figures will accompany any
advertisement of the Fund's performance.
YIELD

The Fund's 30-day yield for the thirty day period ended December
31, 1996 was 1.33%.
The yield for the Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a twelve month period and

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

PERFORMANCE COMPARISONS

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 income
dividends and capital gains distributions, if any. From time to
time, the Fund will quote its Lipper ranking in the growth and
income funds category in advertising and sales literature.
oDOW JONES INDUSTRIAL AVERAGE (``DJIA''), is an unmanaged index
representing share prices of major industrial corporations,
public utilities, and transportation companies. Produced by the
Dow Jones & Company, it is cited as a principal indicator of
market conditions.
oSTANDARD & POOR'S (``S&P'') RATINGS GROUP DAILY STOCK PRICE
INDEX OF 500 COMMON STOCKS, a composite index of common stocks
in industry, transportation, and financial and public utility
companies, can be used to compare to the total returns of funds
whose portfolios are invested primarily in common stocks. In
addition, the S&P index assumes reinvestment of all dividends
paid by stocks listed on its index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated in the S&P figures.
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.

Advertisements and sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in the Fund based on quarterly reinvestment of dividends
over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to
federally insured bank products, including certificates of deposit and
time deposits and to money market funds using the Lipper Analytical
Services money market instruments average.
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 Funds. 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 Investors' value-oriented management style combines
quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the
1970s.
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
Investors' 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.
FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended December 31,
1996, are incorporated herein by reference to the Annual Report of the
Fund dated December 31, 1996 (File Nos. 33-69268 and 811-8042). A copy
of the Report may be obtained without charge by contacting the Fund.

*Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small
degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate

protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB--Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or
implied BBB rating.
B--Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay principal.
MOODY'S INVESTORS SERVICE, INC., CORPORATE BOND RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater

amplitude or there may be other elements present which make the long
term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA--Bonds which are Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.
FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA--Bonds considered to be investment grade and of very high quality.
The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher
ratings.
BBB--Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
impact on these bonds, and therefore, impair timely payment.
BB--Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt
service requirements.
B--Bonds are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable
business and economic activity throughout the life of the issue.
NR--NR indicates that Fitch does not rate the specific issue. Plus or
Minus (-): Plus or minus signs are used with a rating symbol to

indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the AAA category.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign
(+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.
Moody's Investors Service, Inc., Commercial Paper Ratings
PRIME-1--Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics:
oLeading market positions in well established industries.
oHigh rates of return on funds employed.
oConservative capitalization structure with moderated reliance
on debt and ample asset protection.
oBroad margins in earning coverage of fixed financial charges
and high internal cash generation.
oWell-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2--Issuers rated Prime-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more

affected by external conditions. Ample alternate liquidity is
maintained.
FITCH INVESTORS SERVICE, INC., COMMERCIAL PAPER RATINGS
F-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having the strongest degree of assurance for timely payment.
F-2--(Very Good Grade) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the
strongest issues.

FEDERATED UTILITY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

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

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE

FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

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

FUND SHARES ARE AVAILABLE EXCLUSIVELY AS FUNDING VEHICLES FOR LIFE INSURANCE
COMPANIES WRITING VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE

POLICIES. THIS PROSPECTUS SHOULD BE ACCOMPANIED BY THE PROSPECTUS FOR SUCH
CONTRACTS.

Prospectus dated April 22, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Investment Limitations 7
NET ASSET VALUE 7
INVESTING IN THE FUND 7
Purchases and Redemptions 7
What Shares Cost 7
Dividends 8
FUND INFORMATION 8
Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 9
Brokerage Transactions 10
SHAREHOLDER INFORMATION 10
Voting Rights 10
TAX INFORMATION 10
Federal Taxes 10
State and Local Taxes 11
PERFORMANCE INFORMATION 11

ADDRESSES 12
</TABLE>

FEDERATED UTILITY FUND II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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, the net investment income
was distributed to the Fund's adviser.

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

(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 the 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.

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established
as Insurance Management Series, a Massachusetts business trust, under a

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

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.

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

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

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

RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest 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 the Fund may otherwise invest pursuant to its investment
objective and policies, but which are subject to restriction on resale under
federal securities law. The Fund may also invest in illiquid securities but
will limit such investment to no more than 15% of its net assets. This
limitation will include certain restricted securities not determined to be
liquid by the Trustees, repurchase agreements providing for settlement in
more than seven days after notice and over-the-counter options.

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

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

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

* and repurchase agreements.

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

creditworthy under guidelines established by the Trustees and will receive
collateral equal to at least 100% of the value of the securities loaned at
all times.

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

The Fund may also write call options on all or any portion of its portfolio
to generate income for the Fund. The Fund will write call options on

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

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

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

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on the

Fund's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets. When the
Fund purchases futures contracts, an amount of cash and cash equivalents,
equal to the underlying commodity value of the futures contracts (less any
related margin deposits), will be deposited in a segregated account with the
Fund's custodian (or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures contracts is
unleveraged.

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

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

VARIABLE ASSET REGULATIONS. The Fund is also subject to variable contract
asset regulations prescribed by the U.S. Treasury Department under Section

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

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

jurisdiction in which contracts will be offered by the insurance companies
which invest in the Fund.

INVESTMENT LIMITATIONS

The Fund will not:

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

The above investment limitations cannot be changed without shareholder
approval.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund's

shares are used solely as the investment vehicle for separate accounts of
insurance companies offering variable annuity contracts and variable life
insurance policies. The use of Fund shares as investments for both variable
annuity contracts and variable life insurance policies is referred to as
"mixed funding." The use of Fund shares as investments by separate accounts
of unaffiliated life insurance companies is referred to as "shared funding."

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

WHAT SHARES COST

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

following holidays: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

DIVIDENDS

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

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

FUND INFORMATION

MANAGEMENT OF THE FUND

shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
Trust, investment decisions for the Fund are made by Federated 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 and sale of portfolio instruments, for which it
receives an annual fee from the Fund.

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
choose to waive a portion of its fees or reimburse the Fund for certain
operating expenses. The adviser can terminate this voluntary waiver and
reimbursement of expenses at any time at its sole discretion.

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.

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

DISTRIBUTION OF FUND SHARES

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.

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

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

and Aetna Retirement Services Central Valuation Unit owned 34.19% and
26.40%, respectively, of the voting securities of the Fund, and, therefore,
may for certain purposes be deemed to control the Fund and be able to affect
the outcome of certain matters presented for a vote of shareholders. Aetna
Retirement Services Central Valuation Unit is owned by Aetna Inc. and Life
of Virginia is owned by General Electric Capital Assurance Company.

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

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

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

ADDRESSES

Federated Insurance Series
Federated Utility 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 UTILITY 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.

[Graphic]

Cusip 313916108
3113008A (4/97)

FEDERATED UTILITY FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with
the prospectus of Federated Utility Fund II (the ``Fund') a
portfolio of Federated Insurance Series (the ``Trust') 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 Fund
and is a subsidiary of Federated Investors.
Cusip 313916108
3113008B (4/97)
GENERAL INFORMATION 1

INVESTMENT OBJECTIVE AND POLICIES 1

U.S. Government Obligations 1
When-Issued and Delayed Delivery Transactions 1
Lending of Portfolio Securities 1
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Portfolio Turnover 3
INVESTMENT LIMITATIONS 3

FEDERATED INSURANCE SERIES MANAGEMENT 5

Fund Ownership 8
Trustees' Compensation 9
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10

Adviser to the Fund 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 10

OTHER SERVICES 11

Fund Administration 11
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
PURCHASING SHARES 11

DETERMINING NET ASSET VALUE 11

Determining Market Value of Securities 11
MASSACHUSETTS PARTNERSHIP LAW 12

TAX STATUS 12

The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 12

YIELD 12

PERFORMANCE COMPARISONS 13

Economic and Market Information 14
ABOUT FEDERATED INVESTORS 14

Mutual Fund Market 14
Institutional Clients 14
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 15
FINANCIAL STATEMENTS 15

APPENDIX 16

GENERAL INFORMATION

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

INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to achieve high current income and
moderate capital appreciation. The investment objective cannot be
changed without approval of shareholders. The Fund endeavors to
achieve its investment objective by investing primarily in a
professionally managed, diversified portfolio of equity and debt
securities of utility companies.
U.S. GOVERNMENT OBLIGATIONS
The Fund may also invest in U.S. government obligations which
generally include direct obligations of the U.S. Treasury (such as
U.S. Treasury bills, notes, and bonds) and obligations issued and/or
guaranteed by U.S. government agencies or instrumentalities. These
securities are backed by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow an amount limited to a specific
line of credit from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the
obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are:
o Farm Credit System, including the National Bank for
Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
oFederal Home Loan Banks;
oFederal Home Loan Mortgage Corporation;
oFederal National Mortgage Association; and
oStudent Loan Marketing Association.

In order to generate additional income, the Fund may lend its
portfolio securities, up to one-third of the value of its total
assets, to broker/dealers, banks, or other institutional borrowers of
securities. This policy may not be changed without shareholder
approval.

The collateral received when the Fund lends portfolio securities must
be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays
the Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The
Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the

interest earned on the cash or equivalent collateral to the borrower
or placing broker. The Fund does not have the right to vote securities
on loan, but would terminate the loan and regain the right to vote if
that were considered important with respect to the investment.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or other securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. The
Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of
such securities. The Fund will only enter into repurchase agreements
with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in

return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
securities are marked to market daily and maintained until the
transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.

The 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.

For the fiscal year ended December 31, 1996 and 1995, the portfolio
turnover rates for the Fund were 63% and 62%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any
securities on margin, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of
portfolio securities. The deposit or payment by the Fund of
initial or variation margin in connection with futures contracts
or related options transactions is not considered the purchase of
a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund
may borrow money directly or through reverse repurchase

agreements as a temporary, extraordinary, or emergency measure to
facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous, and
then only in amounts not in excess of one-third of the value of
its total assets; provided that, while borrowings and reverse
repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional
investments are made. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing. For purposes
of this limitation, the following are not deemed to be pledges:
margin deposits for the purchase and sale of futures contracts
and related options, any segregation or collateral arrangements
made in connection with options activities or the purchase of
securities on a when-issued basis.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities, if, as a result of such
purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry
other than the utilities industry. However, the Fund may at any
time invest 25% or more of its total assets in cash or cash items
and securities issued and/or guaranteed by the U.S. government,
its agencies or instrumentalities.

INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except that the Fund
may purchase and sell futures and stock index futures contracts
and related options.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.

LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted
by the Fund's investment objective and policies or the Trust's
Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as
it may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.

DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material changes in these limitations become effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in
illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after
notice, over-the-counter options, and certain restricted
securities not determined by the Trustees to be liquid.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5%
of the Fund's total assets would be invested in premiums on open
put option positions.

WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or
after segregating cash in the amount of any further payment.

INVESTING IN SECURITIES OF FOREIGN ISSUERS
The Fund may invest up to 10% of its total assets in the utility
securities of developing countries.

Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of
the value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital,
surplus, and undivided profits in excess of $100,000,000 at the time
of investment to be `cash items.''

FEDERATED INSURANCE SERIES MANAGEMENT

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

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, Member of 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.

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.

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.

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.

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.

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.

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 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%).

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

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a
subsidiary of Federated Investors. All voting securities of Federated

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

For the fiscal years ended December 31, 1996 and 1995, and for the
period from December 9, 1993 (start of business) to December 31, 1994,
the adviser earned advisory fees of $361,797, $89,752 and $2,077,
respectively, of which $248,058, $89,752 and $2,077 were waived.
BROKERAGE TRANSACTIONS

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, the Fund paid $81,701, $59,746 and $476, respectively, in
brokerage commissions on brokerage transactions.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee

as described in the prospectus. From March 1, 1994, to March 1, 1996,
Federated Administrative Services served as the Fund's Administrator.
Prior to March 1, 1994, Federated Administrative Services, Inc. served
as the Fund's Administrator. Both former Administrators are
subsidiaries of Federated Investors. For purposes of this Statement of
Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".
For the fiscal 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.

PURCHASING SHARES

Net asset value generally changes each day. The days on which net
asset value is calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities 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.

MASSACHUSETTS PARTNERSHIP LAW

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 this Statement.
If the Fund fails to comply with these regulations, contracts invested
in the Fund shall not be treated as annuity, endowment, or life
insurance contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

For the fiscal year ended December 31, 1996, and for the period from
April 14, 1994 (date of initial public investment) to December 31,
1996 , the average annual total returns for the Fund were 11.56% and
10.63%, respectively.

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

The Fund's 30-day yield for the thirty day period ended December 31,
1996 was 3.29%.

The yield for the Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a twelve month period and
is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of

certain adjustments required by the Securities and Exchange Commission
and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. Also, the yield does not reflect
the charges and expenses of an insurance contract. You should review
the performance figures for your insurance contract, which figures

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

The Fund's performance depends upon such variables as:
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.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation
of yield and total return.
Investors may use financial publications and/or indices to obtain a
more complete view of the Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may
include:
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 Fund will quote its Lipper ranking in the ``utility
funds'' category in advertising and sales literature.
oLIPPER UTILITY FUND AVERAGE is composed of approximately 87
funds which invest 65% of their equity portfolio in utility
stocks. From time to time, the Trust/Fund will compare its
total return to the average total return of the funds
comprising the average for the same calculation period.
oDOW JONES INDUSTRIAL AVERAGE (``DJIA'') is an unmanaged index
representing share prices of major industrial corporations,
public utilities, and transportation companies. Produced by the
Dow Jones & Company, it is cited as a principal indicator of
market conditions.
oSTANDARD & POOR'S RATINGS GROUP (``S&P'') DAILY STOCK PRICE
INDEX OF 500 COMMON STOCKS, a composite index of common stocks
in industry, transportation, financial, and public utility
companies, can be used to compare the total returns of funds
whose portfolios are invested primarily in common stocks. In
addition, the S&P index assumes reinvestment of all dividends
paid by stocks listed on its index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated in S&P figures.
oSTANDARD & POOR'S RATINGS GROUP UTILITY INDEX is an unmanaged
index of common stocks from forty different utilities. This
index indicates daily changes in the price of the stocks. The
index also provides figures for changes in price from the
beginning of the year to date, and for a twelve month period.
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.
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.

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

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

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.
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.*

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 Fund's Financial Statements for the fiscal year ended December 31,
1996, are incorporated herein by reference to the Annual Report of the
Fund dated December 31, 1996 (File Nos. 33-69268 and 811-8042). Copies
of the Report may be obtained without charge by contacting the Fund.

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated `AAA'' has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated `AA'' has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A--Debt rated `A'' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category than in
higher rated categories.
BB, B--Debt rated "BB" and "B" is regarded, on balance as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. "B"
indicates the highest degree of speculation. While such debt will
likely have some quality and protective characteristics, these are
outweighed by large uncertainties of major risk exposures to adverse
conditions.

MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated `Aaa'' are judged to be of the best
quality. They carry the smallest degree of investment risk and are
generally referred to as `gilt edged.'' Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA--Bonds which are rated `Aa'' are judged to be of high quality by
all standards. Together with the `Aaa'' group, they comprise what are
generally known as high grade Bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
`Aaa'' securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in `Aaa'' securities.
A--Bonds which are rated `A'' possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future.
BAA--Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA--Bonds which are rate "Ba" are judged to have speculative elements;
their future cannot be considered as well-assured. Often the

protection of interest and principal payments may be very moderate and
thereby not well safeguarded during both good and bad times over the
future. Uncertainty of position characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

Federated Fund for U.S. Government Securities II

(A Portfolio of Federated Insurance Series)
PROSPECTUS

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

The shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other government agency. Investment in these shares involves investment
risks, including the possible loss of principal.

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

Prospectus dated April 22, 1997

Table of Contents

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Investment Limitations 5
NET ASSET VALUE 5
INVESTING IN THE FUND 5
Purchases and Redemptions 5
What Shares Cost 6
Dividends 6
FUND INFORMATION 6
Management of the Fund 6
Distribution of Fund Shares 8
Administration of the Fund 8
SHAREHOLDER INFORMATION 8
Voting Rights 8

TAX INFORMATION 9
Federal Taxes 9
State and Local Taxes 9
PERFORMANCE INFORMATION 9
ADDRESSES 11
</TABLE>

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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) on investments (0.18) 0.30 --
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 investments (0.04) -- --
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.

