FEDERATED INSURANCE SERIES, N-30D, 1996-08-28

FEDERATED INSURANCE SERIES
N-30D, 1996-08-28

Previous: ROYCE OTC MICRO CAP FUND INC, NSAR-A, 1996-08-28

Next: AVIC GROUP INTERNATIONAL INC/, 10KSB40/A, 1996-08-28

PRESIDENT'S MESSAGE

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
American Leaders Fund II, formerly named Equity Growth and Income Fund.
"Federated" has been added to the name to make it easy for investors to
locate all Federated Funds in mutual fund listings of newspapers and other
publications. In addition, the fund's new name reflects the fact that it has
always been managed in the same style as Federated American Leaders Fund,
Inc., a stock mutual fund that has been serving investors since 1969.

This report covers the six-month period from January 1, 1996, through June
30, 1996. It begins with a commentary by the fund's portfolio manager, which
is followed by a complete listing of the fund's stock holdings as well as
its financial statements.

The fund's portfolio performed well in the favorable stock market
environment during the six-month reporting period. Contributing to the total
return of 9.40% were income distributions of $0.09 per share, capital gain
distributions of $0.09 per share, and a net asset value increase of 8.00%.*
On June 30, 1996, net assets reached $92.8 million.

Thank you for participating in the long-term growth opportunities of
American companies through Federated American Leaders Fund II. We trust you
were pleased with the positive performance of your investment. As always, we
welcome your comments and suggestions.

Sincerely,

/s/J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1996

INVESTMENT REVIEW

In the second quarter of 1996, the U.S. stock market exhibited higher
volatility which we had begun to experience in the first quarter. By many
measures the equity market is fully valued. With inflation concerns causing
a backup in bond yields and mixed economic signals, the equity market has
become more rotational, reacting quickly to changes in sentiment.

The bond market has its eyes set on the inflation numbers with the bears
pointing to the outsized growth in non-farm payrolls as a preliminary
indication of a much more onerous outlook for inflation. The bulls are
focusing on both the consumer and producer price indexes which indicate that
concerns about price inflation appear to be premature.

The Federal Reserve Board (the "Fed"), in our opinion, will wait to see if
the backup in rates has caused a self-correcting slowdown in the economy
which will keep the moderate growth, low inflationary environment intact
without further Fed action.

The positive performance in the equity markets, despite a negative first
half in bonds, has compressed the spread between the earnings yield for
stocks and bond yields. The current market environment calls for greater
selectivity and attention to the fundamentals which determine the quality of
a company's earnings.

The process and style which we use to manage the Federated American Leaders
Fund II typically produces lower turnover, and therefore, there is rarely
any radical change in the bulk of the portfolio. Our strategy continues to
be the pursuit of large-cap companies that have a leadership position in
their respective industries. We look for companies which appear inexpensive
based on the long-term earnings potential of their underlying businesses and
are exhibiting positive momentum. We are also interested in asset plays,
restructuring candidates, and companies that will be beneficiaries of
industry consolidation.

The fund has several holdings that are positioned to benefit from the
consolidation trends in banking, insurance and defense electronics. Many of
the conglomerates which we own, such as Textron, are restructuring plays. We
have been adding to our positions in Freddie Mac and Fannie Mae recently,
which are underperforming the markets because of both interest rate fears
and privatization concerns. Both of these companies dominate their industry,
have 20% return on equity, excellent management teams, growth rates in the
mid-teens and are selling at a mere 11 times earnings. Also, both are
examples of our focus on quality.

The fund's performance was adversely affected in the second quarter by a
slowing of final demand in the Technology sector, which has caused earnings
disappointments in some areas, particularly semiconductor equipment
producers. We still believe in the long-term growth outlook for information
technology, but have increased our emphasis on quality with additions such
as Computer Associates and Oracle, which we believe are extremely
well-positioned. Other additions include: CPC International, a well-managed
producer of food products, has a strong international presence and
attractive valuation; Kroger, one of the largest food retailers, should be a
beneficiary of consolidation in the food retailing industry; and Union
Pacific and Southern Pacific Rail. The proposed merger of these two
railroads offers excellent upside potential, and an attractive risk/reward
situation.

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--90.6%
BASIC INDUSTRY--6.6%
30,700 Allegheny Ludlum Corp. $ 579,462
34,000 Barrick Gold Corp. 922,250
4,600 Eastman Chemical Co. 280,025
82,000 Millipore Corp. 3,433,750
28,500 Monsanto Co. 926,250
Total 6,141,737
CONSUMER DURABLES--3.9%
9,200 Chrysler Corp. 570,400
20,000 Eastman Kodak Co. 1,555,000
53,075 Mattel, Inc. 1,519,272
Total 3,644,672
CONSUMER NON-DURABLES--10.5%
24,800 Avon Products, Inc. 1,119,100
13,000 CPC International, Inc. 936,000
61,900 IBP, Inc. 1,709,987
23,400 Kimberly-Clark Corp. 1,807,650
20,200 Nike, Inc., Class B 2,075,550
20,200 Philip Morris Cos., Inc. 2,100,800
Total 9,749,087
ENERGY MINERALS--4.9%
18,900 Chevron Corp. 1,115,100
6,900 Exxon Corp. 599,437
25,000 Mobil Corp. 2,803,125
Total 4,517,662
</TABLE>

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCE--18.4%
20,000 Aflac, Inc. $ 597,500
24,508 Allstate Corp. 1,118,177
12,300 American Express Co. 548,887
11,200 CIGNA Corp. 1,320,200
12,900 Chase Manhattan Corp. 911,062
18,600 Citicorp 1,536,825
19,600 Dean Witter, Discover & Co. 1,122,100
33,200 Federal Home Loan Mortgage Corp. 2,838,600
58,500 Federal National Mortgage Association 1,959,750
26,000 Mellon Bank Corp. 1,482,000
4,700 Merrill Lynch & Co., Inc. 306,088
6,700 Sunamerica, Inc. 378,550
10,400 The PMI Group, Inc. 442,000
2,400 Travelers/Aetna Property Casualty Corp. 68,100
45,950 Travelers Group, Inc. 2,096,469
1,500 Wells Fargo & Co. 358,313
Total 17,084,621
HEALTH CARE--9.2%
34,800 Abbott Laboratories 1,513,800
21,000 American Home Products Corp. 1,262,625
17,300 Becton, Dickinson & Co. 1,388,325
18,400 Bristol-Myers Squibb Co. 1,656,000
13,200 Columbia/HCA Healthcare Corp. 704,550
3,500 Ivax Corp. 55,562
14,200 Merck & Co., Inc. 917,675
23,500 (a)Scherer (R.P.) Corp. 1,066,313
Total 8,564,850
</TABLE>

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--5.5%
5,500 (a)FMC Corp. $ 358,875
12,000 General Electric Co. 1,038,000
14,200 Loews Corp. 1,120,025
7,500 Philips Electronics N.V., ADR 244,688
23,800 Textron, Inc. 1,901,025
20,800 Westinghouse Electric Corp. 390,000
Total 5,052,613
RETAIL TRADE--2.8%
21,400 (a)Kroger Co., Inc. 845,300
26,600 Sears, Roebuck & Co. 1,293,425
14,600 (a)Toys "R" Us, Inc. 416,100
Total 2,554,825
SERVICES--1.9%
9,000 Disney (Walt) Co. 565,875
13,300 Gannett Co., Inc. 940,975
5,900 Interpublic Group Cos., Inc. 276,563
Total 1,783,413
TECHNOLOGY--18.9%
27,000 (a)Applied Materials, Inc. 823,500
47,300 (a)Ceridian Corp. 2,388,650
26,300 Computer Associates International, Inc. 1,873,875
37,000 (a)Data General Corp. 481,000
22,500 (a)Electronic Data Systems Corp. 1,209,375
13,200 Hewlett-Packard Co. 1,315,050
17,000 Intel Corp. 1,248,437
13,900 International Business Machines Corp. 1,376,100
4,600 (a)Lam Research Corp. 119,600
12,600 (a)Litton Industries, Inc. 548,100
</TABLE>

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
17,200 Lockheed Martin Corp. $ 1,444,800
9,800 (a)Microsoft Corp. 1,177,225
17,500 (a)Oracle Corp. 690,156
12,300 Raytheon Co. 634,988
23,000 Rockwell International Corp. 1,316,750
24,400 (a)Solectron Corp. 924,150
Total 17,571,756
TRANSPORTATION--2.1%
9,000 Kansas City Southern Industries, Inc. 385,875
20,600 (a)Southern Pacific Railway Co. 515,000
15,300 Union Pacific Corp. 1,069,088
Total 1,969,963
UTILITIES--5.9%
21,200 AT&T Corp. 1,314,400
23,300 CMS Energy Corp. 719,387
16,800 (a)Columbia Gas System, Inc. 875,700
42,000 Enron Corp. 1,716,750
31,300 MCI Communications Corp. 802,063
Total 5,428,300
TOTAL COMMON STOCKS (IDENTIFIED COST $76,309,593) 84,063,499
</TABLE>

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS--0.8%
FINANCE--0.8%
14,100 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12
(IDENTIFIED COST $742,285) $ 761,400
(b) REPURCHASE AGREEMENT--6.6%
$ 6,150,000 BT Securities Corporation, 5.50%, dated 6/28/1996, due 7/1/1996
(AT AMORTIZED COST) 6,150,000
TOTAL INVESTMENTS (IDENTIFIED COST $83,201,878)(c) $ 90,974,899
</TABLE>

(a) Non-income producing security.

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

(c) The cost of investments for federal tax purposes amounts to $83,201,878.
The net unrealized appreciation of investments on a federal tax basis
amounts to $7,773,021 which is comprised of $8,749,095 appreciation and
$976,074 depreciation at June 30, 1996.

Note: The categories of investments are shown as a percentage of net assets
($92,756,169) at June 30, 1996.

The following acronym(s) are used throughout this portfolio:

ADR -- American Depository Receipt
STRYPES -- Structured Yield Product Exchangeable for Stock

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

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified and tax cost $83,201,878) $ 90,974,899
Cash 4,092
Income receivable 129,836
Receivable for investments sold 2,334,640
Total assets 93,443,467
LIABILITIES:
Payable for investments purchased $ 685,555
Accrued expenses 1,743
Total liabilities 687,298
NET ASSETS for 6,709,372 shares outstanding $ 92,756,169
NET ASSETS CONSIST OF:
Paid in capital $ 83,835,283
Net unrealized appreciation of investments 7,773,021
Accumulated net realized gain on investments 1,106,207
Undistributed net investment income 41,658
Total Net Assets $ 92,756,169
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$92,756,169 \ 6,709,372 shares outstanding $ 13.82
</TABLE>

(See Notes which are an integral part of the Financial Statements)
FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 679,708
Interest 162,465
Total Income 842,173
EXPENSES:
Investment advisory fee $ 259,562
Administrative personnel and services fee 62,158
Custodian fees 16,910
Transfer and dividend disbursing agent fees and expenses 7,199
Directors'/Trustees' fees 728
Auditing fees 4,550
Legal fees 910
Portfolio accounting fees 22,810
Share registration costs 9,464
Printing and postage 11,466
Insurance premiums 1,820
Miscellaneous 5,824
Total expenses 403,401
Waiver--
Waiver of investment advisory fee $ (107,708)
Net expenses 295,693
Net investment income 546,480
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 1,152,234
Net change in unrealized appreciation of investments 3,644,611
Net realized and unrealized gain on investments 4,796,845
Change in net assets resulting from operations $ 5,343,325
</TABLE>

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

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 546,480 $ 385,529
Net realized gain (loss) on investments ($1,152,234 and $460,510
net gains, respectively, as computed for federal tax purposes) 1,152,234 418,832
Net change in unrealized appreciation (depreciation) 3,644,611 4,129,761
Change in net assets resulting from operations 5,343,325 4,934,122
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (494,812) (386,024)
Distributions in excess of net investment income -- (10,010)
Distributions from net realized gains (450,672) --
Change in net assets resulting from distributions
to shareholders (945,484) (396,034)
SHARE TRANSACTIONS--
Proceeds from sale of shares 41,366,912 45,176,314
Net asset value of shares issued to shareholders in payment of
distributions declared 945,119 396,398
Cost of shares redeemed (2,467,237) (3,997,296)
Change in net assets resulting from share transactions 39,844,794 41,575,416
Change in net assets 44,242,635 46,113,504
NET ASSETS:
Beginning of period 48,513,534 2,400,030
End of period (including undistributed net investment income of
$41,658 and $0, respectively) $ 92,756,169 $ 48,513,534
</TABLE>

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

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JUNE 30, 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 0.10 0.20 0.19
Net realized and unrealized gain (loss)
on investments 1.10 3.06 (0.26)
Total from investment operations 1.20 3.26 (0.07)
LESS DISTRIBUTIONS
Distributions from net investment income (0.09) (0.19) (0.19)
Distribution in excess of net investment income(b) -- (0.01) --
Total distributions from net investment income (0.09) (0.20) (0.19)
Distributions from net realized gain on investments (0.09) -- --
Total distributions (0.18) (0.20) (0.19)
NET ASSET VALUE, END OF PERIOD $13.82 $12.80 $ 9.74
TOTAL RETURN(c) 9.40 33.71% (0.70%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%* 0.85% 0.54%*
Net investment income 1.58%* 2.03% 2.58%*
Expense waiver/reimbursement(d) 0.31%* 1.36% 25.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $92,756 $48,514 $2,400
Average commission rate paid $0.0547 -- --
Portfolio turnover 52% 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 principles. These
distributions do not represent a return of capital for federal income tax
purposes.

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

(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)

FEDERATED AMERICAN LEADERS FUND II
(FORMERLY, EQUITY GROWTH AND INCOME FUND)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)

1. ORGANIZATION

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

Effective April 15, 1996, the Board of Trustees ("Trustees") changed the
name of the Trust from Insurance Management Series to Federated Insurance
Series and the name of the Fund from Equity Growth and Income Fund to
Federated American Leaders Fund II.

2. SIGNIFICANT ACCOUNTING POLICIES

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

INVESTMENT VALUATIONS -- Listed equity securities are valued at the last
sale price reported on a national securities exchange. Short-term securities
are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of sixty days or
less at the time of purchase may be valued at amortized cost, which
approximates fair market value.

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

The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Trustees. Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the repurchase
price on the sale of collateral securities.

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

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

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

3. SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
Shares sold 3,030,482 3,870,639
Shares issued to shareholders in payment of distributions declared 69,425 32,670
Shares redeemed (180,733) (359,502)
Net change resulting from Fund share transactions 2,919,174 3,543,807
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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

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

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.

ORGANIZATIONAL EXPENSES -- Organizational and start-up administrative
service expenses of $47,855 were borne initially by the Adviser. The Fund
has agreed to reimburse the Adviser for the organizational and start-up
administrative expenses during the five-year period following effective
date. For the period ended June 30, 1996, the Fund paid $9,571 pursuant to
this agreement.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $69,178,005
SALES $33,374,011
</TABLE>

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

OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Douglas L. Hein
Assistant Treasurer
S. Elliott Cohan
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.

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

FEDERATED AMERICAN LEADERS
FUND II
(formerly, Equity Growth and Income Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996
Federated Insurance Series
(formerly, Insurance Management Series)

[LOGO]

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.

[RECYCLE LOGO]
Cusip 313916405
G00433-04 (8/96)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Growth Strategies Fund II, formerly named Growth Stock Fund. "Federated" has
been added to the name to make it easy for investors to locate all Federated
Funds in mutual fund listings of newspapers and other publications. In
addition, the fund's new name reflects the fact that it has always been
managed in the same style as Federated Growth Strategies Fund, a mutual fund
that has been serving investors since 1984.

This report covers the six-month period from January 1, 1996, through June
30, 1996. It begins with an investment review by the fund's portfolio
managers, which is followed by a complete listing of the fund's growth stock
holdings as well as its financial statements.

Federated Growth Strategies Fund II is managed to pursue long-term growth
through a highly diversified portfolio. The fund's portfolio includes common
stocks and convertible securities representing key business sectors with
many familiar names that you will recognize immediately.

This diversified portfolio performed very well in the favorable stock market
environment during the six-month reporting period. The total return of
11.30% was due primarily to a net asset value increase of 11.26%.* On June
30, 1996, net assets reached $5.9 million.

Thank you for participating in the long-term growth opportunities of
American companies through Federated Growth Strategies Fund II. We trust you
were pleased with the positive performance of your investment. As always, we
welcome your comments and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President

August 15, 1996

INVESTMENT REVIEW

The U.S. stock market has been very dynamic in the first half of 1996. For
the six-month period ended June 30, 1996, the market traded distinct
sections, with markedly divergent performance between the various sizes of
stocks. The first six weeks of the year was marked by continuing the trend
favoring a weaker growing economy that we saw in the fourth quarter of 1995.
For the next twelve weeks, smaller stocks (as measured by the Standard &
Poor's 600 SmallCap Index* or by the NASDAQ Over-the-Counter Composite
Index**) maintained their strong performance that started in the second half
of the first quarter. Meanwhile, larger stocks (as measured by the Standard
& Poor's 500 Stock Index* ("S&P 500")) added modest gains. The final six
weeks of the period was quite different as large caps traded essentially
flat, while smaller stocks gave back almost all of their relative gains, to
close just ahead of the S&P 500*. The shift in performance between small and
large cap stocks appears to reflect changes in sentiment with regard to
projected economic growth, interest rates and cash flows into equities.

Growth stocks have outperformed value stocks year-to-date. This trend is
evidenced by the fact that Federated Growth Strategies Fund II returned
11.30% for the period while the S&P 500* returned 10.10%. This is a trend we
believe will continue for the balance of the year and into 1997. Growth
outperforms value whenever the market begins to anticipate a slowdown in the
growth rate of the economy. We think that this kind of situation is
developing. As a result, we continue to favor sectors that offer the
potential for strong growth, such as technology, health care, and certain
services. We are also underweighted in economically sensitive sectors such
as producer manufacturing, consumer durables, and basic industry.

* Standard & Poor's 600 SmallCap Index and Standard & Poor's 500 Stock Index
are unmanaged composite indices of common stocks in industrial,
transportation, and financial and public utility companies, and can be used
to compare the total returns of funds whose portfolios are invested
primarily in common stocks. Investments cannot be made in an index.

** NASDAQ Over-the-Counter Composite Index is an unmanaged index covering
4,500 stocks traded over-the-counter. It represents many small company
stocks but is heavily influenced by about 100 of the largest NASDAQ stocks.
Investments cannot be made in an index.

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- 97%
BASIC INDUSTRY -- 6.4%
1,800 Barrick Gold Corp. $ 48,824
2,100 Monsanto Co. 68,250
1,500 Potash Corporation of Saskatchewan, Inc. 99,375
1,200 Praxair, Inc. 50,700
1,500 (a)Titanium Metals Corp. 38,813
1,700 UCAR Global Enterprises, Inc. 70,763
Total 376,725
CONSUMER DURABLES -- 3.5%
1,100 Harley Davidson, Inc. 45,238
2,000 (a)K2, Inc. 54,250
1,100 Magna International, Inc., Class A 50,600
1,200 Oakley, Inc. 54,600
Total 204,688
CONSUMER NON-DURABLES -- 8.9%
1,000 Campbell Soup Co. 70,500
1,400 Coca-Cola Co. 68,424
1,100 CPC International, Inc. 79,200
1,800 Mossimo, Inc. 71,776
1,000 Nike, Inc., Class B 113,025
900 Philip Morris Cos., Inc. 93,600
500 (a)Tommy Hilfiger Corp. 26,813
Total 523,338
ENERGY MINERALS -- 5.4%
500 British Petroleum Co. PLC, ADR 53,437
4,800 (a)Global Marine, Inc. 66,600
1,700 (a)Petroleum Geo-Services, ADR 48,238
</TABLE>

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ENERGY MINERALS -- CONTINUED
2,200 (a)Reading & Bates Corp. $ 48,675
500 (a)Western Atlas, Inc. 29,125
3,100 YPF Sociedad Anonima, ADR 69,750
Total 315,825
FINANCE -- 11.6%
1,750 Aflac, Inc. 52,282
3,000 (a)Amerin Corp. 80,250
800 Citicorp 66,099
200 CMAC Investment Corp. 11,500
400 Federal Home Loan Mortgage Corp. 34,200
100 First USA, Inc. 5,500
2,650 MBNA Corp. 75,525
1,000 Mellon Bank Corp. 57,000
2,500 Schwab (Charles) Corp. 61,250
1,700 Sunamerica, Inc. 96,050
2,000 TCF Financial Corp. 66,500
1,700 Travelers Group, Inc. 77,563
Total 683,719
HEALTH CARE -- 14.5%
1,200 (a)Amgen, Inc. 64,800
800 (a)Geltex Pharmaceuticals, Inc. 15,000
800 (a)Genzyme Corp. 40,200
800 HBO & Co. 54,200
1,100 Johnson & Johnson 54,450
800 (a)KeraVision, Inc. 12,500
1,300 Lilly (Eli) & Co. 84,500
800 (a)Medaphis Corp. 31,800
1,100 Medtronic, Inc. 61,600
1,100 Merck & Co., Inc. 71,088
</TABLE>

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED

HEALTH CARE -- CONTINUED
2,900 (a)Ornda Healthcorp $ 69,600
500 (a)PacifiCare Health Systems, Inc., Class B 33,875
900 Pfizer, Inc. 64,238
800 (a)Quintiles Transnational Corp. 52,600
1,100 Teva Pharmaceutical Industries, Ltd., ADR 41,663
2,100 (a)Thermedics, Inc. 52,500
2,100 (a)Veterinary Centers of America 46,988
Total 851,602
PRODUCER MANUFACTURING -- 3.6%
1,500 (a)Cable Design Technologies, Class A 49,125
1,000 Danka Business Systems, PLC, ADR 29,205
1,700 Greenfield Industries, Inc. 56,100
1,800 (a)Thermo Electron Corp. 74,926
Total 209,356
RETAIL TRADE -- 5.5%
1,100 AMRE, Inc. 24,063
2,700 (a)General Nutrition Cos., Inc. 47,250
1,500 (a)Kohl's Corp. 54,938
2,000 (a)MSC Industrial Direct Co. 70,950
2,600 (a)Safeway, Inc. 85,800
1,200 TJX Cos., Inc. 40,500
Total 323,501
SERVICES -- 9.4%
1,000 (a)Boston Chicken, Inc. 32,500
2,000 (a)Calenergy, Inc. 51,000
500 (a)Corrections Corp. America 35,000
1,300 (a)HFS, Inc. 91,000
1,950 Olsten Corp. 57,281
2,200 (a)PanAmSat Corp. 63,800
</TABLE>

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SERVICES -- CONTINUED
1,300 Reynolds & Reynolds Co., Class A $ 69,225
1,300 Service Corp. International 74,750
2,600 (a)USA Waste Services, Inc. 77,025
Total 551,581
TECHNOLOGY -- 20.1%
900 (a)Altera Corp. 34,200
2,400 (a)Analog Devices, Inc. 61,200
1,000 (a)Atmel Corp. 30,124
500 (a)Cascade Communications Corp. 34,000
1,400 (a)Cisco Systems, Inc. 79,274
2,500 (a)Cognex Corp. 40,312
1,600 (a)DST Systems, Inc. 51,200
2,200 (a)Dupont Photomasks, Inc. 45,100
1,000 (a)Electronic Data Systems Corp. 53,750
2,700 Ericsson LM 58,050
1,500 (a)ESS Technology, Inc. 27,750
500 First Data Corp., Class 39,812
1,500 (a)FORE Systems, Inc. 54,188
700 (a)Harbinger Corp. 19,425
900 HMC Software 41,625
1,100 Intel Corp. 80,781
1,400 Lucent Technologies, Inc. 53,026
500 (a)Microsoft Corp. 60,063
1,500 (a)Oracle Corp. 59,157
1,500 (a)Ortel Corp. 36,750
1,000 (a)Solectron Corp. 37,876
3,950 (a)StorMedia, Inc. 42,957
</TABLE>