GENERAL INFORMATION

U.S. Government Bond Fund to Federated Fund for U.S. Government Securities
II. The Declaration of Trust permits the Trust to offer separate series of
shares of beneficial interest in separate portfolios of securities,
including the Fund. The shares in any one portfolio may be offered in
separate classes. As of the date of this prospectus, the Trustees have not
established separate classes of shares.

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.

INVESTMENT INFORMATION
INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

Under normal circumstances, the Fund pursues its investment objective by

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

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

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

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

* 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 a nationally
recognized statistical rating agency and which are issued by private
entities such as investment banking firms and companies related to the
construction industry. The CMOs in which the Fund may invest may be: (i)
privately issued securities which are collateralized by pools of mortgages
in which each mortgage is guaranteed as to payment of principal and interest
by an agency or instrumentality of the U.S. government; (ii) privately
issued securities which are collateralized by pools of mortgages in which
payment of principal and interest are guaranteed by the issuer and such
guarantee is collateralized by U.S. government securities; and (iii) other
privately issued securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and

interest are supported by the credit of an agency or instrumentality of the
U.S. government. The mortgage-related securities provide for a periodic
payment consisting of both interest and principal. The interest portion of
these payments will be distributed by the Fund as income, and the capital
portion will be reinvested.

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

will only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are found by the
Fund's adviser to be creditworthy pursuant to guidelines established by the
Trustees.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers,
banks, or other institutional borrowers of securities. This is a fundamental
policy which may not be changed without shareholder approval. The Fund will
only enter into loan arrangements with broker/dealers, banks, or other
institutions which the investment adviser has determined are creditworthy
under guidelines established by the Trustees and will receive collateral
equal to at least 100% of the value of the securities loaned in the form of
cash or U.S. government securities.

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.

government agency or instrumentality shall be treated as a separate issuer.
If the Fund fails to achieve the diversification required by the
regulations, unless relief is obtained from the Internal Revenue Service,
the contracts invested in the Fund will not be treated as annuity,
endowment, or life insurance contracts.

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

INVESTMENT LIMITATIONS

The Fund will not:

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

The above investment limitations cannot be changed without shareholder
approval.

NET ASSET VALUE
The net asset value per share of the Fund fluctuates. It is determined by
dividing the sum of the market value of all securities and other assets of
the Fund, less liabilities, by the number of shares outstanding.

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

annuity contracts and variable life insurance policies is referred to as
"mixed funding." The use of Fund shares as investments by separate accounts
of unaffiliated life insurance companies is referred to as "shared funding."

WHAT SHARES COST

DIVIDENDS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

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

ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to 0.60% of the Fund's average daily net assets. The adviser may
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses. The adviser can terminate this voluntary waiver and
reimbursement of expenses at any time at its sole discretion.

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.

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

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.

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.

ADMINISTRATION OF THE FUND

MAXIMUM AVERAGE AGGREGATE

ADMINISTRATIVE FEE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million

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, United Omaha Life
Insurance Co., Omaha, Nebraska owned 34.52% of the voting securities of the
Fund, and therefore, may for certain purposes be deemed to control the Fund
and be able to affect the outcome of certain matters presented for a vote of
shareholders. United of Omaha Life Insurance Co. is owned by Mutual of Omaha
Insurance Company.

Each share of the Fund gives the shareholder one vote in Trustee elections
and other matters submitted to shareholders for vote. All shares of each

portfolio in the Trust have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund. As a
Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Fund's operation and for the election of
Trustees in certain circumstances.
Trustees may be removed by the Trustees or by the shareholders at a special
meeting. A special meeting of shareholders shall be called by the Trustees
upon the written request of shareholders owning at least 10% of the
outstanding shares of all series of the Trust.

TAX INFORMATION

FEDERAL TAXES

Internal Revenue Code.

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

Performance information will not reflect the charges and expenses of a

variable annuity or variable life insurance contract. Because shares of the
Fund can only be purchased by a separate account of an insurance company
offering such a contract, you should review the performance figures of the
contract in which you are invested, which performance figures will accompany
any advertisement of the Fund's performance.

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

ADDRESSES

Federated Insurance Series
Federated Fund for Federated Investors Tower
U.S. Government Securities II 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 Fund for U.S. Government Securities II

(A Portfolio of Federated
Insurance Series)

PROSPECTUS

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

[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.

April 22, 1997
Cusip 313916207
3113007A (4/97)

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with
the prospectus of Federated Fund for U.S. Government Securities
II (the `Fund''), 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 313916207
3113007B (4/97)

GENERAL INFORMATION 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
When-Issued and Delayed Delivery Transactions 1
Lending of Portfolio Securities 1
Restricted and Illiquid Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Portfolio Turnover 2
INVESTMENT LIMITATIONS 3

FEDERATED INSURANCE SERIES MANAGEMENT 4

Fund Ownership 8
Trustees' Compensation 9
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10

Adviser to the Fund 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 10

OTHER SERVICES 11

Fund Administration 11
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
PURCHASING SHARES 11

DETERMINING NET ASSET VALUE 11

Determining Market Value of Securities 11
MASSACHUSETTS PARTNERSHIP LAW 12

TAX STATUS 12

The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 12

YIELD 12

PERFORMANCE COMPARISONS 13

ABOUT FEDERATED INVESTORS 14

Mutual Fund Market 14
Institutional Clients 14
Bank Marketing 14
Broker/Dealers and Bank Broker/Dealer Subsidiaries 15
FINANCIAL STATEMENTS 15

GENERAL INFORMATION

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

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

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

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

terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.
The 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.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers,
and other recognized financial institutions sell U.S. government
securities or other securities to the Fund and agree at the time of
sale to repurchase them at a mutually agreed upon time and price. The
Fund or its custodian will take possession of the securities subject
to repurchase agreements and these securities will be marked to market

daily. To the extent that the original seller does not repurchase the
securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent,
disposition of such securities by the Fund might be delayed pending
court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities
subject to repurchase agreements, a court of competent jurisdiction
would rule in favor of the Fund and allow retention or disposition of
such securities. The Fund will only enter into repurchase agreements
with banks and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
securities are marked to market daily and maintained until the
transaction is settled.

PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the
Fund's investment objective, without regard to length of time a
particular security may have been held. The Fund's policy of managing
its portfolio of U.S. government securities, including the sale of
securities held for a short period of time, to achieve its investment
objective of current income may result in high portfolio turnover. The
Fund will not attempt to set or meet a portfolio turnover rate as any
turnover would be incidental to transactions undertaken in an attempt
to achieve the Fund's investment objective.
For the fiscal years ended December 31, 1996 and 1995, the
portfolio turnover rates for the Fund were 97% and 65%,
respectively.
INVESTMENT LIMITATIONS

its total assets; provided that, while borrowings and reverse
repurchase agreements outstanding exceed 5% of the Fund's total
assets, any such borrowings will be repaid before additional
investments are made. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amount borrowed or 15% of the
value of total assets at the time of borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in
any one industry. However, the Fund may at any time invest 25% or
more of its total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,

regardless of priorities, series, designations, or other
differences.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as
it may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio
securities up to one-third of the value of its total assets. This
shall not prevent the Fund from purchasing or holding corporate
or U.S. government bonds, debentures, notes, certificates of
indebtedness or other debt securities of an issuer, entering into
repurchase agreements, or engaging in other transactions which
are permitted by the Fund's investment objective and policies or
the Trust's Declaration of Trust.
The above investment limitations cannot be changed without
shareholder approval. The following limitation, however, may be
changed by the Trustees without shareholder approval. Shareholders

will be notified before any material change in this limitation becomes
effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net
assets in illiquid securities, including, among others,
repurchase agreements providing for settlement more than seven
days after notice, and certain restricted securities not
determined by the Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of
the value of its net assets during the coming fiscal year.
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.

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

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

Edward L. Flaherty, Jr.@
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.

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.

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

Shareholder Services; Director, Federated Securities Corp.; Executive
Vice President and Secretary of the Funds; Treasurer of some of the
Funds.

As of March 24, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Fund: 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%).

TRUSTEES' COMPENSATION

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

or reckless disregard of the duties imposed upon it by its contract
with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended December 31, 1996 and 1995, and for the
period from December 8, 1993 (start of business) to December 31, 1994,
the adviser earned advisory fees of $141,092, $30,456 and $2,605,
respectively, all of which were waived.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale
of portfolio instruments, the adviser looks for prompt execution of
the order at a favorable price. In working with dealers, the adviser
will generally use those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may
include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the
adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer

brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons
are reasonable in relationship to the value of the brokerage and
research services provided. For the fiscal years ended December 31,
1996 and 1995, and for the period from December 8, 1993 (start of
business) to December 31, 1994, the Fund paid $0, $322, and $0,
respectively, in brokerage commissions on brokerage transactions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Fund.

OTHER SERVICES

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 8, 1993 (start of business) to December 31, 1994,
the Administrators earned $125,000, $125,000 and $63,015,
respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company,
Pittsburgh, PA, provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments. The fee paid for
this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through it registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a
fee based on the size, type and number of accounts and transactions
made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP,
Pittsburgh, PA.
PURCHASING SHARES

prospectus under `Purchases and Redemptions'' and ``What Shares
Cost.''
DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net
asset value is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
The values of the Fund's portfolio securities 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.
MASSACHUSETTS PARTNERSHIP LAW

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

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

For the fiscal year ended December 31, 1996, and for the period
from March 29, 1994 (date of initial public investment) to December
31, 1996 , the average annual total returns for the Fund were 4.20%
and 5.62%, respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the offering price per share
at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of
the period with $1,000, adjusted over the period by any additional
shares, assuming the monthly reinvestment of all dividends and
distributions. You should review the performance figures for your
insurance contract, which figures reflect the applicable charges and
expenses of the contract. Such performance figures will accompany any
advertisement of the Fund's performance.

YIELD

The Fund's 30-day yield for the thirty day period ended December
31, 1996 was 5.96%.
The yield for the Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a twelve-month period and
is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may
not correlate to the dividends or other distributions paid to
shareholders. Also, the yield does not reflect the charges and
expenses of an insurance contract. You should review the performance
figures for your insurance contract, which figures reflect the
applicable charges and expenses of the contract. Such performance
figures will accompany any advertisement of the Fund's performance.
PERFORMANCE COMPARISONS

The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation
of yield and total return.
Investors may use financial publications and/or indices to obtain a
more complete view of the Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may
include:
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 Fund will quote its Lipper ranking in the growth and
income funds category in advertising and sales literature.
oLEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX is comprised
of approximately 5,000 issues which include non-convertible
bonds publicly issued by the U.S. government or its agencies;
corporate bonds guaranteed by the U.S. government and quasi-
federal corporations; and publicly issued, fixed-rate, non-
convertible domestic bonds of companies in industry, public
utilities, and finance. The average maturity of these bonds
approximates nine years. Tracked by Lehman Brothers, 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 MORTGAGE-BAKED SECURITIES INDEX includes 15-
and 30-year fixed-rate securities backed by mortgage pools of
the Government National Mortgage Association (GNMA), Federal
Home Loan Mortgage Corporation (FHLMC), and Federal National
Mortgage Corporation (FNMA). Graduated payment mortgages (GPMs)
and balloons are included in the index.
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.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These
total returns also represent the historic change in the value of an
investment in the Fund based on quarterly reinvestment of dividends
over a specified period of time.
From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to
federally insured bank products, including certificates of deposit and
time deposits, and to money market funds using the Lipper Analytical
Services money market instruments average.
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 Funds. 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

In the government sector, as of December 31, 1996, Federated Investors
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.
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.

*Source: Investment Company Institute

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
Investors' 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.

FINANCIAL STATEMENTS

FEDERATED HIGH INCOME BOND FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

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

companies.

THE FUND 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 THIS FUND.

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).

FUND INFORMATION 8
Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 10
SHAREHOLDER INFORMATION 10
Voting Rights 10
TAX INFORMATION 11
Federal Taxes 11
State and Local Taxes 11
PERFORMANCE INFORMATION 11
APPENDIX 12
ADDRESSES 16
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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) on investments 0.45 0.89 (1.12)
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 investment income(d) -- -- (0.01)
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.

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

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

The Fund is a portfolio of Federated Insurance Series, which was established

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

* preferred stocks;

* bonds;

* debentures;

* notes;

* equipment lease certificates; and

* equipment trust certificates.

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

REPURCHASE AGREEMENTS. 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 the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price. The Fund or its custodian
will take possession of the securities subject to repurchase agreements and
these securities will be marked to market daily. To the extent that the
original seller does not repurchase the securities from the Fund, the Fund

could receive less than the repurchase price on any sale of such securities.

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

RESTRICTED AND ILLIQUID SECURITIES. The 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 the Fund may otherwise invest pursuant to its investment
objective and policies, but which are subject to restrictions on resale
under federal securities law. The Fund will limit investments in illiquid
securities, including certain restricted securities not determined by the
Trustees to be liquid, non-negotiable time deposits, and repurchase agreements
providing for settlement in more than seven days after notice, to 15% of the
value of its total assets.

only enter into loan arrangements with broker/dealers, banks, or other
institutions which the investment adviser has determined are creditworthy
under guidelines established by the Trustees and will receive collateral in
the form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned at all times.

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.

80% of the total assets of the Fund may be represented by any three
investments, and no more than 90% of the total assets of the Fund may be
represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each treated
as a single investment. In the case of government securities, each
government agency or instrumentality shall be treated as a separate issuer.
If the Fund fails to achieve the diversification required by the
regulations, unless relief is obtained from the Internal Revenue Service,
the contracts invested in the Fund will not be treated as annuity,
endowment, or life insurance contracts.

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

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
CREDIT RATING DECEMBER 31, 1996
<S> <C>
BB & BBB 17.0%
B 73.0%
CCC 4.0%
D 0.1%
Not Rated 5.9%
Total 100.0%
</TABLE>

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

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

DIVERSIFICATION. The Fund invests in securities of many different issuers,
industries, and economic sectors to reduce portfolio risk.

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

INVESTMENT LIMITATIONS

The Fund will not:

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

The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, can be changed by the Trustees
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 assets in illiquid securities.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

Shares of the Fund are not sold directly to the general public. The Fund
reserves the right to reject any purchase request. The Fund's shares are

used solely as the investment vehicle for separate accounts of insurance
companies offering variable annuity contracts and variable life insurance
policies. The use of Fund shares as investments for both variable annuity
contracts and variable life insurance policies is referred to as "mixed
funding." The use of Fund shares as investments by separate accounts of
unaffiliated life insurance companies is referred to as "shared funding."

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

WHAT SHARES COST

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

(iii) the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.

DIVIDENDS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the business affairs of the Trust and for

exercising all of the Trust's powers except those reserved for the
shareholders. An Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.

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

ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to 0.60% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary waiver
and reimbursement of expenses at any time at its sole discretion.

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

DISTRIBUTION OF FUND SHARES

Federated Securities Corp. is the principal distributor for shares of the

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.

ADMINISTRATION OF THE FUND

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 60.83% of the
voting securities of the Fund, and therefore, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.

Trustees in certain circumstances.

TAX INFORMATION

FEDERAL TAXES

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

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

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

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

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS

AAA -- Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.

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

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

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

lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied
BBB rating.

B -- Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal.

CCC -- Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions
to meet timely payment of interest and repayment of principal. In the event
of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal.

The CCC rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied B or B-rating.