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
TECHNOLOGY -- CONTINUED
900 (a)Sun Microsystems, Inc. $ 52,981
400 (a)U.S. Robotics Corp. 34,200
1,000 Varian Association, Inc. 51,750
Total 1,179,551
TRANSPORTATION -- 1.3%
750 (a)Continental Airlines, Inc., Class B 46,312
1,100 (a)Trans World Airlines, Inc. 29,925
Total 76,237
UTILITIES -- 6.8%
2,200 CMS Energy Corp. 67,925
1,300 FPL Group, Inc. 59,800
2,200 MCI Communications Corp. 56,375
2,400 (a)Paging Network, Inc. 57,600
1,800 Sonat, Inc. 81,000
2,600 Trescomm International, Inc. 26,000
1,000 Williams Cos., Inc. (The) 49,500
Total 398,200
TOTAL COMMON STOCKS (IDENTIFIED COST $5,576,853) 5,694,323
PREFERRED STOCKS -- 1.1%
FINANCE -- 1.1%
1,400 First USA, Inc., Cumulative PRIDES, $1.99 (IDENTIFIED COST $ 66,852) 66,850
(b)REPURCHASE AGREEMENT -- 10.2%
$ 600,000 BT Securities Corporation, 5.50%, dated 6/28/1996, due 7/1/1996
(AT AMORTIZED COST) 600,000
TOTAL INVESTMENTS (IDENTIFIED COST $6,243,705)(c) $ 6,361,173
</TABLE>

(a) Non-income producing security.
(b) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(c) The cost of investments for federal tax purposes amounts to $6,243,705.
The net unrealized appreciation/depreciation of investments on a federal
tax basis amounts to $117,468 which is comprised of $327,087 appreciation
and $209,619 depreciation at June 30, 1996.

Note: The categories of investments are shown as a percentage of net assets
($5,871,058) at June 30, 1996.

The following acronyms are used throughout this portfolio:

ADR -- American Depository Receipt
PLC -- Public Limited Company
PRIDES -- Preferred Redeemable Increased Dividend Equity Securities

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

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 600,000
Investments in securities 5,761,173
Total investments in securities, at value
(identified and tax cost $6,243,705) $ 6,361,173
Cash 1,119
Income receivable 3,551
Receivable for investments sold 124,588
Total assets 6,490,431
LIABILITIES:
Payable for investments purchased $ 617,191
Payable for taxes withheld 164
Accrued expenses 2,018
Total liabilities 619,373
NET ASSETS for 512,218 shares outstanding $ 5,871,058
NET ASSETS CONSIST OF:
Paid in capital $ 5,684,618
Net unrealized appreciation of investments and
translation of assets and
liabilities in foreign currency 117,468
Accumulated net realized gain on investments and foreign currency
transactions 42,417
Undistributed net investment income 26,555
Total Net Assets $ 5,871,058
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$5,871,058 / 512,218 shares outstanding $11.46
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $312) $ 10,649
Interest 7,100
Total income 17,749
EXPENSES:
Investment advisory fee $ 9,011
Administrative personnel and services fee 62,158
Custodian fees 12,518
Transfer and dividend disbursing agent fees and
expenses 9,082
Directors'/Trustees' fees 846
Auditing fees 4,150
Legal fees 1,638
Portfolio accounting fees 24,865
Share registration costs 762
Printing and postage 9,164
Insurance premiums 1,802
Miscellaneous 1,180
Total expenses 137,176
Waivers and reimbursements --
Waiver of investment advisory fee $ (9,011)
Reimbursement of other operating expenses (117,900)
Total waivers and reimbursements (126,911)
Net expenses 10,265
Net investment income 7,484
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investment and foreign currency
transactions 42,783
Net change in unrealized appreciation of investments
and translation of
assets and liabilities in foreign currency 109,896
Net realized and unrealized gain on investments and foreign currency 152,679
Change in net assets resulting from operations $ 160,163
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income/operating loss $ 7,484 $ 589
Net realized gain (loss) on investments and foreign currency
transactions ($42,783 and $(368), respectively, as
computed for federal tax purposes 42,783 (368)
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and
liabilities in foreign currency 109,896 7,572
Change in net assets resulting from operations 160,163 7,793
NET EQUALIZATION CREDITS (DEBITS) -- 18,678 506
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (700) --
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED TO
NET INVESTMENT INCOME) --
Proceeds from sale of shares 5,376,523 365,048
Net asset value of shares issued to shareholders in
payment of distributions declared 698 --
Cost of shares redeemed (51,836) (5,815)
Change in net assets resulting from share transactions 5,325,385 359,233
Change in net assets 5,503,526 367,532
NET ASSETS:
Beginning of period 367,532 --
End of period (including undistributed net investment
income of $26,555 and $1,095, respectively) $ 5,871,058 $ 367,532
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(UNAUDITED) ENDED
JUNE 30, 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 0.02 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency 1.14 0.27
Total from investment operations 1.16 0.30
NET ASSET VALUE, END OF PERIOD $11.46 $10.30
TOTAL RETURN(B) 11.30% 3.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%* 0.85%
Net investment income 0.62%* 1.91%
Expense waiver/reimbursement(c) 10.56%* 76.95%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $5,870 $368
Average commission paid $0.0578 --
Portfolio turnover 44% 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.

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

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996

1. ORGANIZATION

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

Effective April 15, 1996, the board of Trustees ("Trustees") changed the
name of the Trust from insurance Management Series to Federated Insurance
Series and the name of the Fund from Growth Stock Fund to Federated Growth
Strategies Fund II.

2. SIGNIFICANT ACCOUNTING POLICIES

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

INVESTMENT VALUATIONS -- Listed foreign and domestic equity securities are
valued at the last sale price reported on national security exchanges.
Short-term securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. All other securities are valued at prices provided by an
independent pricing service

The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less
than the repurchase price on the sale of collateral securities.

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)

At December 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $368, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2003 $368
</TABLE>

EQUALIZATION -- The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.

CONCENTRATION OF CREDIT RISK -- The Fund invests in securities of non-U.S.
issuers. Although the fund maintains a diversified investment portfolio, the
political or economic developments within a particular country or region may
have an adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic development may have an
effect on the liquidity and volatility of portfolio securities and currency
holdings.

At June 30, 1996, the portfolio was diversified with the following
countries:
<TABLE>
<CAPTION>
COUNTRY % OF NET ASSETS
<S> <C>
Argentina 2.5
Canada 1.4
Great Britain 1.2
Israel 0.7
</TABLE>

FOREIGN CURRENCY TRANSLATION -- The accounting records of the Fund are
maintained in U.S. dollars. All assets and liabilities denominated in
foreign currencies ("FC") are translated into U.S. dollars based on the rate
of exchange of such currencies against U.S. dollars on the date of
valuation. Purchases and sales of securities, income and expenses are
translated at the rate of exchange quoted on the respective date that such
transactions are recorded. Differences between income and expense amounts
recorded and collected or paid are adjusted when reported by the custodian
bank. The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)

Reported net realized foreign exchange gains or losses arise from sales of
portfolio securities, sales and maturities of short-term securities, sales
of FCs, currency gains or losses realized between the trade and settlement
dates on securities transactions, the difference between the amounts of
dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in
the value of assets and liabilities other than investments in securities at
fiscal year end, resulting from changes in the exchange rate.

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

3. SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995(a)
<S> <C> <C>
Shares sold 481,104 36,267
Shares issued to shareholders in payment
of distributions declared 64 0
Shares redeemed (4,638) (581)
Net change resulting from share transactions 476,530 35,686
</TABLE>

(a) For the period from November 9, 1995 (date of initial public investment)
to December 31, 1995.

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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

FEDERATED GROWTH STRATEGIES FUND II
(FORMERLY, GROWTH STOCK FUND)

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 6,298,915
SALES $ 1,027,128
</TABLE>

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

FEDERATED
GROWTH
STRATEGIES
FUND II
(formerly, Growth Stock Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996

Federated Insurance Series
(formerly, Insurance Management Series)

[LOGO]

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.

[recycle logo]

Cusip 313916702
G00433-08 (8/96)

PRESIDENT'S MESSAGE
Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
High Income Bond Fund II, formerly named Corporate Bond Fund. "Federated"
has been added to the name to make it easy for investors to locate all
Federated Funds in mutual fund listings of newspapers and other
publications. In addition, the fund's new name reflects the fact that it has
always been managed in the same style as Federated High Income Bond Fund
Inc., a mutual fund that has been serving investors since 1977.

This report covers the six-month period from January 1, 1996, through June
30, 1996. It begins with an investment review by the fund's portfolio
manager, which is followed by a complete listing of the fund's holdings as
well as its financial statements.

As a shareholder in this mutual fund, you are putting your money to work
pursuing a high level of income through a diversified portfolio of corporate
bonds with an average rating of single B. These bonds are issued by American
companies across the entire business spectrum -- from broadcast radio and
television, to chemicals and plastics, through food products, steel, retail,
and telecommunications.

During the six-month reporting period, stronger economic growth caused
interest rates to rise, which caused bond prices to fall. However, because a
growing economy improved the credit outlook for companies that issue
high-yield bonds, these bonds outperformed high-quality bonds. In this
environment, the total return of Federated High Income Bond Fund II for the
reporting period was 3.58%.* The fund paid a healthy stream of dividends
that totaled $0.44 per share. On June 30, 1996, the fund's net assets stood
at $36.8 million.

Thank you for participating in the income-producing potential of American
companies through Federated High Income Bond Fund II. We will continue to
keep you up-to-date on your progress. Your comments and suggestions are
always welcome.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1996

INVESTMENT REVIEW
Stronger than expected economic growth negatively impacted all fixed income
markets in the first half of 1996. The surprising strength in the United
States' economy fueled fears of inflation pushing interest rates higher.
This caused high quality bond prices to fall. During the six-month reporting
period, high yield bonds performed much better than high quality bonds as an
improving credit outlook given the surprising strength in the economy helped
to offset the rise in interest rates. For example, the Lehman Brothers High
Yield Bond Index* returned 3.46% during the period while the Lehman Brothers
Aggregate Bond Index,** a measure of high quality bond performance returned
(1.21%). Stated another way, the yield spread between high yield bonds and
high quality bonds narrowed as perceived credit risk declined.

During the reporting period, Federated High Income Bond Fund II outperformed
the Lehman Brothers High Yield Bond Index* while under performing the Lipper
High Current Yield Average.*** Differences in average quality were the main
factor impacting relative performance for the fund and the indices. The fund
typically has a higher quality profile than the average fund and a lower
quality profile than the Lehman Brothers High Yield Bond Index.* During the
reporting period, the rise in interest rates had a greater negative impact
on higher quality high yield bonds while lower quality high yield bonds
reacted positively to the improving economy. For example, the Lehman
Brothers Single B Index returned 4.69% during the period while the Lehman
Brothers Double B Index returned 1.21%. Turning to the portfolio, the fund
was positively impacted by company specific events during the reporting
period. For example, Pace Industries and Fairchild Industries were involved
in mergers and subsequently retired their high yield securities at premiums.
Amerisource, Waters Technologies and Polymer Group issued equity and used
the proceeds to tender for or call their high yield debt at a premium. As
the period ended, ICON Health and Fitness and Hosiery Corp. of America were
poised to retire high yield debt with the proceeds from equity offerings.
The fund was negatively impacted by its underweight in the specialty retail
sector and its overweight in the cable and telecommunications sectors. The
fund's cable and telecommunications holdings were impacted by the longer
duration of some of the securities as well as substantial new issuance in
these sectors which put pressure on the outstanding issues.

Fund management believes that the U.S. economy will continue along a path of
modest growth with low inflation. Given this economic outlook, we continue
to like the prospects for high yield bonds. A modest growth economy should
be positive from a credit perspective for high yield bonds. Supply and
demand technicals remain in balance. Positive corporate actions including
merger activity and equity issuance continue to favorably impact high yield
issuers. Finally, we believe that yield spreads will continue to narrow as
the positive economic and issuer fundamentals play out.

From a strategic viewpoint, Federated High Income Bond Fund II continues to
like companies impacted by the telecommunications deregulation bill that
passed in February, 1996. Television and radio broadcasters like Sinclair
Broadcasting and Chancellor Broadcasting are poised to benefit as their
industries consolidate. New competitive local exchange carriers like
Teleport and Brooks Fiber have bright futures as the playing field has been
leveled between them and the local Bell operating companies. We continue to
favor the growth aspects of the United Kingdom cable television companies
like Telewest. The fund continues to pursue attractive opportunities in high
yield issuers that have a quality business profile despite having below
investment grade financial positions.

* Lehman Brothers High Yield Bond Index is an unmanaged index which includes
fixed rate, public nonconvertible, non-investment grade issues that are
rated Ba1 or lower by Moody's Investor Service. Investments cannot be made
in an index.
** Lehman Brothers Aggregate Bond Index is an unmanaged total return index
measuring both the capital price changes and income provided by the
underlying universe of securities, weighted by market value outstanding.
Investments cannot be made in an index.
*** Lipper High Current Yield Average is composed of approximately 141 funds
which invest at least 65% of their assets in investment grade debt issues
(rated in top four grades) with dollar weighted average maturities of five
to ten years.
+ Lehman Brothers Single B Index is a proprietary unmanaged index of Single
B rated securities. Investments cannot be made in an index.
++ Lehman Brothers Double B Index is a proprietary unmanaged index of Double
B rated securities. Investments cannot be made in an index.

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- 92.6%
AEROSPACE & DEFENSE -- 0.4%
$ 150,000 Tracor, Inc., Sr. Sub. Note, 10.875%, 8/15/2001 $ 159,375
AUTOMOTIVE -- 3.1%
300,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004 325,500
350,000 Collins & Aikman Products Co., Sr. Sub. Note, 11.50%, 4/15/2006 356,562
350,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 344,750
100,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 95,750
Total 1,122,562
BANKING -- 1.0%
150,000 First Nationwide Holdings, Inc., Sr. Note, 12.25%, 5/15/2001 162,375
200,000 First Nationwide Holdings, Inc., Sr. Note, 12.50%, 4/15/2003 209,500
Total 371,875
BEVERAGE & TOBACCO -- 1.0%
150,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 150,937
250,000 Dr. Pepper Bottling Holdings Co., Sr. Disc. Note, 0/11.625%,
2/15/2003 206,250
Total 357,187
BROADCAST RADIO & TV -- 7.5%
125,000 Allbritton Communication Co., Sr. Sub. Note, 11.50%, 8/15/2004 128,125
90,000 Chancellor Broadcasting Co., Sr. Sub. Note, 12.50%, 10/1/2004 99,225
250,000 Granite Broadcasting Corp., Sr. Sub. Note, 10.375%, 5/15/2005 243,125
300,000 Heritage Media Corp., Sr. Sub. Note, 8.75%, 2/15/2006 279,750
200,000 NWCG Holding Corp., Sr. Disc. Note, 13.50% accrual, 6/15/1999 148,000
125,000 (a)Park Communications, Inc., Sr. Note, 13.75%, 5/15/2004 131,875
150,000 Pegasus Media, Note, 12.50%, 7/1/2005 161,250
400,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 6/30/2005 417,500
250,000 (a)SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 5/15/2006 250,000
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
BROADCAST RADIO & TV -- CONTINUED
$ 150,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 12/15/2003 $ 143,625
250,000 Sinclair Broadcast Group, Sr. Sub. Note, 10.00%, 9/30/2005 239,375
50,000 Sullivan Broadcast Holdings, Inc., Deb., 13.25%, 12/15/2006 43,250
200,000 Sullivan Broadcast Holdings, Inc., Sr. Sub. Note, 10.25%, 12/15/2005 192,000
300,000 Young Broadcasting, Inc., Sr. Sub. Note, 10.125%, 2/15/2005 288,750
Total 2,765,850
BUSINESS EQUIPMENT & SERVICES -- 2.4%
275,000 (a)Knoll, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 281,875
250,000 Monarch Acquisition Corp., Sr. Note, 12.50%, 7/1/2003 265,625
300,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 5/1/2005 323,250
Total 870,750
CABLE TELEVISION -- 12.2%
550,000 Bell Cablemedia PLC, Sr. Disc. Note, 0/11.95%, 7/15/2004 389,812
100,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 11/1/2005 93,500
250,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 5/15/2006 242,812
175,000 CAI Wireless Systems, Inc., Sr. Note, 12.25%, 9/15/2002 183,750
200,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 11.625%, 2/15/2005 219,750
275,000 (a)Charter Communications Southeast, LP, Sr. Note, 11.25%, 3/15/2006 272,250
425,000 Comcast UK Cable, Deb., 0/11.20%, 11/15/2007 247,562
150,000 Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013 162,750
300,000 (a)CS Wireless Systems, Inc., Unit, 0/11.375%, 3/1/2006 156,000
250,000 Diamond Cable Co., Sr. Disc. Note, 0/11.75%, 12/15/2005 147,500
250,000 (a)EchoStar Satellite Broadcasting Corp., Sr. Secd. Disc. Note,
0/13.125%, 3/15/2004 160,000
250,000 Insight Communication Co., Sr. Sub. Note, 11.25%, 3/1/2000 256,250
475,000 International Cabletel, Inc., Sr. Note, 0/12.75%, 4/15/2005 305,781
150,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 2/15/2005 157,313
200,000 (a)Lenfest Communications, Inc., Sr. Sub. Note, 10.50%, 6/15/2006 201,500
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
CABLE TELEVISION -- CONTINUED
$ 350,000 Peoples Choice TV Corp., Unit, 0/13.125%, 6/1/2004 $ 208,250
200,000 Rogers Cablesystems LTD., Sr. Secd. 2nd Priority Note, 10.00%,
3/15/2005 199,500
150,000 Rogers Cablesystems LTD., Sr. Sub. GTD. Note, 11.00%, 12/1/2015 153,000
575,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 342,125
450,000 (a)UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006 244,125
150,000 Wireless One, Inc., Sr. Note, 13.00%, 10/15/2003 158,250
Total 4,501,780
CHEMICALS & PLASTICS -- 6.7%
175,000 Arcadian Partners LP, Sr. Note, Series B, 10.75%, 5/1/2005 190,750
300,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 9/15/2008 300,000
250,000 Crain Industries, Inc., Sr. Sub. Note, 13.50%, 8/15/2005 266,250
50,000 Foamex LP, Sr. Note, 11.25%, 10/1/2002 51,687
250,000 Foamex LP, Sr. Sub. Deb., 11.875%, 10/1/2004 257,500
148,000 G-I Holdings, Inc., Sr. Disc. Note, 11.375% accrual, 10/1/1998 119,510
350,000 Harris Chemical North America, Inc., Sr. Secd. Note, 10.25%,
7/15/2001 351,750
133,000 Polymer Group, Inc., Sr. Note, 12.25%, 7/15/2002 142,975
250,000 RBX Corp., Sr. Sub. Note, 11.25%, 10/15/2005 237,500
100,000 (a)Texas Petrochemicals Corp., Sr. Sub. Note, 11.125%, 7/1/2006 101,750
150,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75%, 6/1/2003 135,750
300,000 Viridian, Inc., Note, 9.75%, 4/1/2003 305,250
Total 2,460,672
CLOTHING & TEXTILES -- 2.4%
300,000 Dan River, Inc., Sr. Sub. Note, 10.125%, 12/15/2003 291,375
600,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 12/15/2005 585,000
Total 876,375
CONSUMER PRODUCTS -- 4.4%
200,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 203,000
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
CONSUMER PRODUCTS -- CONTINUED
$ 150,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 $ 155,250
150,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 13.75%, 8/1/2002 162,000
150,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 13.00%, 7/15/2002 167,438
350,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003 329,438
300,000 (a)Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 298,500
300,000 (a)Twin Laboratories, Inc., Sr. Sub. Note, 10.25%, 5/15/2006 306,750
Total 1,622,376
CONTAINER & GLASS PRODUCTS -- 2.5%
300,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 301,875
200,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 10/15/2004 201,750
175,000 (a)Packaging Resources, Inc., Sr. Secd. Note, 11.625%, 5/1/2003 178,063
250,000 Plastic Containers, Inc., Sr. Secd. Note, 10.75%, 4/1/2001 250,625
Total 932,313
COSMETICS & TOILETRIES -- 0.8%
50,000 Revlon Consumer Products Corp., Note, 9.375%, 4/1/2001 49,125
250,000 Revlon Consumer Products Corp., Sr. Sub. Note, 10.50%, 2/15/2003 252,188
Total 301,313
ECOLOGICAL SERVICES & EQUIPMENT -- 1.1%
50,000 Allied Waste Industries, Inc., Sr. Sub. Note, 12.00%, 2/1/2004 55,000
200,000 ICF Kaiser International, Inc., Sr. Sub. Note, 13.00%, 12/31/2003 193,000
225,000 (b)Mid-American Waste Systems, Inc., Sr. Sub. Note, 12.25%, 2/15/2003 146,250
Total 394,250
FOOD & DRUG RETAILERS -- 2.6%
275,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, 11/15/2005 283,250
350,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 335,125
75,000 Ralph's Grocery Co., Sr. Sub. Note, 11.00%, 6/15/2005 69,188
250,000 Smith's Food & Drug Centers, Inc., Sr. Sub. Note, 11.25%, 5/15/2007 253,750
Total 941,313
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
FOOD PRODUCTS -- 2.5%
$ 200,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 2/1/2005 $ 196,500
75,000 (a)Keebler Corp., Sr. Sub. Note, 10.75%, 7/1/2006 77,438
100,000 PMI Acquisition Corp., Sr. Sub. Note, 10.25%, 9/1/2003 98,500
200,000 Specialty Foods Corp., Sr. Note, 11.125%, 10/1/2002 190,500
100,000 Specialty Foods Corp., Sr. Sub. Note, 11.25%, 8/15/2003 86,500
250,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 266,875
Total 916,313
FOOD SERVICES -- 1.3%
175,000 Americold Corp., Sr. Sub. Note, 12.875%, 5/1/2008 179,375
325,000 Flagstar Corp., Sr. Note, 10.875%, 12/1/2002 281,937
Total 461,312
FOREST PRODUCTS -- 3.7%
50,000 Container Corp. of America, Sr. Note, 11.25%, 5/1/2004 51,625
100,000 Container Corp. of America, Sr. Note, 9.75%, 4/1/2003 98,250
250,000 (a)Four M Corp., Sr. Secd. Note, 12.00%, 6/1/2006 256,875
200,000 Repap New Brunswick, 2nd Priority Sr. Secd. Note, 10.625%,
4/15/2005 190,000
350,000 Riverwood International Corp., Sr. Sub. Note, 10.875%, 4/1/2008 345,625
200,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 211,000
100,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 101,625
100,000 Stone Container Corp., Sr. Note, 9.875%, 2/1/2001 97,750
Total 1,352,750
HEALTHCARE -- 2.5%
400,000 (a)Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006 416,000
200,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.75%, 6/15/2005 204,000
300,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, 3/1/2005 317,250
Total 937,250
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED