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

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

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

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

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

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

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

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

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

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

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

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

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

FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

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

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

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

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

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

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

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

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

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

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

STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS

A-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

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

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

ADDRESSES

Federated Insurance Series
Federated High Income Federated Investors Tower
Bond Fund II 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 HIGH INCOME BOND FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

A Diversified Portfolio of
Federated Insurance Series,
An Open-End Management
Investment Company
[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.
April 22, 1997

[Graphic]

Cusip 313916306
3113009A (4/97)

FEDERATED HIGH INCOME BOND FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated High Income Bond Fund II (the ``Fund'), a
portfolio of Federated Insurance Series (the ``Trust') 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 Fund
and is a subsidiary of Federated Investors.
Cusip 313916306
3113009B (4/97)

GENERAL INFORMATION 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
Currency Risk 2
Investing in Foreign Currencies 2
Repurchase Agreements 3
Reverse Repurchase Agreements 3
When-Issued and Delayed Delivery Transactions 4
Lending of Portfolio Securities 4
Restricted and Illiquid Securities 4
Portfolio Turnover 4
INVESTMENT LIMITATIONS 5

FEDERATED INSURANCE SERIES MANAGEMENT 6

Fund Ownership 10
Trustees' Compensation 11
Trustee Liability 11
INVESTMENT ADVISORY SERVICES 11

Adviser to the Fund 11
Advisory Fees 12
BROKERAGE TRANSACTIONS 12

OTHER SERVICES 12

Fund Administration 12
Custodian and Portfolio Accountant 12
Transfer Agent 13
Independent Auditors 13
PURCHASING SHARES 13

DETERMINING NET ASSET VALUE 13

Determining Market Value of Securities 13
MASSACHUSETTS PARTNERSHIP LAW 13

TAX STATUS 13

The Fund's Tax Status 13
Shareholders' Tax Status 14
TOTAL RETURN 14

YIELD 14

PERFORMANCE COMPARISONS 14

ABOUT FEDERATED INVESTORS 16

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

GENERAL INFORMATION

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

The Fund's investment objective is to seek high current income. The
investment objective cannot be changed without approval of
shareholders.
TYPES OF INVESTMENTS
The Fund endeavors to achieve its objective by investing primarily in
a professionally managed, diversified portfolio of fixed income
securities. Some of these fixed income securities may involve equity
features. Capital growth will be considered, but only when consistent
with the investment objective of high current income.

CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent,
or variable rates of interest. They may involve equity features
such as conversion or exchange rights, warrants for the
acquisition of common stock of the same or a different issuer,
participations based on revenues, sales or profits, or the
purchase of common stock in a unit transaction (where corporate
debt securities and common stock are offered as a unit).
Equipment lease or trust certificates are secured obligations
issued in serial form, usually sold by transportation companies
such as railroads or airlines, to finance equipment purchases.
The certificate holders own a share of the equipment, which can
be resold if the issuer of the certificate defaults. The Fund
does not currently intend to invest more than 5% of its assets in
equipment lease certificates.
EQUITY SECURITIES
Generally, less than 10% of the value of the Fund's total assets
will be invested in equity securities, including common stocks,
warrants, or rights. The Fund's investment adviser may choose to
exceed this 10% limitation if unusual market conditions suggest
such investments represent a better opportunity to reach the
Fund's investment objective.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments for defensive
purposes during times of unusual market conditions.
CERTIFICATES OF DEPOSIT
The Fund may invest in certificates of deposit of domestic and
foreign banks and savings and loans if they have capital,
surplus, and undivided profits of over $100,000,000, or if the

principal amount of the instrument is insured by the Bank
Insurance Fund (`BIF'') or the Savings Association Insurance
Fund (`SAIF''), both of which are administered by the Federal
Deposit Insurance Corporation. These instruments may include
Eurodollar Certificates of Deposit issued by foreign branches of
U.S. or foreign banks, Eurodollar Time Deposits which are U.S.
dollar-denominated 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.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities
subject to repurchase agreements, and these securities will be marked

to market daily. In the event that a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the
Fund might be delayed pending court action. The Fund believes that
under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court
of competent jurisdiction would rule in favor of the Fund and allow
retention or disposition of such securities. The Fund will only enter
into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's
adviser to be creditworthy, pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse
repurchase agreement, the Fund transfers possession of a
portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus
interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of
the Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date.
These securities are marked to market daily and maintained until
the transaction is settled.

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

to vote if that were considered important with respect to the
investment.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law and is generally sold to
institutional investors, such as the Fund, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Fund through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity.
The 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.
PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the
Fund's investment objective, without regard to the length of time a
particular security may have been held. Any such trading will increase
the Fund's portfolio turnover rate and transaction costs. The adviser

to the Fund does not anticipate that portfolio turnover will result in
adverse tax consequences.
For the fiscal years ended December 31, 1996 and 1995, the portfolio
turnover rates of the Fund were 51% and 48%, respectively.

INVESTMENT LIMITATIONS

mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in
any one industry. However, the Fund may at any time invest 25% or
more of its total assets in cash or cash items and securities
issued and/or guaranteed by the U.S. government, its agencies or
instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not
prevent the Fund from purchasing or holding corporate or U.S.
government bonds, debentures, notes, certificates of indebtedness
or other debt securities of an issuer, entering into repurchase
agreements, or engaging in other transactions which are permitted
by the Fund's investment objective and policies or the Trust's
Declaration of Trust.

UNDERWRITING
The Fund will not underwrite any issue of securities, except as
it may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer. Also, the Fund will not purchase more
than 10% of any class of the outstanding voting securities of any
one issuer. For these purposes, the Fund considers common stock
and all preferred stock of an issuer each as a single class,
regardless of priorities, series, designations, or other
differences.
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in this limitation becomes effective.
RESTRICTED AND ILLIQUID SECURITIES
The Fund will not invest more than 15% of its total assets in
illiquid securities, including repurchase agreements providing
for settlement in more than seven days after notice and certain
restricted securities not determined by the Trustees to be
liquid.

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

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee

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

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

Edward L. Flaherty, Jr.@
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.

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 the Fund: 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%).
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

gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a
subsidiary of Federated Investors. All voting securities of Federated
Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife and his son, J. Christopher Donahue.
The adviser shall not be liable to the Fund, the Trust, or any
shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or
omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended December 31, 1996 and 1995, and for the
period from December 9, 1993 (start of business) to December 31, 1994,
the adviser earned advisory fees of $240,233, $46,425 and $7,966,
respectively, of which $203,132, $46,425, and $7,966, respectively,
were voluntarily waived.
BROKERAGE TRANSACTIONS

order can be obtained elsewhere. The adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may
include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the
adviser or by affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons
are reasonable in relationship to the value of the brokerage and
research services provided. During the fiscal years ended December 31,
1996 and 1995, and for the period from December 9, 1993 (start of
business) to December 31, 1994, the Fund paid no brokerage commissions
on brokerage transactions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received

by the Fund or the size of the position obtained or disposed of by the
Fund. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Fund.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the prospectus. From March 1, 1994, to March 1, 1996,
Federated Administrative Services served as the Fund's Administrator.
Prior to March 1, 1994, Federated Administrative Services, Inc. served
as the Fund's Administrator. Both former Administrators are
subsidiaries of Federated Investors. For purposes of this Statement of
Additional Information, Federated Services Company, Federated
Administrative Services and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the `Administrators.''
For the fiscal 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.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company,
Pittsburgh, PA, provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments. The fee paid for
this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.

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

The net asset value of the Fund generally changes each day. The days
on which net asset value is calculated by the Fund are described in
the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
The values of the Fund's portfolio securities 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.
MASSACHUSETTS PARTNERSHIP LAW

TAX STATUS

For the fiscal year 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 the Fund were 14.31%
and 10.48%, respectively.

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

The Fund's 30-day yield for the thirty day period ended December
31, 1996 was 8.87%.
The Fund's yield is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission)
earned by the Fund over a thirty-day period by the offering price per
share of the Fund on the last day of the period. This value is then
annualized using semi-annual compounding. This means that the amount
of income generated during the thirty-day period is assumed to be
generated each month over a twelve month period and is reinvested
every six months. The yield does not necessarily reflect income
actually earned by the Fund because of certain adjustments required by
the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders. Also the yield does not reflect
the charges and expenses of an insurance contract. You should review
the performance figures for your insurance contract, which figures

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

time, the Fund will quote its Lipper ranking in the high
current yield funds category 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, the Fund 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: non-convertible
bonds publicly issued by the U.S. government or its agencies;
corporate bonds guaranteed by the U.S. government and quasi
federal corporations; and publicly issued, fixed-rate, non-
convertible domestic bonds of companies in industry, public
utilities, and finance. The average maturity of these bonds
approximates nine years. Tracked by Lehman Brothers, Inc., the
index calculates total returns for one month, three month,
twelve month, and ten year periods and year-to-date.
oLEHMAN BROTHERS AGGREGATE BOND INDEX is an unmanaged index
measuring both the capital price changes and income provided by
the underlying universe of securities, comprised of U.S.
Treasury obligations, U.S. agency obligations, foreign
obligations, U.S. investment-grade corporate debt and mortgage-
backed obligations.
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 on this index
approximates 22 years.
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,
noninvestment grade debt registered with the SEC. All bonds
included in the Lehman Brothers High Yield Index must be
dollar-denominated and nonconvertible and have at least one
year remaining to maturity and an outstanding par value of at
least $100 million. Generally securities must be rated Ba1 or
lower by Moody's Investors Service, including defaulted issues.
If no Moody's rating is available, bonds must be rated BB+ or
lower by S&P; and if no S&P rating is available, bonds must be
rated below investment grade by Fitch Investor's 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.
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.
Advertisements and sales literature for the Fund may quote total
returns which are calculated on nonstandardized base periods. These
total returns also represent the historic change in the value of an
investment in the Fund based on monthly reinvestment of dividends over
a specified period of time.

From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs and descriptions, compared to
federally insured bank products, including certificates of deposit and
time deposits, and to money market funds using the Lipper Analytical
Services money market instrument average.
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 Funds. 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

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 corporate bond sector, as of December 31, 1996, Federated
Investors managed 12 money market funds and 17 bond funds with assets
approximating $17.2 billion and $4.0 billion, respectively. Federated
Investors' 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.*

*Source: Investment Company Institute

FEDERATED PRIME MONEY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

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

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

Prospectus dated April 22, 1997

TABLE OF CONTENTS

FINANCIAL HIGHLIGHTS 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Investment Risks 5
Investment Limitations 6
NET ASSET VALUE 6
INVESTING IN THE FUND 6
Purchases and Redemptions 6
What Shares Cost 7
Dividends 7
FUND INFORMATION 7
Management of Fund 7
Distribution of Fund Shares 8
Administration of the Fund 8
SHAREHOLDER INFORMATION 9
Voting Rights 9
TAX INFORMATION 9
Federal Taxes 9
State and Local Taxes 10
PERFORMANCE INFORMATION 10
ADDRESSES 11

FEDERATED 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.

GENERAL INFORMATION

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

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

INVESTMENT POLICIES

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

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

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

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

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

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

* asset-backed securities;

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

* repurchase agreements; and

* other money market instruments.

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

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

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

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

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

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

CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments may have
been credit enhanced by a guaranty, letter of credit or insurance. Any
bankruptcy, receivership, 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.

RESTRICTED AND ILLIQUID SECURITIES. The 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 the Fund may otherwise invest pursuant to its investment
objective and policies, but which are subject to restriction on resale under
federal securities law. To the extent restricted securities are deemed to be
illiquid, the Fund will limit their purchase, including non-negotiable time
deposits, repurchase agreements providing for settlement in more than seven
days after notice, over-the-counter options, and certain restricted
securities determined by the Trustees not to be liquid, to 10% of its net
assets.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend its portfolio securities on a short-term or long-term basis,
or both, up to one-third of the value of its total assets to broker/dealers,
banks, or other institutional borrowers of securities. This is a fundamental
policy which may not be changed without shareholder approval. The Fund will
only enter into loan arrangements with broker/dealers, banks, or other
institutions which the adviser has determined are creditworthy under
guidelines established by the Trustees and will receive collateral in the
form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned at all times.

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

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

INVESTMENT RISKS

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

INVESTMENT LIMITATIONS

The Fund will not:

* borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date), or pledge securities except, under certain circumstances, the Fund
may borrow money and engage in reverse repurchase agreements in amounts up
to one-third of the value of its total assets and pledge up to 15% of the
value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder
approval.

NET ASSET VALUE

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

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

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

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

WHAT SHARES COST

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

DIVIDENDS

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

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

FUND INFORMATION

MANAGEMENT OF THE FUND

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, sale, or exchange of portfolio instruments,
for which it receives an annual fee from the Fund.

ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to 0.50% of the Fund's average daily net assets. The adviser may voluntarily
choose to waive a portion of its fee or reimburse the Fund for certain
operating expenses. The adviser can terminate this voluntary waiver and
reimbursement of expenses at any time at its sole discretion.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $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 contintues 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.

DISTRIBUTION OF FUND SHARES

MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million

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, United of Omaha
Life Insurance Co., Omaha, Nebraska owned 42.85% of the voting securities of
the Fund, and therefore, may for certain purposes be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a
vote of shareholders. United of Omaha Life Insurance Co. is owned by Mutual
of Omaha Insurance Company.

TAX INFORMATION

FEDERAL TAXES

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

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

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

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

ADDRESSES

Federated Insurance Series
Federated Prime Money 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 Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600

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

FEDERATED PRIME
MONEY FUND II

(A PORTFOLIO OF FEDERATED
INSURANCE SERIES)

PROSPECTUS

A 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 313916504
3113011A (4/97)

FEDERATED PRIME MONEY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Federated Prime Money 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 313916504
3113011B (4/97)

GENERAL INFORMATION 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
When-Issued and Delayed Delivery Transactions 2
Lending of Portfolio Securities 2
Repurchase Agreements 2
Reverse Repurchase Agreements 3
Credit Enhancement 3
Restricted and Illiquid Securities 3
INVESTMENT LIMITATIONS 3

Regulatory Compliance 5
FEDERATED INSURANCE SERIES MANAGEMENT 5

Fund Ownership 9
Trustees' Compensation 9
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 10

Adviser to the Fund 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 10

OTHER SERVICES 10

Fund Administration 10
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
PURCHASING SHARES 11

DETERMINING NET ASSET VALUE 11

Use of the Amortized Cost Method 11
MASSACHUSETTS PARTNERSHIP LAW 12

TAX STATUS 12

The Fund's Tax Status 12
Shareholders' Tax Status 12
TOTAL RETURN 12

YIELD 13

EFFECTIVE YIELD 13

PERFORMANCE COMPARISONS 13

ABOUT FEDERATED INVESTORS 14

Mutual Fund Market 14
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 15
FINANCIAL STATEMENTS 15

GENERAL INFORMATION

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

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

BANK INSTRUMENTS
In addition to domestic bank obligations such as certificates of
deposit, demand and time deposits, savings shares, and bankers'
acceptances, the Fund may invest in:
oEurodollar Certificates of Deposit issued by foreign branches
of U.S. or foreign banks;
oEurodollar Time Deposits, which are U.S. dollar-denominated
deposits in foreign branches of U.S. or foreign banks;
oCanadian Time Deposits, which are U.S. dollar-denominated
deposits issued by branches of major Canadian banks located in
the U.S.; and
oYankee Certificates of Deposit, which are U.S. dollar-
denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the U.S.
RATINGS
A nationally recognized statistical rating organization's
(`NRSROs'') two highest rating categories are determined without
regard for sub-categories and gradations. For example, securities
rated A-1+, A-1 or A-2 by Standard & Poor's Ratings Group
("S&P"), Prime-1 or Prime-2 by Moody's Investors Service, Inc.
("Moody's"), or F-1 (+ or -) or F-2 (+ or -) by Fitch Investors
Service, Inc. ("Fitch") are all considered rated in one of the
two highest short-term rating categories. The Fund will limit its
investments in securities rated in the second highest short-term
rating category (e.g., A-2 by S&P, Prime-2 by Moody's or F-2 (+
or -) by Fitch) to not more than 5% of its total assets, with
not more than 1% invested in the securities of any one issuer.
The Fund will follow applicable regulations in determining

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

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

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

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

repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the
Fund, in a dollar amount sufficient to make payment for the
obligations to be purchased, are segregated at the trade date. These
assets are marked to market daily and maintained until the transaction
is settled.
CREDIT ENHANCEMENT
The Fund typically evaluates the credit quality and ratings of credit-
enhanced securities based upon the financial condition and ratings of
the party providing the credit enhancement (the `credit enhancer''),
rather than the issuer. However, credit-enhanced securities will not
be treated as having been issued by the credit enhancer for
diversification purposes, unless the Fund has invested more than 10%
of its assets in securities issued, guaranteed or otherwise credit
enhanced by the credit enhancer, in which case the securities will be
treated as having been issued by both the issuer and the credit
enhancer.
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.
INVESTMENT LIMITATIONS

investments are made. The Fund will not borrow money or engage in
reverse repurchase agreements for investment leverage purposes.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge or hypothecate assets having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the
value of its total assets at the time of borrowing.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of its total assets would be invested in
securities of companies engaged principally in any one industry
other than finance companies. However, the Fund may at any time
invest 25% or more of its total assets in cash or cash items and
securities issued and/or guaranteed by the U.S. government, its
agencies or instrumentalities.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity
contracts, or commodity futures contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or
sale of real estate or in securities secured by real estate or
interests in real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio
securities up to one-third of its total assets. This shall not

prevent the Fund from purchasing or holding money market
instruments, corporate or U.S. government bonds, debentures,
notes, certificates of indebtedness or other debt securities of
an issuer, entering into repurchase agreements, or engaging in
other transactions which are permitted by the Fund's investment
objective and policies or the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as
it may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to 75% of its total assets, the Fund will not
purchase the securities of any one issuer (other than cash, cash
items, or securities issued and/or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if, as a result,
more than 5% of its total assets would be invested in the
securities of that issuer.
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material changes in this limitation becomes
effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of its net assets in
illiquid securities, including, among others, repurchase
agreements providing for settlement more than seven days after

notice and certain restricted securities not determined by the
Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value of total or net assets
will not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of
the value of its net assets during the coming fiscal year.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings association having capital,
surplus, and undivided profits in excess of $100,000,000 at the time
of investment to be `cash items.''
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth
in its prospectus and this Statement of Additional Information, in
order to comply with applicable laws and regulations, including the
provisions of and regulations under the Investment Company Act of
1940. In particular, the Fund will comply with the diversification and
other requirements of Rule 2a-7, which regulates money market mutual
funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having
received the requisite short-term ratings by NRSROs, according to Rule
2a-7. The Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its
shareholders.