HOTELS, MOTELS, INNS & CASINOS -- 0.9%
$ 250,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008 $ 245,625
100,000 Motels of America, Inc., Sr. Sub. Note, 12.00%, 4/15/2004 96,500
Total 342,125
INDUSTRIAL PRODUCTS & EQUIPMENT -- 1.6%
200,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005 221,500
150,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 11.375%, 7/1/2001 152,250
200,000 Spreckels Industries, Inc., Sr. Secd. Note, 11.50%, 9/1/2000 207,000
Total 580,750
LEISURE & ENTERTAINMENT -- 3.8%
200,000 Affinity Group, Inc., Sr. Sub. Note, 11.50%, 10/15/2003 202,500
500,000 (a)AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006 277,500
100,000 (a)AMF Group, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 99,000
200,000 (a)Cobblestone Golf Group, Inc., Sr. Note, 11.50%, 6/1/2003 202,000
150,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 159,750
550,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 6/15/2005 468,875
Total 1,409,625
MACHINERY & EQUIPMENT -- 1.3%
250,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 1/31/2003 256,250
200,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 215,000
Total 471,250
OIL & GAS -- 4.6%
300,000 (a)Benton Oil & Gas Co., Sr. Note, 11.625%, 5/1/2003 310,500
300,000 Clark USA, Inc., Sr. Note, Series B, 10.875%, 12/1/2005 307,875
100,000 Falcon Drilling Co., Inc., Sr. Note, 8.875%, 3/15/2003 99,250
150,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 152,437
50,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 12.50%, 3/15/2005 55,812
100,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 11/15/2003 98,500
50,000 HS Resources, Inc., Sr. Sub. Note, 9.875%, 12/1/2003 48,500
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED

OIL & GAS -- CONTINUED
$ 150,000 Mesa Operating Company, Sr. Sub. Disc. Note, 0/11.625%, 7/1/2006 $ 88,125
200,000 Mesa Operating Company, Sr. Sub. Note, 10.625%, 7/1/2006 203,500
325,000 United Meridian Corp., Sr. Sub. Note, 10.375%, 10/15/2005 333,938
Total 1,698,437
PRINTING & PUBLISHING -- 2.4%
250,000(a)Adams Outdoor Advertising LP, Sr. Note, 10.75%, 3/15/2006 257,500
300,000 Affiliated Newspaper, Sr. Disc. Note, 0/13.25%, 7/1/2006 208,500
150,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 7/1/2004 158,625
300,000 Hollinger International Publishing, Inc., Sr. Sub. Note, 9.25%,
2/1/2006 276,375
Total 901,000
REAL ESTATE -- 0.8%
300,000 Trizec Finance LTD., Sr. Note, 10.875%, 10/15/2005 303,750
RETAILERS -- 0.8%
300,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 9/1/2003 289,500
SERVICES -- 0.9%
300,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 315,750
STEEL -- 3.1%
100,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, 8/1/2004 91,125
50,000 Armco, Inc., Sr. Note, 9.375%, 11/1/2000 49,437
100,000 (a)Bar Technologies, Inc., Unit, 13.50%, 4/1/2001 102,000
200,000 Bayou Steel Corp., 1st Mtg. Note, 10.25%, 3/1/2001 188,500
250,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 229,375
300,000 GS Technologies Operating Co., Inc., Sr. Note, 12.00%, 9/1/2004 307,500
200,000 Republic Engineered Steel, Inc., 1st Mtg. Note, 9.875%, 12/15/2001 187,250
Total 1,155,187
SURFACE TRANSPORTATION -- 4.4%
175,000 AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%, 11/15/2005 172,375
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
SURFACE TRANSPORTATION -- CONTINUED
$ 250,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 $ 262,500
150,000 Great Dane Holdings, Inc., Sr. Sub. Deb., 12.75%, 8/1/2001 144,750
200,000 OMI Corp., Sr. Note, 10.25%, 11/1/2003 197,250
200,000 Sea Containers LTD., Sr. Note, 9.50%, 7/1/2003 200,000
350,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 349,125
100,000 Trans Ocean Container Corp., Sr. Sub. Note, 12.25%, 7/1/2004 103,500
200,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 188,500
Total 1,618,000
TELECOMMUNICATIONS & CELLULAR -- 8.7%
350,000 American Communications Services, Inc., Sr. Disc. Note, 0/12.75%,
4/1/2006 185,500
250,000 Arch Communications Group, Inc., Sr. Disc. Note, 0/10.875%,
3/15/2008 130,000
500,000 (a)Brooks Fiber Properties, Inc., Sr. Disc. Note, 0/10.875%, 3/1/2006 267,500
250,000 Cellular Communications International, Inc., Sr. Disc. Note, 13.25%
accrual, 8/15/2000 153,750
100,000 Fonorola, Inc., Sr. Secd. Note, 12.50%, 8/15/2002 107,625
500,000 (a)Millicom International Cellular S. A., Sr. Sub. Disc. Note, 0/13.50%,
6/1/2006 265,625
50,000 MobileMedia Communications, Inc., Sr. Sub. Note, 9.375%, 11/1/2007 44,750
150,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/11.50%, 9/1/2003 102,750
100,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 8/15/2004 59,750
250,000 (a)NEXTLINK Communications, L.L.C., Sr. Note, 12.50%, 4/15/2006 250,313
250,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 8/1/2007 246,875
400,000 PanAmSat, LP, Sr. Sub. Disc. Note, 0/11.375%, 8/1/2003 350,000
250,000 ProNet, Inc., Sr. Sub. Note, 10.875%, 9/15/2006 241,250
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT OR
SHARES VALUE
<C> <S> <C>
CORPORATE BONDS -- CONTINUED
TELECOMMUNICATIONS & CELLULAR -- CONTINUED
$ 50,000 ProNet, Inc., Sr. Sub. Note, 11.875%, 6/15/2005 $ 49,750
350,000 Teleport Communications Group, Sr. Disc. Note, 0/11.125%, 7/1/2007 205,625
75,000 Teleport Communications Group, Sr. Note, 9.875%, 7/1/2006 75,563
150,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004 137,625
350,000 Vanguard Cellular System, Inc., Deb., 9.375%, 4/15/2006 340,375
Total 3,214,626
UTILITIES -- 1.2%
450,000 California Energy Co., Inc., Sr. Disc. Note, 0/10.25%, 1/15/2004 432,000
TOTAL CORPORATE BONDS (IDENTIFIED COST $ 34,266,420) 34,077,616
PREFERRED STOCKS -- 2.9%
BROADCAST RADIO & TV -- 0.7%
2,500 (a)Chancellor Broadcasting Co., Cumulative PIK Pfd., 12.25% 253,125
PRINTING & PUBLISHING -- 1.1%
2,044 K-III Communications Corp., Cumulative PIK Pfd., Series B, 11.625% 205,460
2,000 (a)K-III Communications Corp., Pfd., Series C, 10.00% 184,000
Total 389,460
TELECOMMUNICATIONS & CELLULAR -- 0.4%
150 PanAmSat Corp., PIK Pfd., 12.75% 167,100
UTILITIES -- 0.7%
2,500 El Paso Electric Co., PIK Pfd., Series A, 11.40% 263,750
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,074,263) 1,073,435
COMMON STOCKS -- 0.1%
BROADCAST RADIO & TV -- 0.1%
15 (a)Pegasus Media, Class B 9,000
800 Sullivan Broadcast Holdings Inc., Class B 8,000
Total 17,000
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS -- CONTINUED
CABLE TELEVISION -- 0.0%
450 Wireless One, Inc., Warrants $ 2,700
CONSUMER PRODUCTS -- 0.0%
50 Hosiery Corp. of America, Inc. 250
ECOLOGICAL SERVICES & EQUIPMENT -- 0.0%
960 ICF Kaiser International, Inc., Warrants 600
FOOD & DRUG RETAILERS -- 0.0%
884 Grand Union Co. 5,746
PRINTING & PUBLISHING -- 0.0%
50 Affiliated Newspaper 1,250
TELECOMMUNICATIONS & CELLULAR -- 0.0%
250 Cellular Communications International, Inc., Warrants 3,875
TOTAL COMMON STOCKS (IDENTIFIED COST $57,145) 31,421
U.S. TREASURY -- 1.3%
$ 500,000 United States Treasury Note, 5.75%, 8/15/2003 (IDENTIFIED
COST $476,406) 476,265
(c)REPURCHASE AGREEMENT -- 3.0%
1,090,000 BT Securities Corporation, 5.50%, dated 6/28/1996, due 7/1/1996
(AT AMORTIZED COST) 1,090,000
TOTAL INVESTMENTS (IDENTIFIED COST $36,964,234)(d) $ 36,748,737
</TABLE>

(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1996, these securities amounted
to $5,811,064 which represents 15.8% of net assets.
(b) Non-Income producing security.
(c) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $36,964,234.
The net unrealized depreciation of investments on a federal tax basis
amounts to $215,497 which is comprised of $489,011 appreciation and
$704,508 depreciation at June 30, 1996.

Note: The categories of investments are shown as a percentage of net assets
($36,780,401) at June 30, 1996.

The following acronyms are used throughout this portfolio:

GTD -- Guaranty
LP -- Limited Partnership
PIK -- Payment in Kind
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)

MID-AMERICAN WASTE SYSTEMS, INC.

On February 15, 1996, Mid-American Waste Systems failed to make its
scheduled interest payment. Currently, the company is in negotiations with
its debt holders and has retained an investment bank to evaluate financing
options including the sale of the company and other restructuring measures.
The unofficial subordinated bondholders group has retained legal counsel and
financial advisors and is monitoring the situation closely.

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $36,964,234) $ 36,748,737
Cash 4,147
Income receivable 720,593
Receivable for investments sold 824,326
Total assets 38,297,803
LIABILITIES:
Payable for investments purchased $ 1,512,376
Accrued expenses 5,026
Total liabilities 1,517,402
NET ASSETS for 3,790,208 shares outstanding $ 36,780,401
NET ASSETS CONSIST OF:
Paid in capital $ 36,809,359
Net unrealized depreciation of investments (215,497)
Accumulated net realized gain on investments 148,317
Undistributed net investment income 38,222
Total Net Assets $ 36,780,401
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$36,780,401/3,790,208 shares outstanding $9.70
</TABLE>

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

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 5,444
Interest 1,405,102
Total income 1,410,546
EXPENSES:
Investment advisory fee $ 84,800
Administrative personnel and services fee 62,158
Custodian fees 12,892
Transfer and dividend disbursing agent fees and
expenses 8,384
Directors'/Trustees' fees 1,288
Auditing fees 5,054
Legal fees 1,596
Portfolio accounting fees 32,104
Share registration costs 6,328
Printing and postage 12,748
Insurance premiums 1,799
Miscellaneous 6,188
Total expenses 235,339
Waivers and reimbursements --
Waiver of investment advisory fee $ (84,800)
Reimbursement of other operating expenses (36,851)
Total waivers and reimbursements (121,651)
Net expenses 113,688
Net investment income 1,296,858
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 154,881
Net change in unrealized depreciation of investments (543,448)
Net realized and unrealized loss on investments (388,567)
Change in net assets resulting from operations $ 908,291
</TABLE>

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

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 1,296,858 $ 717,145
Net realized gain (loss) on investments ($154,881 and
$8,035 net gain, respectively, as computed for federal tax
purposes 154,881 5,784
Net change in unrealized appreciation (depreciation) (543,448) 493,099
Change in net assets resulting from operations 908,291 1,216,028
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (1,286,099) (687,618)
SHARE TRANSACTIONS --
Proceeds from sale of shares 23,564,337 21,185,904
Net asset value of shares issued to shareholders in
payment of distributions declared 1,287,437 686,601
Cost of shares redeemed (7,858,580) (3,692,843)
Change in net assets resulting from share
transactions 16,993,194 18,179,662
Change in net assets 16,615,386 18,708,072
NET ASSETS:
Beginning of period 20,165,015 1,456,943
End of period (including undistributed net investment
income of $38,222 and $27,463, respectively) $ 36,780,401 $ 20,165,015
</TABLE>

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

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, 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 0.44 0.85 0.75
Net realized and unrealized gain (loss) on investments (0.09) 0.89 (1.12)
Total from investment operations 0.35 1.74 (0.37)
LESS DISTRIBUTIONS
Distributions from net investment income (0.44) (0.82) (0.75)
Distributions in excess of net investment income(b) -- -- (0.01)
Total distributions (0.44) (0.82) (0.76)
NET ASSET VALUE, END OF PERIOD $ 9.70 $ 9.79 $ 8.87
TOTAL RETURN(c) 3.58% 20.38% (3.73)%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%* 0.80% 0.41%*
Net investment income 9.18%* 9.27% 9.11%*
Expense waiver/reimbursement(d) 0.86%* 3.40% 10.01%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $36,780 $20,165 $1,457
Portfolio turnover 37% 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 (start of business) to February 1, 1994, the Fund had no
public investment.
(b) Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

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

FEDERATED HIGH INCOME BOND FUND II
(FORMERLY, CORPORATE BOND FUND)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)

1. ORGANIZATION

Effective April 15, 1996, the Board of Trustees ("Trustees") changed the
name of the Trust from Insurance Management Series to Federated Insurance
Series and the name of the Fund from Corporate Bond Fund to Federated High
Income Bond Fund II.

2. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. At December 31, 1995, the Fund,
for federal tax purposes, had a capital loss carryforward of $4,313, which
will reduce the Fund's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise
be necessary to relieve the Fund of any liability for federal tax. Pursuant
to the Code, such capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2002 $4,313
</TABLE>

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

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

Additional information on each restricted security held at June 30, 1996
is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE(S) ACQUISITION
COST
<S> <C> <C>
Park Communications, Inc., Sr. Note 5/6/96 $ 125,000
SFX Broadcasting, Inc., Sr. Sub. Note 5/23/96 250,000
Knoll, Inc., Sr. Sub. Note 2/22/96-6/6/96 279,188
Charter Communications Southeast, L.P., Sr. Note 3/22/96 275,000
CS Wireless Systems, Inc. 2/16/96 179,032
EchoStar Satellite Broadcasting Corp., Sr. Secd. Disc Note 3/19/96 156,195
Lenfest Communications, Inc., Sr. Sub. Note 6/20/96 198,442
UIH Australia/Pacific, Sr. Disc. Note 5/8/96 232,880
Texas Petrochemicals Corp., Sr. Sub. Note 6/25/96 100,000
Simmons Co., Sr. Note 4/15/96-5/16/96 301,250
Twin Laboratories, Inc., Sr. Sub. Note 5/2/96-5/16/96 302,875
Packaging Resources, Inc., Sr. Secd. Note 5/10/96-6/18/96 175,313
Keebler Corp., Sr. Sub. Note 6/20/96 75,000
Four M Corp., Sr. Secd. Note 5/23/96-6/13/96 253,250
Dade International, Inc., Sr. Sub. Note 4/30/96-6/13/96 408,625
AMF Group, Inc., Sr. Sub. Disc. Note 3/7/96-6/13/96 279,505
AMF Group, Inc., Sr. Sub. Note 3/7/96 100,000
Cobblestone Golf Group, Inc., Sr. Note 5/29/96-6/20/96 202,000
Benton Oil & Gas Co., Sr. Note 4/29/96-6/11/96 304,875
Adams Outdoor Advertising LP, Sr. Note 3/5/96-3/26/96 254,125
Bar Technologies, Inc. 3/28/96 98,495
Brooks Fiber Properties, Inc., Sr. Disc. Note 2/16/96 308,589
Millicom International Cellular S.A., Sr. Sub Note 5/24/96 267,656
NEXTLINK Communications, L.L.C., Sr. Note 4/18/96 250,000
Chancellor Broadcasting Co., Cumulative PIK Pfd. 2/21/96 250,000
K-III Communications Corp., Pfd., Series C 7/26/95-5/28/96 200,388
Pegasus Media, Class B 6/30/95-1/2/96 1,250
</TABLE>

INVESTMENT RISKS -- Although the Fund has a diversified portfolio, the Fund
has 100% of its portfolio invested in lower rated and comparable quality
unrated high yield securities. Investments in higher yield securities are
accomplished by a greater degree of credit risk and the risk tends to be
more sensitive to economic conditions than higher rated securities. The risk
of loss due to default by the issuer may be significantly greater for the
holder of high yielding securities because such securities are generally
unsecured and are often subordinated to other creditors of the issuer. The
Fund held no defaulted securities as June 30, 1996.

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

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

3. SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
Shares sold 2,400,464 2,211,100
Shares issued to shareholders in payment of distributions declared 131,995 71,640
Shares redeemed (801,017) (388,244)
Net change resulting from share transactions 1,731,442 1,894,496
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.60% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee and reimburse
certain operating expenses of the Fund. The Adviser can modify or terminate
this voluntary waiver and reimbursement at any time at its sole discretion.

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

ORGANIZATIONAL EXPENSES -- Organizational and start-up administrative
service expenses of $47,820 were borne initially by the Adviser. The Fund
has agreed to reimburse the Adviser for the organizational and start-up
administrative expenses during the five-year period following effective
date. For the period ended June 30, 1996, the Fund paid $9,564 pursuant to
this agreement.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $27,792,667
SALES $ 9,909,057
</TABLE>

FEDERATED
HIGH INCOME
BOND
FUND II
(formerly, Corporate Bond Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)

[LOGO]
Federated Investors
Since 1955

Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[RECYCLE LOGO]

Cusip 313916306
G00433-02 (8/96)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
International Equity Fund II, formerly named International Stock Fund.
"Federated" has been added to the name to make it easy for investors to
locate all Federated Funds in mutual fund listings of newspapers and other
publications. In addition, the fund's new name reflects the fact that it has
always been managed in the same style as Federated International Equity
Fund, a mutual fund that has been serving investors since 1984.

Federated International Equity Fund II brings you long-term growth
opportunities through a broadly diversified portfolio of stocks issued by
companies throughout the world. As you pursue your long-term financial
goals, international stocks can be a wise complement to U.S. stocks.*
Because international stocks respond to different influences than U.S.
stocks, adding international stocks to U.S. stock holdings can enhance
overall performance by smoothing out periodic ups and downs in the U.S.
market.

The international stock market improved substantially in 1996. As a result,
the fund's total return was 6.48% over the six-month reporting period.**
Contributing to the total return were dividends totaling $0.48 per share and
a net asset value increase of 5% to $10.97. At the end of the six-month
reporting period, total assets stood at $10.6 million.

Thank you for participating in the long-term growth opportunities of
international stocks through Federated International Equity Fund II. We look
forward to keeping you informed about the progress of your investment.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue

President

August 15, 1996

* Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.

** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.
INVESTMENT REVIEW

The international markets as measured by the Morgan Stanley/Capital
International-Europe, Australia, Far East Index* ("MSCI-EAFE Index") posted
a gain of 1.58% in U.S. dollar terms for the second quarter of 1996, with
strong performances out of a number of the European markets and a weaker
return out of Japan of 0.8% as a result of the weaker yen partially
offsetting a stronger gain by the market in local terms. This was the broad
picture for the major markets in general, strength in Europe, in terms of
equity market returns, and relative weakness in Asia. The more interesting
story came out of the emerging markets during the second quarter of 1996,
where much stronger returns were shown as investor interest began to return
to these markets and their longer term investment attractions.

Federated International Equity Fund II showed a return of 3.20% for the
second quarter of 1996, beating the return on the MSCI-EAFE Index* by 1.62%.
During the quarter we added two new countries to the portfolio, finding new
investment opportunities in Pakistan and Colombia. For emerging markets, in
general, that is markets that are not included in the developed market
MSCI-EAFE Index*, the fund's exposure rose from 7.3% at the end of March,
1996 to 9.4% at the end of June, 1996. This included raising the fund's
weighting in India from 0.8% to 1.0%. During the quarter, the Philippines
rose from 0.8% to 1.2%, while we cut back slightly in Indonesia and
Thailand.

Looking at the fundamental factors affecting the various regions of the
world, declining short-term interest rates and slow economic growth
continued to dominate the stage in Europe in the second quarter. A standout
performance was delivered by Italy, following the April election, which
ushered in what many regard as a new administration with a real chance of
lasting longer than most previous Italian governments. The lira also
benefited from this new-found confidence. In the U.K., meanwhile, corporate
reorganizations and mergers have bolstered the equity market, but we are
somewhat concerned with the political outlook as elections must be held by
next May and the ruling conservative party is trailing in the polls.

Turning to Asia, Japan posted annualized quarter-over-quarter Gross Domestic
Product growth of 12.7% for the first quarter of the year, blowing away any
economist's prediction for the strength of the recovery. And while the major
Japanese banks announced huge write-offs from the bad real estate loans they
made during the bubble period, manufacturing earnings rose 70% for the
fiscal year ended March, 1996. Elsewhere in the region, the earnings growth
picture for Hong Kong is improving based on improving economic activity in
its largest trading partner, China. In the Philippines, meanwhile, the
macroeconomic indicators are very favorable. Interest rates and inflation
are declining, a trend we see continuing into the third quarter of 1996.

Finally, capital flows to the Latin American markets continue to rebound
despite U.S. interest rate volatility. Brazil, which represents the largest
allocation of the fund's assets in the region, has risen 15.4% for the
second quarter and 28.4% year-to-date. Although the Brazilian Congress
continues to debate administrative and social security reforms, the
government is beginning to show signs of their commitment to accelerating
the pace of state privatizations. As political reform grinds forward,
interest rates fall and the exchange rate remains stable, we continue to be
optimistic regarding the Brazilian equity market. Investor confidence is
also returning to Mexico and Argentina, both of which had strong equity
market gains for the quarter, which the fund participated in through
investments in those markets.

* Morgan Stanley/Capital International - Europe, Australia, Far East Index
is an unmanaged, market capitalization weighed foreign securities index,
which is widely used to measure the performance of European, Australian, New
Zealand and Far Eastern stock markets. Investments cannot be made in an
index.