FEDERATED INSURANCE SERIES MANAGEMENT

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

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.

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

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.

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

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 the Fund: 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%).
TRUSTEES' COMPENSATION

AGGREGATE
NAME , COMPENSATION

POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM 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

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a
subsidiary of Federated Investors. All voting securities of Federated
Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife and his son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract
with the Trust.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual
investment advisory fee as described in the prospectus.
For the fiscal years ended December 31, 1996 and 1995, and for the
period from December 10, 1993 (start of business) to December 31,
1994, the adviser earned advisory fees of $154,455, $40,601 and $287,
respectively, all of which were voluntarily waived.
BROKERAGE TRANSACTIONS

portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers
and dealers who offer brokerage and research services. These services
may be furnished directly to the Fund or to the adviser and may
include: advice as to the advisability of investing in securities;
security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services.
Research services provided by brokers and dealers may be used by the
adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates
exercise reasonable business judgment in selecting brokers who offer
brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons
are reasonable in relationship to the value of the brokerage and
research services provided. For the fiscal years ended December 31,
1996 and 1995, and for the period from December 10, 1993 (start of
business) to December 31, 1994, the Fund paid no brokerage commissions
on brokerage transactions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When
the Fund and one or more other accounts managed by the adviser are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by the adviser to be equitable to each. In some
cases, this procedure may adversely affect the price paid or received

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a fee
as described in the prospectus. From March 1, 1994, to March 1, 1996,
Federated Administrative Services served as the Fund's Administrator.
Prior to March 1, 1994, Federated Administrative Services, Inc. served
as the Fund's Administrator. Both former Administrators are
subsidiaries of Federated Investors. For purposes of this Statement of
Additional Information, Federated Services Company, Federated
Administrative Services, and Federated Administrative Services, Inc.
may hereinafter collectively be referred to as the "Administrators".
For the fiscal 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.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company,
Pittsburgh, PA, provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments. The fee paid for
this service is based upon the level of the Fund's average net assets
for the period plus out-of-pocket expenses.

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

The Fund attempts to stabilize the value of a share at $1.00. The days
on which net asset value is calculated by the Fund are described in
the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the
value of portfolio instruments is amortized cost. Under this method,
portfolio instruments are valued at the acquisition cost as adjusted
for amortization of premium or accumulation of discount rather than at
current market value.
The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule

2a-7 (the `Rule'') promulgated by the Securities and Exchange
Commission under the Investment Company Act of 1940. Under the Rule,
the Trustees must establish procedures reasonably designed to
stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. Under
the Rule, the Fund is permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the
Rule, a demand feature entitles the Fund to receive the principal
amount of the instrument from the issuer or a third party on (1) no
more than 30 days' notice or (2) at specified intervals not exceeding
397 calendar days on no more than 30 days' notice. A standby
commitment entitles the Fund to achieve same-day settlement and to
receive an exercise price equal to the amortized cost of the
underlying instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship
between the amortized cost value per share and the net asset
value per share based upon available indications of market value.
The Trustees will decide what, if any, steps should be taken if
there is a difference of more than 0.5 of 1% between the two
values. The Trustees will take any steps they consider
appropriate (such as redemption in kind or shortening the average
portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods
of determining net asset value.

INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to
instruments that, in the opinion of the Trustees, present minimal
credit risks and have received the requisite rating from one or
more nationally recognized statistical rating organizations. If
the instruments are not rated, the Trustees must determine that
they are of comparable quality. The Rule also requires the Fund
to maintain a dollar-weighted average portfolio maturity (not
more than 90 days) appropriate to the objective of maintaining a
stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than thirteen months
can be purchased by the Fund.
Should the disposition of a portfolio security result in a
dollar-weighted average portfolio maturity of more than 90 days,
the Fund will invest its available cash to reduce the average
maturity to 90 days or less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities
to take advantage of short-term market variations. This policy may,
from time to time, result in high portfolio turnover. Under the
amortized cost method of valuation, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on
shares of the Fund computed by dividing the annualized daily income on
the Fund's portfolio by the net asset value computed as above may tend
to be higher than a similar computation made by using a method of
valuation based upon market prices and estimates.

In periods of rising interest rates, the indicated daily yield on
shares of the Fund computed the same way may tend to be lower than a
similar computation made by using a method of calculation based upon
market prices and estimates.
MASSACHUSETTS PARTNERSHIP LAW

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 this Statement.
If the Fund fails to comply with these regulations, contracts invested
in the Fund shall not be treated as annuity, endowment, or life
insurance contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

For the fiscal year ended December 31, 1996, and for the period
from November 18, 1994 (date of initial public investment) to December
31, 1996, the average annual total returns for the Fund were 4.75% and
4.95%, respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the offering price per share

The Fund's yield for the seven-day period ended December 31, 1996
was 4.77%.
The Fund calculates its yield daily, based upon the seven days ending
on the day of the calculation, called the `base period.'' This yield
is computed by:
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 Fund's effective yield for the seven-day period ended December
31, 1996 was 4.88%.

The Fund'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

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 Fund will quote its Lipper ranking in the ``money
market instruments funds'' category in advertising and sales
literature.
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.
Advertisements and other sales literature for the Fund may refer to
total return. Total return is the historic change in the value of an
investment in the Fund based on the monthly reinvestment of dividends
over a specified period of time.
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 Funds. 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

In the money market sector, Federated Investors gained prominence in
the mutual fund industry in 1974 with the creation of the first
institutional money market fund. Simultaneously, the company pioneered
the use of the amortized cost method of accounting for valuing shares
of money market funds, a principal means used by money managers today
to value money market fund shares. Other innovations include the first
institutional tax-free money market fund. As of December 31, 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.*

*Source: Investment Company Institute

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
Investors' 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.
FINANCIAL STATEMENTS

FEDERATED INTERNATIONAL EQUITY FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

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

variable annuity contracts issued by the insurance companies.

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

The Fund has also filed a Statement of Additional Information dated April
22, 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

<TABLE>
<S> <C>
FINANCIAL HIGHLIGHTS 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Investment Limitations 9
NET ASSET VALUE 10
INVESTING IN THE FUND 10
Purchases and Redemptions 10
What Shares Cost 11
Dividends 11
FUND INFORMATION 11
Management of the Fund 11
Distribution of Fund Shares 13
Administration of the Fund 13
Brokerage Transactions 13
SHAREHOLDER INFORMATION 14
Voting Rights 14
TAX INFORMATION 14
Federal Income Tax 14
State and Local Taxes 14
PERFORMANCE INFORMATION 15
ADDRESSES 16
</TABLE>

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 may 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.

(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.

GENERAL INFORMATION

The Fund is a portfolio of Federated Insurance Series, which was established
as Insurance Management Series, a Massachusetts business trust, under a

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

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.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The Fund's investment objective is to obtain a total return on its assets.

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

INVESTMENT POLICIES

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

Unless otherwise indicated, the investment policies may be changed by the

Trustees without shareholder approval. Shareholders will be notified before
any material change to these policies becomes effective.

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

FIXED INCOME SECURITIES. At the date of this prospectus, the Fund has

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

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

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities that
are rated, at the time of purchase, investment grade by a nationally
recognized statistical rating organization ("NRSRO") or, if unrated, of
comparable quality as determined by the adviser. Convertible securities are
fixed income securities which may be exchanged or converted into a

predetermined number of the issuer's underlying common stock at the option
of the holder during a specified time period. Convertible securities may
take the form of convertible bonds, convertible preferred stock or
debentures, units consisting of "usable" bonds and warrants or a combination
of the features of several of these securities. The investment
characteristics of each convertible security vary widely, which allows
convertible securities to be employed for different investment objectives.

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

convertible securities generally entail less risk than investments in the
common stock of the same issuer.

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

FORWARD COMMITMENTS. Forward commitments are contracts to purchase
securities for a fixed price at a date beyond customary settlement time. The
Fund may enter into these contracts if liquid securities in amounts
sufficient to meet the purchase price are segregated on the Fund's records
at the trade date and maintained until the transaction has been settled.
Risk is involved if the value of the security declines before settlement.
Although the Fund enters into forward commitments with the intention of
acquiring the security, it may dispose of the commitment prior to settlement
and realize a short-term profit or loss.

REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. To the extent that the original seller
does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities.

MONEY MARKET INSTRUMENTS. The Fund may invest in foreign and U.S. money
market instruments, including interest-bearing call deposits with banks,
government obligations, certificates of deposit, banker's acceptances,

commercial paper, short-term corporate debt securities, and repurchase
agreements. The commercial paper in which the Fund invests will be rated A-1
by S&P or P-1 by Moody's. These investments may be used to temporarily
invest cash received from the sale of Fund shares, to establish and maintain
reserves for temporary defensive purposes, or to take advantage of market
opportunities. Investments in the World Bank, Asian Development Bank, or
Inter-American Development Bank are not anticipated.

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

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

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or
both, to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees and
will receive collateral at all times equal to at least 100% of the value of
the securities loaned.

FOREIGN CURRENCY TRANSACTIONS. The Fund will enter into foreign currency
transactions to obtain the necessary currencies to settle securities
transactions. Currency transactions may be conducted either on a spot or
cash basis at prevailing rates or through forward foreign currency exchange
contracts.

The Fund may also enter into foreign currency transactions to protect Fund
assets against adverse changes in foreign currency exchange rates or
exchange control regulations. Such changes could unfavorably affect the
value of Fund assets which are denominated in foreign currencies, such as

foreign securities or funds deposited in foreign banks, as measured in U.S.
dollars. Although foreign currency exchanges may be used by the Fund to
protect against a decline in the value of one or more currencies, such
efforts may also limit any potential gain that might result from a relative
increase in the value of such currencies and might, in certain cases, result
in losses to the Fund. Further, the Fund may be affected either unfavorably
or favorably by fluctuations in the relative rates of exchange between the
currencies of different nations. Cross-hedging transactions by the Fund
involve the risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in the value of
the currency or other asset or liability that is the subject of the hedge.

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

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

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

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

of the premium plus related transaction costs. Options on foreign currencies
to be written or purchased by the Fund are traded on U.S. and foreign
exchanges or over-the-counter.

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

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

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

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

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

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

* less publicly available information about foreign companies;

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

* less readily available market quotations on foreign companies;

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

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

* generally lower foreign stock market volume;

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

* foreign brokerage commissions may be higher;

* unreliable mail service between countries; and

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

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

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

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

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

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

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

INVESTMENT LIMITATIONS

The Fund will not:

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

* sell securities short except under strict limitations;

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

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

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

The Fund will not:

* invest more than 15% of the value of its net assets in illiquid
securities, including securities not determined by the Trustees to be
liquid, repurchase agreements with maturities longer than seven days after

notice, and certain over-the-counter options; or

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

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

STATE INSURANCE REGULATIONS. The Fund is intended to be a funding vehicle

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

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

any other considerations when the Fund's investment adviser deems it
appropriate to make changes in the Fund's portfolio.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

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

The Fund intends to engage in mixed funding and shared funding in the
future. Although the Fund does not currently foresee any disadvantage to
contract owners due to differences in redemption rates, tax treatment, or
other considerations, resulting from mixed funding or shared funding, the
Trustees of the Fund will closely monitor the operation of mixed funding and
shared funding and will consider appropriate action to avoid material
conflicts and take appropriate action in response to any material conflicts

which occur. Such action could result in one or more participating insurance
companies withdrawing their investment in the Fund.

WHAT SHARES COST

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

DIVIDENDS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
Trust, investment decisions for the Fund are made by Federated Global
Research Corp., the Fund's investment adviser, subject to direction by the
Trustees. The adviser continually conducts investment research and
supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.

Both the Fund and the adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Fund and its portfolio

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

ADVISORY FEES. The Fund's adviser receives an annual investment advisory fee
equal to 1.00% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary waiver
and reimbursement of expenses at any time at its sole discretion.

ADVISER'S BACKGROUND. Federated Global Research Corp., incorporated in
Delaware on May 12, 1995, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Prior to September 1995, Federated Global Research Corp. had not served as
an investment adviser to mutual funds.

Federated Global Research Corp. and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies

and private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $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.

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

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

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
<C> <S>
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
</TABLE>

BROKERAGE TRANSACTIONS

SHAREHOLDER INFORMATION

VOTING RIGHTS

prospectus of the separate account. As of March 24, 1997, Aetna Retirement
Services Central Valuation Unit, Hartford, Connecticut, owned 95.47% of the
voting securities of the Fund, and therefore, may for certain purposes be
deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders. 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 or the Fund's operation and for the election of
Trustees in certain circumstances.

TAX INFORMATION

FEDERAL INCOME TAX

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

companies.

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital

gain distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage. The yield of the Fund is
calculated by dividing the net investment income per share (as defined by
the Securities and Exchange Commission) earned by the Fund over a thirty-day
period by the offering price per share of the Fund on the last day of the
period. This number is then annualized using semi-annual compounding.

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

ADDRESSES

Federated Insurance Series
Federated International Federated Investors Tower
Equity Fund II Pittsburgh, Pennsylvania 15222-3779

Distributor

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

Investment Adviser
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 INTERNATIONAL
EQUITY 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.

[Graphic]

Cusip 313916603

G01078-01 (4/97)

FEDERATED INTERNATIONAL EQUITY FUND II
(A PORTFOLIO OF FEDERATED INSURANCE SERIES)
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with
the prospectus of Federated International Equity 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 313916603
G01078-02 (4/97)

GENERAL INFORMATION 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
Futures and Options Transactions 1
Repurchase Agreements 5
Reverse Repurchase Agreements 5
When-Issued and Delayed Delivery Transactions 5
Lending of Portfolio Securities 5
Restricted and Illiquid Securities 5
Risks 6
Portfolio Turnover 6
INVESTMENT LIMITATIONS 6

FEDERATED INSURANCE SERIES MANAGEMENT 9

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

Adviser to the Fund 13
Advisory Fees 14
BROKERAGE TRANSACTIONS 14

OTHER SERVICES 14

Fund Administration 14
Custodian and Portfolio Accountant 14
Transfer Agent 15
Independent Auditors 15

PURCHASING SHARES 15

DETERMINING NET ASSET VALUE 15

Determining Market Value of Securities 15
Trading in Foreign Securities 15
MASSACHUSETTS PARTNERSHIP LAW 15

TAX STATUS 16

The Fund's Tax Status 16
Foreign Taxes 16
Shareholders' Tax Status 16
TOTAL RETURN 16

YIELD 17

PERFORMANCE COMPARISONS 17

Economic and Market Information 18
ABOUT FEDERATED INVESTORS 18

Mutual Fund Market 18
Institutional Clients 18
Bank Marketing 18
Broker/Dealers and Bank Broker/Dealer Subsidiaries19
FINANCIAL STATEMENTS 19

APPENDIX 20

GENERAL INFORMATION

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

The Fund's investment objective is to obtain a total return on its assets.
TYPES OF INVESTMENTS
The Fund invests in a diversified portfolio of equity securities issued by
non-U.S. issuers. The Fund will invest at least 65%, and under normal
market conditions, substantially all of its total assets, in equity
securities of issuers located in at least three different countries outside
of the United States. The Fund may also purchase sponsored or unsponsored
American Depositary Receipts (`ADRs''), Global Depositary Receipts
(`GDRs'') and European Depositary Receipts (``EDRs''); purchase investment
grade corporate and government fixed income securities of issuers outside
the U.S.; enter into forward commitments, repurchase agreements, and

foreign currency transactions; and maintain reserves in foreign or U.S.
money market instruments.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio by
buying and selling futures contracts and options on futures contracts, and
buying put and call options on portfolio securities and securities indices.
The Fund may also write covered put and call options on portfolio
securities to attempt to increase its current income or to hedge a portion
of its portfolio investments. The Fund will maintain its positions in
securities, option rights, and segregated cash subject to puts and calls
until the options are exercised, closed, or have expired. An option
position on a futures contract may be closed out over-the-counter or on a
nationally recognized exchange which provides a secondary market for
options of the same series. The Fund will not engage in futures
transactions for speculative purposes.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities
due to anticipated changes in interest rates and market conditions
without necessarily buying or selling the securities. Although some
financial futures contracts call for making or taking delivery of the
underlying securities, in most cases these obligations are closed out
before the settlement date. The closing of a contractual obligation is
accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for
cash settlements.