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<C> <S> <C>
VALUE IN
SHARES U.S. DOLLARS
COMMON STOCKS -- 90.9%
ARGENTINA -- 0.6%
BANKING -- 0.1%
430 Banco Frances del Rio de la Plata S.A., ADR $ 12,363
ENERGY SOURCES -- 0.1%
700 YPF Sociedad Anonima, ADR 15,750
MULTI-INDUSTRY -- 0.2%
2,745 Compania Naviera Perez Companc S.A., Class B 17,987
REAL ESTATE -- 0.2%
502 IRSA Inversiones y Representaciones S.A., GDR 16,943
TOTAL ARGENTINA 63,043
AUSTRALIA -- 1.7%
BROADCASTING & PUBLISHING -- 0.5%
8,635 News Corp., Ltd. 48,926
ENERGY SOURCES -- 0.4%
7,850 Woodside Petroleum Ltd. 47,131
LEISURE & TOURISM -- 0.4%
28,625 (a) Sydney Harbour Casino Holdings, Inc. 39,591
REAL ESTATE -- 0.4%
3,020 Lend Lease Corp. Ltd. 46,279
TOTAL AUSTRALIA 181,927
BELGIUM -- 0.3%
MERCHANDISING -- 0.3%
600 Delhaize-Le Lion 30,190
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
COMMON STOCKS -- CONTINUED
<C> <S> <C>
CHILE -- 0.4%
BANKING -- 0.1%
400 (a) Banco BHIF, ADR $ 8,050
300 (a) Banco de A. Edwards, ADR 6,300
Total 14,350
ENERGY EQUIPMENT & SERVICES -- 0.1%
100 (a) Chilectra S.A., ADR 5,552
MERCHANDISING -- 0.1%
200 (a) Santa Isabel S.A., ADR 5,550
METALS - NON FERROUS -- 0.0%
100 Sociedad Quimica Y Minera de Chile, ADR 5,425
TELECOMMUNICATIONS -- 0.1%
100 Compania Telecomunicacion Chile, ADR 9,813
TOTAL CHILE 40,690
COLOMBIA -- 0.3%
BANKING -- 0.3%
700 Banco Ganadero S.A., ADR 16,975
700 Banco Industrial Colombiano, ADR 11,813
Total 28,788
FINLAND -- 0.2%
ELECTRICAL & ELECTRONICS -- 0.2%
690 Nokia AB-A 25,475
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FRANCE -- 5.9%
BANKING -- 0.6%
13 Compagnie Financiere de Paribas $ 768
400 Compagnie Financiere de Paribas, Class A 23,641
966 Credit Commerical de France 44,833
Total 69,242
BEVERAGE & TOBACCO -- 0.4%
165 LVMH (Moet-Hennessy) 39,168
BUILDING MATERIALS & COMPONENTS -- 0.3%
460 Lafarge-Coppee 27,858
BUSINESS & PUBLIC SERVICES -- 0.3%
140 Ecco Sa 35,248
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.7%
1,500 Schneider S.A. 78,739
ENERGY SOURCES -- 0.6%
800 Total S.A.-B 59,399
ENGINEERING -- 0.4%
1,300 (a) Dassault Systemes S.A. 40,742
FOOD & HOUSEHOLD PRODUCTS -- 0.7%
910 Etablissements Economiques du Casino Guichard-Perrachon 37,595
220 Group Danon 33,319
Total 70,914
HEALTH & PERSONAL CARE -- 0.3%
228 Clarins 35,063
INSURANCE -- 0.4%
694 AXA 37,995
6 (a) AXA, Rights 348
Total 38,343
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FRANCE -- CONTINUED
LEISURE & TOURISM -- 0.4%
288 Accor S.A. $ 40,247
MULTI-INDUSTRY -- 0.5%
1,400 Lagardere Groupe 36,119
270 Lyonnaise des Eaux S.A. 25,805
Total 61,924
PHARMACEUTICALS -- 0.3%
500 Rhone-Poulenc Rorer, Inc. 33,563
TOTAL FRANCE 630,450
GERMANY, FEDERAL REPUBLIC OF -- 5.4%
AUTOMOBILE -- 0.4%
80 Daimler Benz AG 42,854
80 (a) Daimler Benz AG, Rights 8
Total 42,862
BANKING -- 0.9%
115 Commerzbank AG, Frankfurt 23,824
660 Deutsche Bank, AG 31,253
1,500 Dresdner Bank Ag, Frankfurt 37,734
Total 92,811
CHEMICALS -- 0.7%
145 BASF AG 41,483
1,000 Bayer AG 35,350
Total 76,833
CONSTRUCTION & HOUSING -- 0.3%
81 Hochtief AG 36,385
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
GERMANY, FEDERAL REPUBLIC OF -- CONTINUED
ELECTRICAL & ELECTRONICS -- 0.5%
1,000 Siemens AG $ 53,469
HEALTH & PERSONAL CARE -- 0.2%
250 Schering Ag 18,201
MACHINERY & ENGINEERING -- 0.9%
60 Linde AG 39,066
180 Mannesmann AG 62,269
Total 101,335
MERCHANDISING -- 0.3%
80 Kaufhof Holding AG 30,295
PHARMACEUTICALS -- 0.5%
695 Schwarz Pharma Ag 52,108
UTILITIES - ELECTRICAL & GAS -- 0.7%
950 RWE AG 37,050
700 Veba AG 37,231
Total 74,281
TOTAL GERMANY, FEDERAL REPUBLIC OF 578,580
HONG KONG -- 3.0%
BANKING -- 0.1%
1,000 HSBC Holdings PLC 15,115
FOOD & HOUSEHOLD PRODUCTS -- 0.3%
52,000 Guangnan Holdings 31,069
HEALTH & PERSONAL CARE -- 0.2%
19,000 (a) Shanghai Industrial Holdings Ltd. 23,318
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
HONG KONG -- CONTINUED
MERCHANDISING -- 0.3%
34,000 Goldlion Holdings Ltd. $ 29,209
MULTI-INDUSTRY -- 0.3%
3,500 Swire Pacific Ltd. 29,955
REAL ESTATE -- 1.3%
23,000 Amoy Properties Ltd. 27,781
4,000 Cheung Kong 28,808
58,000 Henderson Investment Ltd. 52,075
3,000 Sun Hung Kai Properties 30,326
Total 138,990
TELECOMMUNICATIONS -- 0.5%
800 (a) Asia Satellite Telecommunications Holdings Ltd., ADR 23,800
13,409 Hong Kong Telecom 24,078
Total 47,878
TOTAL HONG KONG 315,534
INDIA -- 1.0%
AUTOMOBILE -- 0.2%
1,800 (a) Mahindra and Mahindra, GDR 19,350
ENERGY EQUIPMENT & SERVICES -- 0.2%
1,400 (a) Bombay Suburban Electric Supply, GDR 26,950
MACHINERY & ENGINEERING -- 0.3%
1,500 Larsen & Toubro Ltd., GDR 28,125
METALS - NON FERROUS -- 0.2%
500 (a) Hindalco Industries Ltd., GDR 19,000
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
INDIA -- CONTINUED
METALS - STEEL -- 0.1%
950 (a) Steel Authority of India, GDR $ 14,013
TOTAL INDIA 107,438
INDONESIA -- 1.3%
BUILDING MATERIALS & COMPONENTS -- 0.1%
4,000 PT Semen Gresik 11,643
FOREST PRODUCTS & PAPER -- 0.2%
22,000 Pab K Tjiwi Kimia 22,449
MINING -- 0.2%
12,000 Tambang Timah 22,170
TOBACCO -- 0.2%
4,000 PT Gudang Garam 17,143
TEXTILES & APPAREL -- 0.2%
32,000 PT Great River Industries 18,561
TRANSPORTATION - ROAD & RAIL -- 0.4%
13,000 PT Citra Marga Nusaphala Persada 19,828
19,000 PT Steady Safe 23,673
Total 43,501
TOTAL INDONESIA 135,467
ITALY -- 1.7%
BANKING -- 0.6%
6,500 Bca Pop Di Milano 32,261
3,700 Imi 30,929
Total 63,190
BUILDING MATERIALS & COMPONENTS -- 0.2%
3,500 (a) Unicem S.P.A. 25,600
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ITALY -- CONTINUED
FOREST PRODUCTS & PAPER -- 0.2%
4,100 Burgo (Cartiere) S.P.A. $ 22,425
MERCHANDISING -- 0.0%
285 (a) La Rinascente S.P.A., Warrants 232
TELECOMMUNICATIONS -- 0.7%
17,150 (a) Telecom Italia Mobile 38,360
16,500 Telecom Italia S.P.A. 35,505
Total 73,865
TOTAL ITALY 185,312
JAPAN -- 34.9%
APPLIANCES & HOUSEHOLD DURABLES -- 1.2%
2,000 Sony Corp. 131,852
BANKING -- 0.7%
5,000 Sumitomo Trust & Banking 68,578
BROADCASTING & PUBLISHING -- 1.8%
3,000 Asatsu, Inc. 130,298
7,000 Ikegami Tsushinki 58,437
Total 188,735
BUILDING MATERIALS & COMPONENTS -- 1.0%
14,000 Nihon Cement Co. Ltd. 103,305
BUSINESS & PUBLIC SERVICES -- 2.3%
7,000 Dai Nippon Printing Co. Ltd. 135,692
4,000 Kokuyo Co. 110,822
Total 246,514
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
CHEMICALS -- 2.2%
10,000 Daicel Chemical Industries $ 61,720
7,000 Kuraray Co. Ltd. 78,727
15,000 Nippon Zeon Co 93,266
Total 233,713
CONSTRUCTION & HOUSING -- 3.2%
6,000 Maeda Road Construction Co. 103,689
10,000 Nichiei Construction 117,954
9,000 Nippon Comsys Corp. 121,794
Total 343,437
ELECTRICAL & ELECTRONICS -- 4.3%
3,000 Hitachi Maxell 62,817
8,000 Japan Radio Co. 114,845
6,000 Nitto Denko Corp. 105,884
3,000 Pioneer Electronic Corp. 71,595
16,000 Sanyo Electric Co. 97,874
Total 453,015
ELECTRONIC COMPONENTS, INSTRUMENTS -- 3.1%
1,000 Kyocera Corp. 70,864
3,000 Noritsu Koki Co. Ltd. 151,968
6,000 Yamatake-Honeywell 109,176
Total 332,008
FINANCIAL SERVICES -- 1.5%
5,000 Nomura Securities Co. Ltd. 97,838
8,000 Wako Securities Co. Ltd. 64,591
Total 162,429
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
FOOD & HOUSEHOLD PRODUCTS -- 1.0%
7,000 Takashimaya Co. $ 108,810
HEALTH & PERSONAL CARE -- 0.6%
3,000 Taisho Pharmaceutical Co. 65,012
INDUSTRIAL COMPONENTS -- 0.6%
9,000 Tsubakimoto Chain 61,473
INSURANCE -- 1.4%
5,000 Mitsui Marine & Fire Insurance Co. 39,821
8,000 Tokio Marine and Fire Insurance Co. 106,798
Total 146,619
MACHINERY & ENGINEERING -- 4.0%
8,000 JGC Corp. 105,335
12,000 Mitsubishi Heavy Industries Ltd. 104,567
3,000 (a) Nissei ASB Machine Co. 60,348
12,000 Sumitomo Heavy Industries 52,558
9,000 Toyoda Machine Works 97,106
Total 419,914
MERCHANDISING -- 1.0%
9,000 Matsuzakaya Co. Ltd. 110,273
METALS - STEEL -- 0.9%
30,000 (a) NKK Corp. 91,071
REAL ESTATE -- 1.0%
16,000 Tokyo Tatemono Co. Ltd. 103,726
TOBACCO -- 0.1%
2 Japan Tobacco, Inc. 15,361
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
TELECOMMUNICATIONS -- 0.9%
11 DDI Corp. $ 96,155
TEXTILES & APPAREL -- 1.3%
25,000 Renown, Inc. 100,352
1,000 Xebio Co. Ltd. 37,581
Total 137,933
WHOLESALE & INTERNATIONAL TRADE -- 0.8%
16,000 Marubeni Corp. 87,779
TOTAL JAPAN 3,707,712
KOREA, REPUBLIC OF -- 1.4%
BANKING -- 0.7%
1,000 (a) Housing & Commercial Bank 27,726
1,300 Kookmin Bank 24,038
2,100 Korea Exchange Bank 24,075
Total 75,839
BUILDING MATERIALS & COMPONENTS -- 0.2%
1,000 Chonggu Housing & Construction 22,806
TELECOMMUNICATIONS -- 0.3%
1,800 (a) Korea Mobile Telecomm Corp., ADR 30,825
UTILITIES - ELECTRICAL & GAS -- 0.2%
700 Korea Electric Power Corp. 24,162
TOTAL KOREA, REPUBLIC OF 153,632
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
MALAYSIA -- 2.1%
BANKING -- 0.4%
2,000 Malayan Banking Berhad $ 19,242
17,000 TA Enterprise Berhad 26,578
Total 45,820
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.3%
8,000 Malaysian Pacific Industries 33,353
FINANCIAL SERVICES -- 0.4%
27,000 Malaysian Industrial Development Bhd 41,780
MACHINERY & ENGINEERING -- 0.3%
10,000 UMW Holdings Bhd 35,678
REAL ESTATE -- 0.4%
17,000 Eastern and Oriental Berhad 40,209
TELECOMMUNICATIONS -- 0.3%
9,000 (a) Technology Resources Industries Bhd 31,389
TOTAL MALAYSIA 228,229
MEXICO -- 1.3%
BANKING -- 0.2%
2,100 (a) Grupo Financiero Bancomer, S.A. de C.V., Class B, ADR 18,286
BEVERAGE & TOBACCO -- 0.5%
11,000 Fomento Economico Mexicano, S.A. de C.V., Class B 31,615
400 Pan American Beverage, Class A 17,900
Total 49,515
BUILDING MATERIALS & COMPONENTS -- 0.2%
2,200 Cemex S.A., Class B, ADR 16,809
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
MEXICO -- CONTINUED
CONSTRUCTION & HOUSING -- 0.2%
1,400 Empresas ICA Sociedad Controladora S.A., ADR $ 19,425
MERCHANDISING -- 0.1%
11,000 (a) Cifra S.A. de CV, Class B 15,924
TELECOMMUNICATIONS -- 0.1%
400 Telefonos de Mexico, Class L, ADR 13,400
TOTAL MEXICO 133,359
NETHERLANDS -- 2.8%
BROADCASTING & PUBLISHING -- 1.1%
3,800 Elsevier NV 57,707
600 Wolters Kluwer NV 68,215
Total 125,922
FINANCIAL SERVICES -- 0.7%
2,323 ING Groep, NV 69,314
RECREATION, OTHER CONSUMER GOODS -- 0.5%
870 PolyGram NV 51,420
TELECOMMUNICATIONS -- 0.5%
1,318 Koninklijke PTT Nederland NV 49,923
TOTAL NETHERLANDS 296,579
PAKISTAN -- 0.1%
ENERGY SOURCES -- 0.1%
300 (a) Hub Power Co., GDR 7,350
PHILIPPINES -- 1.2%
BANKING -- 0.2%
1,300 (a) Philippine Commercial International Bank 16,250
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
PHILIPPINES -- CONTINUED
BUILDING MATERIALS & COMPONENTS -- 0.2%
62,500 Davao Union Cement Corp., Class B $ 26,240
HEALTH & PERSONAL CARE -- 0.2%
21,000 (a) Marsman & Company 10,019
50,000 Metro Pacific Corp. 14,886
Total 24,905
MULTI-INDUSTRY -- 0.1%
61,000 (a) Aboitiz Equity Ventures, Inc. 11,408
REAL ESTATE -- 0.5%
25,100 (a) Empire East Land Holdings, Inc. 15,328
43,200 (a) Filinvest Land, Inc. 17,725
99,000 (a) Universal Rightfield Property 18,893
Total 51,946
TOTAL PHILIPPINES 130,749
SINGAPORE -- 1.9%
AUTOMOBILE -- 0.3%
3,000 Cycle & Carriage Ltd. 32,105
BANKING -- 0.8%
9,000 Hong Leong Finance Ltd. 31,510
5,000 United Overseas Bank Ltd. 47,838
Total 79,348
BROADCASTING & PUBLISHING -- 0.2%
1,000 Singapore Press Holdings Ltd. 19,631
MACHINERY & ENGINEERING -- 0.2%
3,000 Keppel Corp. 25,089
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SINGAPORE -- CONTINUED
REAL ESTATE -- 0.4%
8,000 Parkway Holdings Ltd. $ 23,813
6,000 Straits Steamship Land Ltd. 20,071
1,500 (a) Straits Steamship Land Ltd., Warrants 1,882
Total 45,766
TOTAL SINGAPORE 201,939
SPAIN -- 1.7%
ENERGY SOURCES -- 0.2%
650 Repsol S.A. 22,622
INSURANCE -- 0.4%
760 Corp Mapfre Sa 38,830
MACHINERY & ENGINEERING -- 0.3%
350 Zardoya-Otis S.A. 33,549
350 (a) Zardoya-Otis S.A., Rights 3,322
Total 36,871
MERCHANDISING -- 0.1%
400 Centros Comerciales Pryca, S.A. 10,000
TELECOMMUNICATIONS -- 0.2%
1,200 Telefonica de Espana 22,124
UTILITIES - ELECTRICAL & GAS -- 0.5%
5,200 Iberdrola S.A. 53,420
TOTAL SPAIN 183,867
SWEDEN -- 1.1%
BROADCASTING & PUBLISHING -- 0.2%
750 Marieberg Tidnings AB, Class A 18,806
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SWEDEN -- CONTINUED
FOREST PRODUCTS & PAPER -- 0.3%
2,100 Stora Kopparbergs, Class A $ 27,756
INDUSTRIAL COMPONENTS -- 0.3%
900 Autoliv AB 27,462
MACHINERY & ENGINEERING -- 0.3%
2,000 Svedala Industri 37,915
TOTAL SWEDEN 111,939
SWITZERLAND -- 4.3%
BANKING -- 0.4%
500 CS Holding AG 47,592
CHEMICALS -- 0.7%
60 Ciba-Giegy AG 73,188
ELECTRICAL & ELECTRONICS -- 0.3%
25 BBC Brown Boveri 30,955
FOOD & HOUSEHOLD PRODUCTS -- 0.5%
51 Nestle S.A. 58,294
HEALTH & PERSONAL CARE -- 1.0%
6 Roche Holding AG 45,809
26 Sandoz AG 29,760
26 Sandoz AG, Class B 29,594
Total 105,163
INSURANCE -- 0.3%
105 Zurich Versicherungsgesellschaft 28,639
MACHINERY & ENGINEERING -- 0.3%
45 Sulzer AG 28,939
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>