The Fund also may purchase and sell stock index futures contracts with
respect to any stock index traded on a recognized stock exchange or
board of trade to hedge against changes in prices. Stock index futures
contracts are based on indices that reflect the market value of common
stock of the firms included in the indices. An index futures contract
is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the difference between the
value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally
written. No physical delivery of the underlying securities in the
index is made. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at
the expiration of the contract.

A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract (`going short'') and the buyer who agrees to take
delivery of the security (`going long'') at a certain time in the
future. For example, in the fixed income securities market, prices
move inversely to interest rates. A rise in rates means a drop in
price. Conversely, a drop in rates means a rise in price. In order to
hedge its holdings of fixed income securities against a rise in market
interest rates, the Fund could enter into contracts to deliver
securities at a predetermined price (i.e., `go short'') to protect
itself against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding period.

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

To the extent required to comply with Commodity Futures Trading
Commission (`CFTC'') Regulation 4.5 and thereby avoid status as a
`commodity pool operator,'' the Fund will not enter into a futures
contract, or purchase an option thereon, if immediately thereafter the
initial margin deposits for futures contracts held by it, plus
premiums paid by it for open options on futures contracts, would
exceed 5% of the market value of the Fund's total assets, after taking
into account the unrealized profits and losses on those contracts it
has entered into; and, provided further, that in the case of an option
that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in computing such 5%. Second, the Fund will not enter
into these contracts for speculative purposes; rather, these
transactions are entered into only for bona fide hedging purposes, or
other permissible purposes pursuant to regulations promulgated by the
CFTC. Third, since the Fund does not constitute a commodity pool, it
will not market itself as such, nor serve as a vehicle for trading in
the commodities futures or commodity options markets. Finally, because
the Fund will submit to the CFTC special calls for information, the
Fund will not register as a commodities pool operator.
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
The Fund may purchase listed put options on financial and stock index
futures contracts to protect portfolio securities against decreases in
value resulting from market factors, such as an anticipated increase
in interest rates or stock prices. Unlike entering directly into a
futures contract, which requires the purchaser to buy a financial
instrument on a set date at a specified price, the purchase of a put
option on a futures contracts entitles (but does not obligate) its

purchaser to decide on or before a future date whether to assume a
short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also
decrease in value and the option will increase in value. In such an
event, the Fund will normally close out its option by selling an
identical option. If the hedge is successful, the proceeds received by
the Fund upon the sale of the second option will be large enough to
offset both the premium paid by the Fund for the original option plus
the decrease in value of the hedged securities.

Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures
contract of the type underlying the option (for a price less than the
strike price of the option) and exercise the option. The Fund would
then deliver the futures contract in return for payment of the strike
price. If the Fund neither closes out nor exercises an option, the
option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.
When the Fund sells a put on a futures contract, it receives a cash
premium in exchange for granting to the purchaser of the put the right
to receive from the Fund, at the strike price, a short position in
such futures contract, even though the strike price upon exercise of
the option is greater than the value of the futures position received
by such holder. If the value of the underlying futures position is not
such that exercise of the option would be profitable to the option
holder, the option will generally expire without being exercised. It

will generally be the policy of the Fund, in order to avoid the
exercise of an option sold by it, to cancel its obligation under the
option by entering into a closing purchase transaction, if available,
unless it is determined to be in the Fund's interest to deliver the
underlying futures position. A closing purchase transaction consists
of the purchase by the Fund of an option having the same term as the
option sold by the Fund, and has the effect of canceling the Fund's
position as a seller. The premium which the Fund will pay in executing
a closing purchase transaction may be higher than the premium received
when the option was sold, depending in large part upon the relative
price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call
option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates
rise, causing the prices of futures to go down, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase.
In other words, as the underlying futures price falls below the strike
price, the buyer of the option has no reason to exercise the call, so
that the Fund keeps the premium received for the option. This premium

can substantially offset the drop in value of the Fund's portfolio
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but
not the obligation, to enter into the underlying futures contract at a
strike price determined at the time the call was purchased, regardless
of the comparative market value of such futures position at the time
the option is exercised. The holder of a call option has the right to
receive a long (or buyer's) position in the underlying futures
contract.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds
the current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the
futures contracts. If this limitation is exceeded at any time, the
Fund will take prompt action to close out a sufficient number of open
contracts to bring its open futures and options positions within this
limitation.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may purchase put options on portfolio securities and stock
indices to protect against price movements in the Fund's portfolio
securities. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a
specified price during the term of the option.

WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES AND STOCK INDICES
The Fund may also write covered call options to generate income and
thereby protect against price movements in the Fund's portfolio
securities. As writer of a call option, the Fund has the obligation
upon exercise of the option during the option period to deliver the
underlying security upon payment of the exercise price or, in the case
of a securities index, a cash payment equal to the difference between
the closing price of the index and the exercise price of the option.
The Fund may only sell call options either on securities held in its
portfolio or on securities which it has the right to obtain without
payment of further consideration (or has segregated cash in the amount
of any additional consideration).
FOREIGN CURRENCY HEDGING TRANSACTIONS
In order to hedge against foreign currency exchange rate risks, the Fund
may enter into forward foreign currency exchange contracts and foreign
currency futures contracts, as well as purchase put or call options on
foreign currencies, as described below. The Fund may also conduct its
foreign currency exchange transactions on a spot (i.e., cash) basis at the
spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
(`forward contracts'') to attempt to minimize the risk to the Fund from
adverse changes in the relationship between the U.S. dollar and foreign
currencies. A forward contract is an obligation to purchase or sell a
specific currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders and their
customers. The Fund may enter into a forward contract, for example, when it

enters into a contract for the purchase or sale of a security denominated
in a foreign currency in order to `lock in'' the U.S. dollar price of the
security. In addition, for example, when the Fund believes that a foreign
currency may suffer a substantial decline against the U.S. dollar, it may
enter into a forward contract to sell an amount of that foreign currency
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency, or when the Fund believes that the
U.S. dollar may suffer a substantial decline against a foreign currency, it
may enter into a forward contract to buy that foreign currency for a fixed
dollar amount. This second investment practice is generally 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 Fund may invest in warrants. Warrants are basically options to purchase
common stock at a specific price (usually at a premium above the market
value of the optioned common stock at issuance) valid for a specific period
of time. Warrants may have a life ranging from less than a year to twenty

years or may be perpetual. However, most warrants have expiration dates
after which they are worthless. In addition, if the market price of the
common stock does not exceed the warrant's exercise price during the life
of the warrant, the warrant will expire as worthless. Warrants have no
voting rights, pay no dividends, and have no rights with respect to the
assets of the corporation issuing them. The percentage increase or decrease
in the market price of the warrant may tend to be greater than the
percentage increase or decrease in the market price of the optioned common
stock.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.
In the event that a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject
to repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy, pursuant to guidelines
established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in

the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed upon rate.
When effecting reverse repurchase agreements, liquid assets of the Fund, in
a dollar amount sufficient to make payment for the obligations to be
purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on the Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.

RESTRICTED AND ILLIQUID SECURITIES
The 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 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.
RISKS
When the Fund uses futures and options on futures as hedging devices, there
is a risk that the prices of the securities or foreign currency subject to
the futures contracts may not correlate perfectly with the prices of the
securities or currency in the Fund's portfolio. This may cause the futures
contract and any related options to react differently to market changes
than the portfolio securities or foreign currency. In addition, the adviser

could be incorrect in its expectations about the direction or extent of
market factors such as stock price movements or foreign currency exchange
rate fluctuations. In these events, the Fund may lose money on the futures
contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the adviser will
consider liquidity before entering into these transactions, there is no
assurance that a liquid secondary market on an exchange or otherwise will
exist for any particular futures contract or option at any particular time.
The Fund's ability to establish and close out futures and options positions
depends on this secondary market. The inability to close out these
positions could have an adverse effect on the Fund's ability to effectively
hedge its portfolio.
To minimize risks, the Fund may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amount of margin
deposits on the Fund's existing futures positions and premiums paid for
related options would exceed 5% of the value of the Fund's total assets
after taking into account the unrealized profits and losses on those
contracts it has entered into; and, provided further, that in the case of
an option that is in-the-money at the time of purchase, the in-the-money
amount may be excluded in computing such 5%. When the Fund purchases
futures contracts, an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any related
margin deposits), will be deposited in a segregated account with the Fund's
custodian (or the broker, if legally permitted) to collateralize the
position and thereby insure that the use of such futures contract is
unleveraged. When the Fund sells futures contracts, it will either own or

have the right to receive the underlying future or security, or will make
deposits to collateralize the position as discussed above.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt
to achieve the Fund's investment objective. Portfolio securities will be
sold when the adviser believes it is appropriate, regardless of how long
those securities have been held.

For the 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.

INVESTMENT LIMITATIONS

DIVERSIFICATION OF INVESTMENTS
With respect to 75% of the value of its total assets, the Fund will
not purchase securities of any one issuer (other than securities
issued or guaranteed by the government of the United States or its
agencies or instrumentalities) if as a result more than 5% of the
value of its total assets would be invested in the securities of that
issuer, or if it would own more than 10% of the outstanding voting
securities of any one issuer.
ACQUIRING SECURITIES
The Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer.

CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of its total assets in securities
of issuers having their principal business activities in the same
industry.
BORROWING
The Fund will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts up to
one-third of the value of its total assets, including the amount
borrowed. This borrowing provision is not for investment leverage but
solely to facilitate management of the portfolio by enabling the Fund
to meet redemption requests when the liquidation of portfolio
securities would be inconvenient or disadvantageous. The Fund will not
purchase securities while outstanding borrowings exceed 5% of the
value of its total assets.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate assets, except when
necessary for permissible borrowings. Neither the deposit of
underlying securities or other assets in escrow in connection with the
writing of put or call options or the purchase of securities on a
when-issued basis, nor margin deposits for the purchase and sale of
financial futures contracts and related options are deemed to be a
pledge.
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain
such short-term credits as are necessary for clearance of
transactions, except that the Fund may make margin payments in

connection with its use of financial futures contracts or related
options and transactions.
ISSUING SENIOR SECURITIES
The Fund will not issue senior securities except in connection with
borrowing money directly or through reverse repurchase agreements or
as required by forward commitments to purchase securities or
currencies.
UNDERWRITING
The Fund will not underwrite or participate in the marketing of
securities of other issuers, except as it may be deemed to be an
underwriter under federal securities law in connection with the
disposition of its portfolio securities.
INVESTING IN REAL ESTATE
The Fund will not invest in real estate, although it may invest in
securities secured by real estate or interests in real estate or
issued by companies, including real estate investment trusts, which
invest in real estate or interests therein.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures contracts
and options on financial futures contracts, provided that the sum of
its initial margin deposits for financial futures contracts held by
the Fund, plus premiums paid by it for open options on financial
futures contracts, may not exceed 5% of the fair market value of the
Fund's total assets, after taking into account the unrealized profits
and losses on those contracts. Further, the Fund may engage in foreign
currency transactions and purchase or sell forward contracts with
respect to foreign currencies and related options.

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

SELLING SHORT
The Fund will not sell securities short unless (1) it owns, or has a
right to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other assets equal to the lesser of the
market value of the securities sold short or the amount required to
acquire such securities. The segregated amount will not exceed 10% of
the Fund's net assets. While in a short position, the Fund will retain
the securities, rights, or segregated assets.
To comply with registration requirements in certain states, the Fund
(1) will limit short sales of securities of any class of any one
issuer to the lesser of 2% of the Fund's net assets or 2% of the
securities of that class, (2) will make short sales only on securities
listed on recognized stock exchanges. These restrictions do not apply
to short sales of securities the Fund holds or has a right to acquire
without the payment of any further consideration. (If state
requirements change, these restrictions may be revised without
shareholder notification.)
Except as noted, the above investment limitations cannot be changed without
shareholder approval. The following limitations, however, may be changed by
the Trustees without shareholder approval. Except as noted, shareholders

will be notified before any material change in these limitations becomes
effective.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of the value of its net assets
in illiquid securities, including securities not determined by the
Trustees to be liquid, repurchase agreements with maturities longer
than seven days after notice, and certain over-the-counter options.
DEALING IN PUTS AND CALLS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or the Fund is entitled to
them in deliverable form without further payment or the Fund has
segregated cash in the amount of any further payments. The Fund will
not purchase put options on securities unless the securities or an
offsetting call option is held in the Fund's portfolio. The Fund may
also purchase, hold or sell (i) contracts for future delivery of
securities or currencies and (ii) warrants granted by the issuer of
the underlying securities.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not result
in a violation of such restriction.
The Fund has no present intent to borrow money or pledge securities in
excess of 5% of the value of its total assets in the coming fiscal year.
For purposes of their policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S.

branch of a domestic bank or savings association having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment
to be `cash items.''

FEDERATED INSURANCE SERIES MANAGEMENT

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

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, Member
of 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.; 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.

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.

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.

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, `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 International Equity Fund II: Aetna
Retirement Services Central Valuation Unit, Hartford, Connecticut owned
1,787,050 shares (95.47%).

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

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

ADVISER TO THE FUND
The Fund's investment adviser is Federated Global Research Corp. It is a
subsidiary of Federated Investors. All the voting securities of Federated
Investors are owned by a trust, the trustees of which are John F. Donahue,
his wife, and his son, J. Christopher Donahue.

The adviser shall not be liable to the Fund, the Trust, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding,
or sale of any security or for anything done or omitted by it, except acts
or omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trust.
ADVISORY FEES
For its advisory services, Federated Global Research Corp. receives an
annual investment advisory fee as described in the prospectus.

For the fiscal year ended December 31, 1996 and for the period from May 5,
1995 (date of initial public investment) to December 31, 1995, the adviser
earned advisory fees of $106,851 and $12,476, respectively, all of which
were waived.
BROKERAGE TRANSACTIONS

The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the

adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the adviser or its affiliated might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. 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 Fund paid total
brokerage commissions of $104,437 and $15,076, respectively.

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

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From May 5, 1995 (date of initial public investment), to
March 1, 1996, Federated Administrative Services, a subsidiary of Federated
Investors, served as the Fund's Administrator. For purposes of this
Statement of Additional Information, Federated Services Company and
Federated Administrative Services may hereinafter collectively be referred
to as the `Administrators.'' For the 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.

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 Fund are Deloitte & Touche LLP,
Pittsburgh, PA.
PURCHASING SHARES

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

The net asset value of the Fund generally changes each day. The days on
which net asset value is calculated by the Fund are described in the
prospectus.
Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have
passed, are recorded as soon as the Fund is informed of the ex-dividend
date.
DETERMINING MARKET VALUE OF SECURITIES
Market or fair values of the Fund's portfolio securities are determined as
follows:
oaccording to the last reported sale price on a recognized securities
exchange, if available. (If a security is traded on more than one
exchange, the price on the primary market for that security, as
determined by the Adviser is used.);

oaccording to the 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 consider: institutional
trading in similar groups of securities; yield; quality; coupon rate;
maturity; type of issue; trading characteristics; and other market data.
TRADING IN FOREIGN SECURITIES
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange. In computing the net asset value,
the Fund values foreign securities at the latest closing price on the
exchange on which they are traded immediately prior to the closing of the
New York Stock Exchange. Certain foreign currency exchange rates may also
be determined at the latest rate prior to the closing of the New York Stock
Exchange. Foreign securities quoted in foreign currencies are translated
into U.S. dollars at current rates. Occasionally, events that affect these
values and exchange rates may occur between the times at which they are
determined and the closing of the New York Stock Exchange. If such events
materially affect the value of portfolio securities, these securities may
be valued at their fair value as determined in good faith by the Trustees,
although the actual calculation may be done by others.

MASSACHUSETTS PARTNERSHIP LAW

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, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the
Fund must, among other requirements:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;

oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute to its shareholders at least 90% of its net income earned
during the year.
However, the Fund may invest in the stock of certain foreign corporations
which would constitute a Passive Foreign Investment Company (PFIC). Federal
income taxes may be imposed on the Fund upon disposition of PFIC
investments.
FOREIGN TAXES
Investment income on certain foreign securities in which the Fund may
invest may be subject to foreign withholding or other taxes that could
reduce the return on these securities. Tax treaties between the United
States and foreign countries, however, may reduce or eliminate the amount
of foreign taxes to which the Fund would be subject.
SHAREHOLDERS' TAX STATUS
The Fund intends to comply with the variable asset diversification
regulations which are described in the prospectus and in this Statement of
Additional Information. If the Fund fails to comply with these regulations,
contracts invested in the Fund shall not be treated as annuity, endowment
or life insurance contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

For the 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 for the Fund were 8.32% and 7.17%,
respectively.

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

YIELD

The Fund did not calculate a yield for the thirty-day period ended December
31, 1996.

The Fund's yield is determined by dividing the net investment income per
share (as defined by the SEC) earned by the Fund over a thirty-day period
by the offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed
to be generated each month over a twelve-month period and is reinvested

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

The Fund's performance depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates on money market instruments;
ochanges in Fund expenses; and
ovarious other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net earnings
and offering price per share are factors in the computation of total
return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any indices used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:

oLIPPER ANALYTICAL SERVICES, INC., for example, makes comparative
calculations for one-month, three-month, one-year, and five-year
periods which assume the reinvestment of all capital gains
distributions and income dividends.
oMORGAN STANLEY EUROPE, AUSTRALIA, AND FAR EAST (EAFE) Index is a
market capitalization weighted foreign securities index, which is
widely used to measure the performance of European, Australian, New
Zealand and Far Eastern stock markets. The index covers
approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars
and local currency and calculates total returns monthly. EAFE U.S.
dollar total return is a net dividend figure less Luxembourg
withholding tax. The EAFE is monitored by Capital International,
S.A., Geneva, Switzerland.
oSALOMON BROTHERS WORLD EQUITY INDEX EX U.S. is a capitalization-
weighted index comprised of equities from 22 countries excluding the
United States.
oFT ACTUARIES WORLD - EX U.S. index is comprised of 1,740 stocks,
excluding U.S. stocks, jointly compiled by the Financial Times Ltd.,
Goldman, Sachs & Co., and NatWest Securities Ltd. in conjunction
with the Institute of Actuaries and the Faculty of Actuaries.
Advertisements and sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
also represent the historic change in the value of an investment in the
Fund based on annual reinvestment of dividends over a specified period of
time.

From time to time as it deems appropriate the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits
and to money market fund using the Lipper Analytical Services money market
instruments average.

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

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.
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.

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 Fund's Financial Statements for the fiscal year ended December 31,
1996, are incorporated herein by reference to the Annual Report of the Fund
dated December 31, 1996 (File Nos. 33-69268 and 811-8042). Copies of the
Report may be obtained without charge by contacting the Fund.

APPENDIX

STANDARD AND POOR'S RATINGS GROUP BOND RATING DEFINITIONS
AAA-Debt rated "AAA" has the highest rating assigned by Standard & Poor's
Corporation. Capacity to pay interest and repay principal is extremely
strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.

BB-Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The BB rating category is also used for debt subordinated to senior debt
that is assigned an actual or implied BBB- rating.
B-Debt rated B has a greater vulnerability to default but currently has the
capacity to meet interest payments and principal payments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC-Debt rated CCC has a currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
CC-The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.
C-The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed but
debt service payments are continued.
CI-The rating CI is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D

rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA-Bonds which are rated AAA are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as `gilt edged.'' Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
AA-Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in AAA securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in AAA securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.

BAA-Bonds which are rated BAA are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present, but
certain protective elements may be lacking or may be characteristically

unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics
as well.
BA-Bonds which are BA are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA-Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA-Bonds which are rated C represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds rated in

the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered strong,
but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligator's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and, therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
BB-Bonds are considered speculative. The obligor's ability to pay interest
and repay principal may be affected over time by adverse economic changes.
However, business and financial alternatives can be identified which could
assist the obligor in satisfying its debt service requirements.
B-Bonds are considered highly speculative. While bonds in this call are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the limited margin of
safety and the need for reasonable business and economic activity
throughout the life of the issue.
CCC-Bonds have certain identifiable characteristics which, if not remedied,
may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC-Bonds are minimally protected. Default in payment of interest and/or
principal seems probably over time.

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

STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING
PRIME-1 - Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics: leading market positions in well established industries;
high rates of return on funds employed; conservative capitalization
structure with moderate reliance on debt and ample asset protection; broad
margins in earning coverage of fixed financial charges and high internal
cash generation; well-established access to a range of financial markets
and assured sources of alternate liquidity.
PRIME-2 - Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but

to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING
F-1+ - Exceptionally Strong Credit Quality. Issues assigned this rating
are regarded as having the strongest degree of assurance for timely
payment.
F-1 - Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment only slightly less in degree than issues rated
F-1+.
F-2 - Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not
as great as for issues assigned F-1+ and F-1 ratings.

FEDERATED GROWTH STRATEGIES FUND II

(A PORTFOLIO OF FEDERATED INSURANCE SERIES)

PROSPECTUS

This prospectus offers shares of Federated Growth Strategies Fund II (the
"Fund"), which is a diversified investment portfolio in Federated Insurance
Series (the "Trust"), an open-end, diversified management investment
company. The investment objective of the Fund is capital appreciation.

Shares of the Fund may be sold only to separate accounts of insurance
companies to serve as the investment medium for variable life insurance
policies and variable annuity contracts issued by insurance companies.

The Fund has also filed a Statement of Additional Information dated April
22, 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).

Prospectus dated April 22, 1997

TABLE OF CONTENTS
FINANCIAL HIGHLIGHTS 1
GENERAL INFORMATION 2
INVESTMENT INFORMATION 2
Investment Objective 2
Investment Policies 2
Investment Limitations 7
NET ASSET VALUE 7
INVESTING IN THE FUND 7
Purchases and Redemptions 7
What Shares Cost 8
Dividends 8
FUND INFORMATION 8
Management of the Fund 8
Distribution of Fund Shares 9
Administration of the Fund 10

Brokerage Transactions 10
SHAREHOLDER INFORMATION 10
Voting Rights 10
TAX INFORMATION 11
Federal Taxes 11
State and Local Taxes 11
PERFORMANCE INFORMATION 11
ADDRESSES 12

FEDERATED GROWTH STRATEGIES FUND II
Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<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.

(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 a commission was 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.

GENERAL INFORMATION

of the Trustees held on February 26, 1996, the Trustees approved an
amendment to the Declaration of Trust to change the name of the Fund from
Growth Stock Fund to Federated Growth Strategies Fund II. The Declaration of
Trust permits the Trust to offer separate series of shares of beneficial
interest in separate portfolios of securities, including the Fund. The
shares in any one portfolio may be offered in separate classes. As of the
date of this prospectus, the Trustees have not established separate classes
of shares.

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.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is capital appreciation. The investment
objective cannot be changed without the approval of the Fund's shareholders.
While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies

described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing at least 65% of its
assets in equity securities of companies with prospects for above-average
growth in earnings and dividends or companies where significant fundamental
changes are taking place. Equity securities include common stocks, preferred
stocks, and securities (including debt securities) that are convertible into
common stocks.

ACCEPTABLE INVESTMENTS. The Fund's investment adviser selects equity
securities on the basis of traditional research techniques, including
assessment of earnings and dividend growth prospects and of the risk and
volatility of each company's business. The Fund generally invests in
companies with market capitalization of $100,000,000 or more. The
fundamental changes which the investment adviser will seek to identify in
companies include, for example, restructuring of basic businesses or
reallocations of assets which present opportunities for significant share
price appreciation. At times, the Fund will invest in securities of
companies which are deemed by the investment adviser to be candidates for
acquisition by other entities as indicated by changes in ownership, changes
in standard price-to-value ratios, and an examination of other standard

analytical indices.

The securities in which the Fund invests include, but are not limited to
common stocks, preferred stocks, convertible securities, securities of
foreign issuers, securities of other investment companies, and corporate
obligations, including bonds, debentures, notes, and warrants. In addition,
the Fund may engage in repurchase agreements, lend portfolio securities,
purchase securities on a when-issued or delayed-delivery basis, and invest
in put and call options, futures, and options on futures.

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

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. The Fund will exchange or
convert the convertible securities held in its portfolio into shares of the
underlying common stock in instances in which, in the investment adviser's
opinion, the investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objective. Otherwise, the Fund
will hold or trade the convertible securities. In selecting convertible
securities for the Fund, the Fund's investment adviser evaluates the
investment characteristics of the convertible security as a fixed income

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

SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of
foreign issuers which are freely traded on United States securities
exchanges or in the over-the-counter market in the form of depositary
receipts. Securities of a foreign issuer may present greater risks in the
form of nationalization, confiscation, domestic marketability, or other
national or international restrictions.

As a matter of practice, the Fund will not invest in the securities of a
foreign issuer if any such risk appears to the investment adviser to be
substantial.

CORPORATE OBLIGATIONS. The Fund may invest up to 35% of its total assets in
bonds, debentures, notes and warrants of corporate issuers. These securities
will generally be rated "BBB" or better by S&P or "Baa" or better by Moody's
at the time of investment, or if unrated, of comparable quality. Securities
which are rated BBB by S&P or Baa by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than higher-rated bonds. The prices of fixed income securities
generally fluctuate inversely to the direction of interest rates. Downgrades
will be evaluated on a case by case basis by the investment adviser. The
investment adviser will determine whether or not the security continues to
be an acceptable investment. If not, the security will be sold. A
description of the ratings categories is contained in the Appendix to the
Statement of Additional Information.

In addition, with respect to the 35% limit, the Fund may invest up to 5% of
its assets in debt obligations rated "B" or better by S&P or Moody's.

The investment adviser will waive its investment advisory fee on assets
invested in securities of other Federated Funds.

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

subject to restriction on resale under federal securities law. To the extent
restricted securities are deemed to be illiquid, the Fund will limit their
purchase, including non-negotiable time deposits, repurchase agreements
providing for settlement in more than seven days after notice,
over-the-counter options, and certain restricted securities determined by
the Trustees not to be liquid, to 15% of the net assets of the Fund.

LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or
both, up to one-third of the value of its total assets to broker/dealers,
banks, or other institutional borrowers of securities. This is a fundamental
policy which may not be changed without the approval of shareholders. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the investment adviser has determined are
creditworthy under guidelines established by the Trustees, and will receive
collateral in the form of cash or U.S. government securities equal to at
least 100% of the value of the portfolio securities loaned at all times.

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.

* 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.

VARIABLE ASSET REGULATIONS. The Fund is also subject to variable contract
asset regulations prescribed by the U.S. Treasury Department under Section
817(h) of the Internal Revenue Code. After a one-year start-up period, the
regulations generally require that, as of the end of each calendar quarter
or within 30 days thereafter, no more than 55% of the total assets of the
Fund may be represented by any one investment, no more than 70% of the total
assets of the Fund may be represented by any two investments, no more than
80% of the total assets of the Fund may be represented by any three
investments, and no more than 90% of the total assets of the Fund may be
represented by any four investments. In applying these diversification
rules, all securities of the same issuer, all interests in the same real
property project, and all interests in the same commodity are each treated
as a single investment. In the case of government securities, each
government agency or instrumentality shall be treated as a separate issuer.
If the Fund fails to achieve the diversification required by the
regulations, unless relief is obtained from the Internal Revenue Service,

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

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

INVESTMENT LIMITATIONS

The Fund will not:

assets to secure such borrowings.

The above investment limitations cannot be changed without shareholder
approval.

NET ASSET VALUE

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

funding and will consider appropriate action to avoid material conflicts and
take appropriate action in response to any material conflicts which occur.
Such action could result in one or more participating insurance companies
withdrawing their investment in the Fund.

WHAT SHARES COST

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

DIVIDENDS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

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.

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.

DISTRIBUTION OF FUND SHARES

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

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

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 100% of the
voting securities of the Fund, and, therefore, may for certain purposes be

deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders. Aetna Retirement Services
Central Valuation Unit is owned by Aetna Inc.

TAX INFORMATION

FEDERAL TAXES

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

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.

STATE AND LOCAL TAXES

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

PERFORMANCE INFORMATION

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

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

ADDRESSES

Federated Insurance Series
Federated Growth Federated Investors Tower
Strategies Fund II 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 GROWTH STRATEGIES 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 313916702
G01283-01 (4/97)

FEDERATED GROWTH STRATEGIES 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 Growth Strategies 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 313916702
G01283-02 (4/97)

GENERAL INFORMATION 1

INVESTMENT OBJECTIVE AND POLICIES 1

Types of Investments 1
Restricted and Illiquid Securities 5
When-Issued and Delayed Delivery Transactions 5
Lending of Portfolio Securities 6
Repurchase Agreements 6
Reverse Repurchase Agreements 6
Portfolio Turnover 6
INVESTMENT LIMITATIONS 6

FEDERATED INSURANCE SERIES MANAGEMENT 9

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

Adviser to the Fund 13
Advisory Fees 14
Brokerage Transactions 14
OTHER SERVICES 14

Fund Administration 14
Custodian And Portfolio Accountant 14
Independent Auditors 15
PURCHASING SHARES 15

DETERMINING NET ASSET VALUE 15

Determining Market Value Of Securities 15
MASSACHUSETTS PARTNERSHIP LAW 15

TAX STATUS 16

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

YIELD 16

PERFORMANCE COMPARISONS 17

ABOUT FEDERATED INVESTORS 18

Mutual Fund Market 18
Institutional Clients 19
Bank Marketing 19
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 19
FINANCIAL STATEMENTS 19

APPENDIX 20

GENERAL INFORMATION

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

The investment objective of the Fund is capital appreciation. The Fund
pursues this investment objective by investing primarily in equity
securities of companies with prospects for above-average growth in earnings
and dividends or companies where significant changes are taking place. The
investment objective cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund may invest in common stocks, preferred stocks, convertible
securities, securities of foreign issuers, U.S. government obligations,
securities of other investment companies; and corporate obligations,
including bonds, debentures, notes, and warrants. The Fund may also engage
in repurchase agreements, lend portfolio securities, purchase securities on

a when-issued or delayed delivery basis, and invest in put and call
options, futures and options on futures. The following supplements the
discussion of acceptable investments in the prospectus.
CORPORATE DEBT SECURITIES
Corporate debt securities may bear fixed, fixed and contingent, or
variable rates of interest. They may involve equity features such as
conversion or exchange rights, warrants for the acquisition of common
stock of the same or a different issuer, participations based on
revenues, sales or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are
offered as a unit).
Corporate debt securities that are lower-rated (i.e., rated below BBB
by Standard & Poor's Ratings Group or Baa by Moody's Investors
Service, Inc.) are commonly referred to as `junk bonds.'' While these
lower-rated bonds will usually offer higher yields than higher-rated
securities, there is more risk associated with these investments.
These lower-rated bonds may be more susceptible to real or perceived
adverse economic conditions than investment grade bonds. These lower-
rated bonds are regarded as predominately speculative with regard to
each issuer's continuing ability to make principal and interest
payments. In addition, the secondary trading market for lower-rated
bonds may be less liquid than for investment grade bonds. As a result
of these factors, lower-rated bonds tend to have more price volatility
and carry more risk to principal than higher-rated bonds. The
investment adviser will endeavor to limit these risks through
diversifying the portfolio and through careful credit analysis of
individual issuers.

CONVERTIBLE SECURITIES
As with all fixed-income securities, various market forces influence
the market value of convertible securities, including changes in the
level of interest rates. As interest rates increase, the market value
of convertible securities may decline and, conversely, as interest
rates decline, the market value of convertible securities may
increase. The unique investment characteristic of convertible
securities, the right to be exchanged for the issuer's common stock,
causes the market value of convertible securities to increase when the
underlying common stock increases. However, since securities prices
fluctuate, there can be no assurance of capital appreciation, and most
convertible securities will not reflect quite as much capital
appreciation as their underlying common stocks. When the underlying
common stock is experiencing a decline, the value of the convertible
security tends to decline to a level approximating the yield-to-
maturity basis of straight nonconvertible debt of similar quality,
often called `investment value,'' and may not experience the same
decline as the underlying common stock.

Many convertible securities sell at a premium over their conversion
values (i.e., the number of shares of common stock to be received upon
conversion multiplied by the current market price of the stock). This
premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of
capital appreciation due to the conversion privilege. If this
appreciation potential is not realized, the premium may not be
recovered.

WARRANTS
Warrants are basically options to purchase common stock at a specific
price (usually at a premium above the market value of the optioned
common stock at issuance) valid for a specific period of time.
Warrants may have a life ranging from less than a year to twenty years
or may be perpetual. However, most warrants have expiration dates
after which they are worthless. In addition, if the market price of
the common stock does not exceed the warrant's exercise price during
the life of the warrant, the warrant will expire as worthless.
Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the
market price of the optioned common stock.
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares
of the Fund, the Fund may attempt to hedge all or a portion of its
portfolio by buying and selling futures contracts and options on
futures contracts, and buying put and call options on portfolio
securities and securities indices. The Fund may also write covered put
and call options on portfolio securities to attempt to increase its
current income or to hedge a portion of its portfolio investments. The
Fund will maintain its positions in securities, option rights, and
segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position on a futures
contract may be closed out over-the-counter or on a nationally
recognized exchange which provides a secondary market for options of

the same series. The Fund will not engage in futures transactions for
speculative purposes.
FUTURES CONTRACTS
The Fund may purchase and sell financial futures contracts to hedge
against the effects of changes in the value of portfolio securities
due to anticipated changes in interest rates and market conditions
without necessarily buying or selling the securities. Although some
financial futures contracts call for making or taking delivery of the
underlying securities, in most cases these obligations are closed out
before the settlement date. The closing of a contractual obligation is
accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for
cash settlements.
The Fund also may purchase and sell stock index futures contracts with
respect to any stock index traded on a recognized stock exchange or
board of trade to hedge against changes in prices. Stock index futures
contracts are based on indices that reflect the market value of common
stock of the firms included in the indices. An index futures contract
is an agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to the difference between the
value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally
written. No physical delivery of the underlying securities in the
index is made. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the difference
between the contract price and the actual level of the stock index at
the expiration of the contract.

``MARGIN''IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of `initial margin'' in
cash, U.S. government securities or highly-liquid debt securities
with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of
margin in securities transactions in that initial margin in futures
transactions does not involve the borrowing of funds by the Fund to
finance the transactions. Initial margin is in the nature of a
performance bond or good faith deposit on the contract which is

returned to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the
Fund pays or receives cash, called `variation margin,'' equal to the
daily change in value of the futures contract. This process is known
as `marking to market.'' Variation margin does not represent a
borrowing or loan by the Fund but is instead settlement between the
Fund and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset value, the
Fund will mark to market its open futures positions. The Fund is also
required to deposit and maintain margin when it writes call options on
futures contracts.
To the extent required to comply with Commodity Futures Trading
Commission (`CFTC'') Regulation 4.5 and thereby avoid status as a
`commodity pool operator,'' the Fund will not enter into a futures
contract, or purchase an option thereon, if immediately thereafter the
initial margin deposits for futures contracts held by it, plus
premiums paid by it for open options on futures contracts, would
exceed 5% of the market value of the Fund's total assets, after taking
into account the unrealized profits and losses on those contracts it
has entered into; and, provided further, that in the case of an option
that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in computing such 5%. Second, the Fund will not enter
into these contracts for speculative purposes; rather, these
transactions are entered into only for bona fide hedging purposes, or
other permissible purposes pursuant to regulations promulgated by the
CFTC. Third, since the Fund does not constitute a commodity pool, it

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

option will expire on the date provided in the option contract, and
only the premium paid for the contract will be lost.

When the Fund sells a put on a futures contract, it receives a cash
premium in exchange for granting to the purchaser of the put the right
to receive from the Fund, at the strike price, a short position in
such futures contract, even though the strike price upon exercise of
the option is greater than the value of the futures position received
by such holder. If the value of the underlying futures position is not
such that exercise of the option would be profitable to the option
holder, the option will generally expire without being exercised. It
will generally be the policy of the Fund, in order to avoid the
exercise of an option sold by it, to cancel its obligation under the
option by entering into a closing purchase transaction, if available,
unless it is determined to be in the Fund's interest to deliver the
underlying futures position. A closing purchase transaction consists
of the purchase by the Fund of an option having the same term as the
option sold by the Fund, and has the effect of canceling the Fund's
position as a seller. The premium which the Fund will pay in executing
a closing purchase transaction may be higher than the premium received
when the option was sold, depending in large part upon the relative
price of the underlying futures position at the time of each
transaction.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed and over-the-counter call options on financial and stock index
futures contracts to hedge its portfolio. When the Fund writes a call

option on a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures contract) at the
fixed strike price at any time during the life of the option if the
option is exercised. As stock prices fall or market interest rates
rise, causing the prices of futures to go down, the Fund's obligation
under a call option on a future (to sell a futures contract) costs
less to fulfill, causing the value of the Fund's call option position
to increase.
In other words, as the underlying futures price falls below the strike
price, the buyer of the option has no reason to exercise the call, so
that the Fund keeps the premium received for the option. This premium
can substantially offset the drop in value of the Fund's portfolio
securities.
When the Fund purchases a call on a financial futures contract, it
receives in exchange for the payment of a cash premium the right, but
not the obligation, to enter into the underlying futures contract at a
strikeprice 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).

the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Farm Credit System; including the National Bank for Cooperatives,
Farm
Credit Banks, and Banks for Cooperatives;
Federal Home Loan Banks;
Federal Home Loan Mortgage Corporation;
Federal National Mortgage Association; and
Student Loan Marketing Association.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial paper
is normally resold to other institutional investors like the Fund through
or with the assistance of the issuer or investment dealers who make a
market in Section 4(2) commercial paper, thus providing liquidity.

The Trustees may consider the following criteria in determining the
liquidity of certain restricted securities:

the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and
the number of other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund sufficient to make payment for the securities to be purchased are
segregated on a Fund's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.

LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, the Fund may lend its portfolio
securities, up to one-third of the value of its total assets, to
broker/dealers, banks, or other institutional borrowers of securities. The
collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends
or interest paid on such securities. Loans are subject to termination at
the option of the Fund or the borrower. The Fund may pay reasonable
administrative and custodial fees in connection with a loan and may pay a

negotiated portion of the interest earned on the cash or equivalent
collateral to the borrower or placing broker. The Fund does not have the
right to vote securities on loan, but would terminate the loan and regain
the right to vote if that were considered important with respect to the
investment.
REPURCHASE AGREEMENTS
The Fund or its custodian will take possession of the securities subject to
repurchase agreements, and these securities will be marked to market daily.
In the event that such a defaulting seller filed for bankruptcy or became
insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under regular procedures
normally in effect for custody of the Fund's portfolio securities subject
to repurchase agreements, a court of competent jurisdiction would rule in
favor of the Fund and allow retention or disposition of such securities.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are found
by the Fund's investment adviser to be creditworthy pursuant to guidelines
established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in
the future the Fund will repurchase the portfolio instrument by remitting
the original consideration plus interest at an agreed upon rate. When
effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be

purchased, are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
PORTFOLIO TURNOVER
Securities in the Fund's portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the
Fund's investment objectives, without regard to the length of time a
particular security may have been held. It is not anticipated that the
portfolio trading engaged in by the Fund will result in its annual rate of
portfolio turnover exceeding 100%.

For the 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 for the Fund were 96% and 4%, respectively.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities
on margin, but may obtain such short-term credits as may be necessary
for clearance of purchases and sales of portfolio securities. The
deposit or payment by the Fund of initial or variation margin in
connection with futures contracts or related options transactions is
not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may
borrow money directly or through reverse repurchase agreements as a
temporary, extraordinary, or emergency measure to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be

inconvenient or disadvantageous, and then only in amounts not in
excess of one-third of the value of its total assets; provided that,
while borrowings and reverse repurchase agreements outstanding exceed
5% of the Fund's total assets, any such borrowings will be repaid
before additional investments are made. The Fund will not borrow
money or engage in reverse repurchase agreements for investment
leverage purposes.

INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts,
or commodity futures contracts, except that the Fund may purchase and
sell futures contracts and options on futures contracts provided that
the sum of its initial margin deposits for futures contracts plus
premiums paid by it for open options on futures contracts may not
exceed 5% of the fair market value of the Fund's total assets, after
taking into account the unrealized profits and losses on those
contracts.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests in real estate, although it may invest in
securities of companies whose business involves the purchase or sale
of real estate or in securities secured by real estate or interests in
real estate.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities
up to one-third of its total assets. This shall not prevent the Fund
from purchasing or holding corporate or U.S. government bonds,
debentures, notes, certificates of indebtedness or other debt
securities of an issuer, entering into repurchase agreements, or
engaging in other transactions which are permitted by the Fund's
investment objective and policies or the Trust's Declaration of Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.

INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, unless the
securities are held in the Fund's portfolio and not more than 5% of
the value of the Fund's total assets would be invested in premiums on
open put options.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the
securities are held in the Fund's portfolio or unless the Fund is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment.

PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for the purpose of
exercising control or management.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including, among others, repurchase agreements providing
for settlement more than seven days after notice, over the counter
options, and certain restricted securities not determined by the
Trustees to be liquid.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value of total or net assets will
not result in a violation of such restriction.
The Fund has no present intention to borrow money in excess of 5% of the
value of its net assets during the coming fiscal year.
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, Member
of 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.

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.

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.

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.

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 Growth Strategies Fund II: Aetna
Retirement Services Central Valuation Unit, Hartford, Connecticut owned
1,672,697 shares (100%).

TRUSTEES' COMPENSATION

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

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

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

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his wife,
and his son, J. Christopher Donahue.

The adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security, or for anything done or omitted by it, except acts or omissions

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

For the fiscal year ended December 31, 1996 and for the period from
November 9, 1995 (date of initial public investment) to December 31, 1995,
the adviser earned advisory fees of $51,083 and $231, respectively, all of
which were waived.
BROKERAGE TRANSACTIONS
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The Adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. For the fiscal
year ended December 31, 1996, and for the period from November 9, 1995
(date of initial public investment) to December 31, 1995, the Fund paid

$26,305 and $322, respectively, in brokerage commissions on brokerage
transactions.

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

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From November 9, 1995 (date of initial public investment)
to March 1, 1996, Federated Administrative Services, a subsidiary of
Federated Investors, served as the Fund's Administrator. For purposes of
this Statement of Additional Information, Federated Services Company and
Federated Administrative Services, may hereinafter collectively be referred
to as the `Administrators''. For the 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.

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

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

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.

DETERMINING MARKET VALUE OF SECURITIES

The values of the Fund's portfolio securities are determined as follows:
for equity securities and bonds and other fixed income securities,
according to the last sale price on a national securities exchange,
if available;
in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
for bonds and other fixed income securities, at the last sale price
on a national securities exchange, if available; otherwise, as
determined by an independent pricing service;
for unlisted equity securities, the latest mean prices;
for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service, or for
short-term obligations with remaining maturities of 60 days or less
at the time of purchase, at amortized cost; or
for all other securities, at fair value as determined in good faith
by the Trustees.
MASSACHUSETTS PARTNERSHIP LAW

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:
derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities
held less than three months;
invest in securities within certain statutory limits; and
distribute 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 this Statement. If
the Fund fails to comply with these regulations, contracts invested in the

Fund shall not be treated as annuity, endowment, or life insurance
contracts under the Internal Revenue Code.
Contract owners should review the contract prospectus for information
concerning the federal income tax treatment of their contracts and
distributions from the Fund to the separate accounts.
TOTAL RETURN

The Fund's total returns 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, were 24.32% and 24.04%, respectively.

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

The Fund's 30-day yield for the thirty day period ended December 31, 1996
was 0.39%.

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

PERFORMANCE COMPARISONS

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

and offering price per share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specified period of time. From time to
time, the Trust will quote its Lipper ranking in the ``growth
funds'' category in advertising and sales literature.
DOW JONES INDUSTRIAL AVERAGE (``DJIA'') is an unmanaged index
representing share prices of major industrial corporations, public
utilities, and transportation companies. Produced by the Dow Jones &
Company, it is cited as a principal indicator of market conditions.
STANDARD & POOR'S RATINGS GROUP (``S&P'') LOW-PRICED INDEX compares
a group of approximately twenty actively traded stocks priced under
$25 for one month periods and year-to-date.
STANDARD & POOR'S RATINGS GROUP DAILY STOCK PRICE INDEX OF 500
COMMON STOCKS, a composite index of common stocks in industry,
transportation, and financial and public utility companies, can be
used to compare to the total returns of funds whose portfolios are
invested primarily in common stocks. In addition, the Standard &

Poor's index assumes reinvestments of all dividends paid by stocks
listed on its index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in the S&P
figures.
STANDARD & POOR'S RATINGS GROUP 500 is an unmanaged index of common
stocks in industry, transportation, finance, and public utilities
denoting general market performance, as monitored by S&P
Corporation.
LIPPER GROWTH FUND AVERAGE is an average of the total returns for
251 growth funds tracked by Lipper Analytical Services, Inc., an
independent mutual fund rating service.
LIPPER GROWTH FUND INDEX is an average of the net asset-valuated
total returns for the top 30 growth funds tracked by Lipper
Analytical Services, Inc., an independent mutual fund rating
service.
MORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns
also represent the historic change in the value of an investment in the
Fund based on quarterly reinvestment of dividends over a specified period
of time.

From time to time as it deems appropriate, the Fund may advertise its
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposit and time deposits
and to money market funds using the Lipper Analytical Services money market
instruments average.

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

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.

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

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.
FINANCIAL STATEMENTS

The Fund's Financial Statements for the fiscal year ended December 31,
1996, are incorporated herein by reference to the Annual Report of the Fund
dated December 31, 1996 (File Nos. 33-69268 and 811-8042). A copy of the
Report may be obtained without charge by contacting the Fund.

*Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA-Debt rated `AAA'' has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA-Debt rated `AA'' has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-Debt rated `A'' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects

of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB-Debt rated `BBB'' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B-Debt rated `BB'' and ``B'' is regarded, on balance as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. `B'' indicates the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties of
major risk exposures to adverse conditions.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA-Bonds which are rated `Aaa'' are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as `gilt edged.'' Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
AA-Bonds which are rated `Aa'' are judged to be of high quality by all
standards. Together with the `Aaa'' group, they comprise what are
generally known as high grade Bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in `Aaa''
securities or fluctuation of protective elements may be of greater

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

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 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).

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.

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.

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.

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.

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.

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.

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.

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 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.

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.

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

INVESTING IN THE FUND

PURCHASES AND REDEMPTIONS

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

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

companies withdrawing their investment in the Fund.

WHAT SHARES COST

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.

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.

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.

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

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

BROKERAGE TRANSACTIONS

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.

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.

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.

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.

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

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.

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

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

C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever

attaining any real investment standing.

FITCH INVESTORS SERVICE, INC., LONG-TERM DEBT RATINGS

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

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

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

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

* 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.

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
</R.
[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 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
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

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 `Trustees'').
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).
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.

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 `investment 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

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.

President, Naples Property Management, Inc. and Northgate Village
Development Corporation; Director or Trustee of the Funds.

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.

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.

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

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.

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 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.

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
`Purchases 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

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

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

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

products that have gained the confidence of thousands of clients and
their customers.

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.*

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.

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:
(a) Financial Statements: (1-7) incorporated by
reference from the Funds' annual
reports dated December 31, 1996 (File
No. 811-8042O) (8) to be filed by
amendment.
(b) Exhibits:

*source: Investment Company Institute

(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 Equity Growth and
Income Fund; (2)
(ii) Copy of Specimen Certificate for Shares of
Beneficial Interest of Utility Fund; (2)
(iii) Copy of Specimen Certificate for Shares
of Beneficial Interest of U.S. Government
Bond Fund; (2)
(iv) Copy of Specimen Certificate for Shares of
Beneficial Interest of Corporate Bond
Fund; (2)
(v) Copy of Specimen Certificate for Shares of
Beneficial Interest of Prime Money Fund; (2)
(vi) Copy of Specimen Certificate for Shares of
Beneficial Interest of International Stock
Fund; (4)
(vii) Copy of Specimen Certificate for Shares
of Beneficial Interest of Growth Stock Fund;
(10)
(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).
(4) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-1A filed January 19, 1995.
(File Nos. 33-69268 and 811-8042O).
(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).

(vii) Conformed copy of Exhibit G to the
Trust's present investment advisory contract
to add Growth Stock Fund; (10)
(viii)Conformed copy of Exhibit H to the Trust's
present investment advisory contract to add
Growth Stock Fund; (12)
(5a) 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;+
(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 Equity Growth and Income Fund
Schedule for Computation of Fund Performance
Data; (3)
(ii) Copy of Utility 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).
(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).
(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).

(iii) Copy of U.S. Government Bond Fund
Schedule for Computation of Fund Performance
Data;(3)
(iv) Copy of Corporate Bond Fund Schedule for
Computation of Fund Performance Data; (2)

(v) Copy of Prime Money Fund Schedule for
Computation of Fund Performance Data; (9)
(vi) Copy of International Stock Fund Schedule for
Computation of Fund Performance Data; (10)
(vii) Copy of Growth Stock Fund Schedule for
Computation of Fund Performance Data; (10)
(17) Copy of Financial Data Schedules;+
(18) Not applicable
(19) Conformed copy of Power of Attorney; (13)

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 March 24, 1997

Shares of beneficial interest
(no par value)

Federated American Leaders Fund II 15
Federated Growth Strategies Fund II 7
Federated Utility Fund II 17
Federated Prime Money Fund II 17
Federated Fund for U.S. Government Securities II 18

Federated High Income Bond Fund II 20
Federated International Equity Fund II 8
Federated Equity Income Fund II 8

Item 27. Indemnification: (1)

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 International Stock
Fund, 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 `Insurance Management
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.

+ 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).

(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).
(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. 11 on Form N-1A filed November 15, 1996.
(File Nos. 33-69268 and 811-8042O).
(13) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 13 on Form N-1A filed April 1, 1997.
(File Nos. 33-69268 and 811-8042O).

The remaining Officers of the investment adviser are:
William D. Dawson, III, Henry A. Frantzen, J. Thomas Madden,
and Mark L. Mallon, Executive Vice Presidents; Henry J.
Gailliot, Senior Vice President-Economist; Peter R.
Anderson, Drew J.Collins, Jonathan C.Conley, and J. Alan
Minteer, Senior Vice Presidents; J. Scott Albrecht, Joseph
M. Balestrino, Randall S. Bauer, David A. Briggs, Deborah A.
Cunningham, Michael P. Donnelly, Mark E. Durbiano, Kathleen
M. Foody-Malus, Thomas M. Franks, Edward C. Gonzales,
Timothy E. Keefe, Stephen A. Keen, Mark S. Kopinski, Jeff A.
Kozemchak, Marian R. Marinack, Susan M. Nason, Mary Jo

Ochson, Robert J. Ostrowski, Frederick L. Plautz, Jr.,
Charles A. Ritter, James D. Roberge, Frank Semack, William
F. Stolz, Sandra L. Weber and Christopher H. Wiles, 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 International Stock Fund, 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) 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 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.; andWorld Investment Series,
Inc.

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

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

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

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

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

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

Laura M. Deger 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

James E. Hickey 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

Steven A. La Versa 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

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

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

Eugene B. Reed 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

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

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

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

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

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

J. Timothy Radcliff 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

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

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

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.

Registrant hereby undertakes to file a post-effective
amendment on behalf of Federated Equity Income Fund II,
using financial statements for Federated Equity Income Fund
II, which need not be certified, within four to six months
from the effective date of Post-Effective Amendment No. 11.

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 14th day of April,
1997.

FEDERATED INSURANCE SERIES

BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
April 14, 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/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact April 14, 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 11 under Form N-1A
Exhibit 23 under Item 601/Reg. S-K

INDEPENDENT AUDITORS' CONSENT

To the Board of Trustees and
Shareholders of FEDERATED INSURANCE SERIES

We consent to the incorporation by reference in Post-Effective Amendment
No. 14 to Registration Statement (No. 33-69268) of Federated Insurance
Series of our report dated February 7, 1997, appearing in the Annual
Report, which is incorporated by reference in such Registration Statement,
and to the reference to us under the heading `Financial Highlights'' in
such Prospectuses.

The Federated Insurance Series consists of the following eight portfolios:

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

/s/ Deliotte & Touche LLP
DELIOTTE & TOUCHE LLP

Pittsburgh, Pennsylvania
April 14, 1997

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Federated Insurance Series
Federated American Leaders Fund II

<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 124,733,784
<INVESTMENTS-AT-VALUE> 141,645,960
<RECEIVABLES> 1,359,275
<ASSETS-OTHER> 15,361
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,020,596
<PAYABLE-FOR-SECURITIES> 544,984
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 259,148
<TOTAL-LIABILITIES> 804,132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 121,468,683
<SHARES-COMMON-STOCK> 9,322,235
<SHARES-COMMON-PRIOR> 3,790,198
<ACCUMULATED-NII-CURRENT> 111,318
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,724,287
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,912,176
<NET-ASSETS> 142,216,464
<DIVIDEND-INCOME> 1,888,201
<INTEREST-INCOME> 323,745
<OTHER-INCOME> 0
<EXPENSES-NET> 789,515
<NET-INVESTMENT-INCOME> 1,422,431
<REALIZED-GAINS-CURRENT> 3,780,324
<APPREC-INCREASE-CURRENT> 12,783,766
<NET-CHANGE-FROM-OPS> 17,986,521
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,311,113
<DISTRIBUTIONS-OF-GAINS> 450,672
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6,346,064
<NUMBER-OF-SHARES-REDEEMED> 938,427
<SHARES-REINVESTED> 124,400
<NET-CHANGE-IN-ASSETS> 93,702,930
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 404,645
<OVERDISTRIB-NII-PRIOR> (10,010)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 693,045
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 993,118
<AVERAGE-NET-ASSETS> 92,688,452
<PER-SHARE-NAV-BEGIN> 12.800
<PER-SHARE-NII> 0.190
<PER-SHARE-GAIN-APPREC> 2.540
<PER-SHARE-DIVIDEND> 0.180
<PER-SHARE-DISTRIBUTIONS> 0.090
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 15.260
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> Federated Insurance Series
Federated Utility Fund II

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 59,754,653
<INVESTMENTS-AT-VALUE> 64,786,720
<RECEIVABLES> 618,003
<ASSETS-OTHER> 789
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 65,405,512
<PAYABLE-FOR-SECURITIES> 1,708,514
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 139,462
<TOTAL-LIABILITIES> 1,847,976
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56,986,551
<SHARES-COMMON-STOCK> 5,382,230
<SHARES-COMMON-PRIOR> 2,691,470
<ACCUMULATED-NII-CURRENT> 91,190
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,447,599
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,032,196
<NET-ASSETS> 63,557,536
<DIVIDEND-INCOME> 2,052,676
<INTEREST-INCOME> 250,263
<OTHER-INCOME> 0
<EXPENSES-NET> 412,160
<NET-INVESTMENT-INCOME> 1,890,779
<REALIZED-GAINS-CURRENT> 1,471,710
<APPREC-INCREASE-CURRENT> 2,758,768
<NET-CHANGE-FROM-OPS> 6,121,257
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,821,526
<DISTRIBUTIONS-OF-GAINS> 192,047
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,296,405
<NUMBER-OF-SHARES-REDEEMED> 785,968
<SHARES-REINVESTED> 180,323
<NET-CHANGE-IN-ASSETS> 33,878,130
<ACCUMULATED-NII-PRIOR> 5,636
<ACCUMULATED-GAINS-PRIOR> 184,237
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 361,797
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 660,218
<AVERAGE-NET-ASSETS> 48,050,166
<PER-SHARE-NAV-BEGIN> 11.030
<PER-SHARE-NII> 0.420
<PER-SHARE-GAIN-APPREC> 0.820
<PER-SHARE-DIVIDEND> 0.410
<PER-SHARE-DISTRIBUTIONS> 0.050
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.810
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> Federated Insurance Series
Federated Fund for U.S. Government Securities

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 34,451,003
<INVESTMENTS-AT-VALUE> 34,649,147
<RECEIVABLES> 610,179
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 35,259,326
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 294,779
<TOTAL-LIABILITIES> 294,779
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,827,248
<SHARES-COMMON-STOCK> 3,466,312
<SHARES-COMMON-PRIOR> 1,191,893
<ACCUMULATED-NII-CURRENT> 69,050
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (129,895)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 198,144
<NET-ASSETS> 34,964,547
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,599,538
<OTHER-INCOME> 0
<EXPENSES-NET> 189,157
<NET-INVESTMENT-INCOME> 1,410,381
<REALIZED-GAINS-CURRENT> (129,895)
<APPREC-INCREASE-CURRENT> 21,469
<NET-CHANGE-FROM-OPS> 1,301,955
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,344,598
<DISTRIBUTIONS-OF-GAINS> 68,239
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,618,961
<NUMBER-OF-SHARES-REDEEMED> 1,484,884
<SHARES-REINVESTED> 140,342
<NET-CHANGE-IN-ASSETS> 22,700,318
<ACCUMULATED-NII-PRIOR> 3,267
<ACCUMULATED-GAINS-PRIOR> 68,239
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 141,092
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 427,100
<AVERAGE-NET-ASSETS> 23,566,233
<PER-SHARE-NAV-BEGIN> 10.290
<PER-SHARE-NII> 0.590
<PER-SHARE-GAIN-APPREC> (0.180)
<PER-SHARE-DIVIDEND> 0.570
<PER-SHARE-DISTRIBUTIONS> 0.040
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.090
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 05
<NAME> Federated Insurance Series
Federated High Income Bond Fund II

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 62,442,641
<INVESTMENTS-AT-VALUE> 64,822,356
<RECEIVABLES> 1,456,308
<ASSETS-OTHER> 42,730
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,321,394
<PAYABLE-FOR-SECURITIES> 236,309
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 41,775
<TOTAL-LIABILITIES> 278,084
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,269,852
<SHARES-COMMON-STOCK> 6,450,008
<SHARES-COMMON-PRIOR> 2,058,766
<ACCUMULATED-NII-CURRENT> 109,795
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 283,948
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,379,715
<NET-ASSETS> 66,043,310
<DIVIDEND-INCOME> 19,194
<INTEREST-INCOME> 3,998,585
<OTHER-INCOME> 0
<EXPENSES-NET> 322,073
<NET-INVESTMENT-INCOME> 3,695,706
<REALIZED-GAINS-CURRENT> 290,512
<APPREC-INCREASE-CURRENT> 2,051,764
<NET-CHANGE-FROM-OPS> 6,037,982
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,613,374
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5,638,009
<NUMBER-OF-SHARES-REDEEMED> 1,611,816
<SHARES-REINVESTED> 365,049
<NET-CHANGE-IN-ASSETS> 45,878,295
<ACCUMULATED-NII-PRIOR> 27,463
<ACCUMULATED-GAINS-PRIOR> (6,564)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 240,233
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 557,490
<AVERAGE-NET-ASSETS> 40,038,829
<PER-SHARE-NAV-BEGIN> 9.790
<PER-SHARE-NII> 0.880
<PER-SHARE-GAIN-APPREC> 0.450
<PER-SHARE-DIVIDEND> 0.880
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.240
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> Federated Insurance Series
Federated Prime Money Fund II

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 37,607,463
<INVESTMENTS-AT-VALUE> 37,607,463
<RECEIVABLES> 526,294
<ASSETS-OTHER> 8,062,347
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 46,196,104
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 540,772
<TOTAL-LIABILITIES> 540,772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45,655,332
<SHARES-COMMON-STOCK> 45,655,332
<SHARES-COMMON-PRIOR> 17,837,904
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 45,655,332
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,694,866
<OTHER-INCOME> 0
<EXPENSES-NET> 248,488
<NET-INVESTMENT-INCOME> 1,446,378
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 1,446,378
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,446,378
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 214,683,781
<NUMBER-OF-SHARES-REDEEMED> 188,312,731
<SHARES-REINVESTED> 1,446,378
<NET-CHANGE-IN-ASSETS> 27,817,428
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 154,455
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 424,178
<AVERAGE-NET-ASSETS> 30,891,057
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
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<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

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

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 16,581,433
<INVESTMENTS-AT-VALUE> 17,706,307
<RECEIVABLES> 131,724
<ASSETS-OTHER> 4,801
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,842,832
<PAYABLE-FOR-SECURITIES> 56,427
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34,689
<TOTAL-LIABILITIES> 91,116
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,785,472
<SHARES-COMMON-STOCK> 1,590,287
<SHARES-COMMON-PRIOR> 967,545
<ACCUMULATED-NII-CURRENT> 22,969
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (181,293)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,124,568
<NET-ASSETS> 17,751,716
<DIVIDEND-INCOME> 167,834
<INTEREST-INCOME> 60,920
<OTHER-INCOME> 0
<EXPENSES-NET> 134,034
<NET-INVESTMENT-INCOME> 94,720
<REALIZED-GAINS-CURRENT> (231,600)
<APPREC-INCREASE-CURRENT> 1,010,299
<NET-CHANGE-FROM-OPS> 873,419
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,449
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,188,525
<NUMBER-OF-SHARES-REDEEMED> 60,899
<SHARES-REINVESTED> 3,009
<NET-CHANGE-IN-ASSETS> 12,992,157
<ACCUMULATED-NII-PRIOR> 34,524
<ACCUMULATED-GAINS-PRIOR> (6,812)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 459,841
<AVERAGE-NET-ASSETS> 20,691,017
<PER-SHARE-NAV-BEGIN> 10.350
<PER-SHARE-NII> 0.110
<PER-SHARE-GAIN-APPREC> 0.750
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<PER-SHARE-NAV-END> 11.160
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> Federated Insurance Series
Federated Growth Strategies Fund II

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<INVESTMENTS-AT-COST> 15,596,073
<INVESTMENTS-AT-VALUE> 17,115,610
<RECEIVABLES> 51,619
<ASSETS-OTHER> 3,239
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,170,468
<PAYABLE-FOR-SECURITIES> 160,004
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 25,615
<TOTAL-LIABILITIES> 185,619
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,326,540
<SHARES-COMMON-STOCK> 1,326,805
<SHARES-COMMON-PRIOR> 35,686
<ACCUMULATED-NII-CURRENT> 37,360
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 101,412
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,519,537
<NET-ASSETS> 16,984,849
<DIVIDEND-INCOME> 62,159
<INTEREST-INCOME> 33,509
<OTHER-INCOME> 0
<EXPENSES-NET> 58,195
<NET-INVESTMENT-INCOME> 37,473
<REALIZED-GAINS-CURRENT> 101,778
<APPREC-INCREASE-CURRENT> 1,511,965
<NET-CHANGE-FROM-OPS> 1,651,216
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 700
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,310,281
<NUMBER-OF-SHARES-REDEEMED> 19,226
<SHARES-REINVESTED> 64
<NET-CHANGE-IN-ASSETS> 16,617,317
<ACCUMULATED-NII-PRIOR> 1,095
<ACCUMULATED-GAINS-PRIOR> (368)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 51,083
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 321,542
<AVERAGE-NET-ASSETS> 6,966,030
<PER-SHARE-NAV-BEGIN> 10.300
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 2.450
<PER-SHARE-DIVIDEND> 0.004
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 12.800
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>