COMMON STOCKS -- CONTINUED
SWITZERLAND -- CONTINUED
MULTI-INDUSTRY -- 0.3%
300 (a) Oerlikon-Buhrle Holding AG $ 31,195
TRANSPORTATION - AIRLINES -- 0.5%
50 (a) Swissair AG 48,432
TOTAL SWITZERLAND 452,397
TAIWAN, PROVINCE OF CHINA -- 0.2%
FOOD & HOUSEHOLD PRODUCTS -- 0.2%
8,000 (a) Want Want Holdings 21,520
THAILAND -- 0.4%
BANKING -- 0.1%
2,100 Krung Thai Bank PLC 9,844
FINANCIAL SERVICES -- 0.1%
2,800 (a) Industrial Finance Corporation of Thailand 12,574
TELECOMMUNICATIONS -- 0.1%
500 Advanced Information Service PCL 7,839
UTILITIES - ELECTRICAL & GAS -- 0.1%
900 (a) PTT Exploration and Production Public Co. 13,189
TOTAL THAILAND 43,446
UNITED KINGDOM -- 15.5%
BANKING -- 0.6%
4,900 Barclays PLC 58,786
BEVERAGE & TOBACCO -- 0.3%
4,650 Allied Domecq PLC 32,714
BROADCASTING & PUBLISHING -- 0.7%
7,600 Pearson 78,372
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
BUILDING MATERIALS & COMPONENTS -- 0.3%
18,500 Rugby Group PLC $ 31,604
BUSINESS & PUBLIC SERVICES -- 1.4%
8,600 Anglian Water PLC 79,135
4,000 Associated British Ports Holdings PLC 17,208
3,600 Chubb Security 18,031
3,300 Thames Water PLC 29,033
Total 143,407
CHEMICALS -- 0.3%
1,623 Boc Group PLC 23,278
1,200 Imperial Chemical Industries PLC 14,686
Total 37,964
ELECTRICAL & ELECTRONICS -- 0.4%
8,500 General Electric Co. PLC 45,741
ENERGY SOURCES -- 0.3%
3,300 British Petroleum Co. PLC 28,956
FOOD & HOUSEHOLD PRODUCTS -- 1.1%
5,100 Cadbury Schweppes PLC 40,315
6,945 Grand Metropolitan PLC 46,056
3,300 Reckitt & Colman PLC 34,696
Total 121,067
FOREST PRODUCTS & PAPER -- 0.3%
9,200 Bunzl PLC 33,791
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
HEALTH & PERSONAL CARE -- 1.0%
4,500 Smithkline Beecham Corp. $ 48,117
2,400 Zeneca Group 53,077
Total 101,194
INSURANCE -- 0.5%
7,600 Guardian Royal Ex 29,272
10,200 Sedgwick Group PLC 21,861
Total 51,133
LEISURE & TOURISM -- 1.4%
8,000 Carlton Communications PLC 64,358
4,100 Compass Group 37,568
9,000 Ladbroke Group PLC 24,950
3,100 Rank Organisation PLC 23,952
Total 150,828
MANUFACTURING -- 0.5%
12,000 Cookson Group 52,741
MERCHANDISING -- 1.5%
2,500 Boots Co. PLC 22,480
4,800 Marks & Spencer PLC 35,074
6,500 Sainsbury PLC 38,259
8,700 Smith, W.H. Group PLC 64,044
Total 159,857
METALS - NON FERROUS -- 0.2%
1,311 RTZ Corp. PLC 19,403
METALS - STEEL -- 0.2%
6,700 British Steel PLC 17,091
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>

COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.1%
4,600 Caradon PLC $ 15,395
MULTI-INDUSTRY -- 1.1%
15,000 BTR PLC 58,938
1,900 Siebe PLC 27,000
8,300 Tomkins PLC 31,194
Total 117,132
TELECOMMUNICATIONS -- 1.9%
5,100 British Telecommunication PLC 27,405
5,436 Cable & Wireless 35,922
18,900 (a) Pace Micro Technology PLC 55,183
9,200 Racal Electronic PLC 43,578
10,000 Vodafone Group PLC 37,195
Total 199,283
TRANSPORTATION - SHIPPING -- 0.4%
3,200 Peninsular & Oriental Steam Navigation Co. 24,053
6,500 Railtrack Group PLC 22,108
Total 46,161
UTILITIES - ELECTRICAL & GAS -- 1.0%
4,700 British Gas PLC 13,066
4,500 National Power Co. PLC 36,341
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
6,600 Scottish Power PLC $ 31,160
1,800 Shell Transport & Trading Co. 26,277
Total 106,844
TOTAL UNITED KINGDOM 1,649,464
TOTAL FOREIGN EQUITY (IDENTIFIED COST $9,120,877 ) 9,645,076
PREFERRED STOCKS -- 2.1%
BRAZIL -- 1.2%
BANKING -- 0.4%
2,176,500 Banco Bradesco S.A., Preference 17,773
50,000 Banco Itau S.A., Preference 20,314
Total 38,087
BEVERAGE & TOBACCO -- 0.2%
28,000 Cia Cervejaria Brahma, Preference 16,702
MERCHANDISING -- 0.2%
445,000 (a) Lojas Renner S.A., Preference 23,486
METALS - STEEL -- 0.1%
14,268,000 Usinas Siderurgicas de Minas Gerais, Pfd. 15,061
TELECOMMUNICATIONS -- 0.2%
94,000 Telecomunicacoes de Sao Paulo S.A., Preference 20,126
UTILITIES - ELECTRICAL & GAS -- 0.1%
524,000 Companhia Energetica de Minas Gerais, Preference 13,932
TOTAL BRAZIL 127,394
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS -- CONTINUED
GERMANY, FEDERAL REPUBLIC OF -- 0.9%
FOOD & HOUSEHOLD PRODUCTS -- 0.2%
38 Henkel KGAA, Vorzugsaktien $ 16,420
HEALTH & PERSONAL CARE -- 0.2%
30 Wella AG, Vorzugsaktien 17,560
MACHINERY & ENGINEERING -- 0.5%
180 Gea AG, Vorzugsaktien 59,901
TOTAL GERMANY, FEDERAL REPUBLIC OF 93,881
TOTAL PREFERRED STOCKS (IDENTIFIED COST $204,278) 221,275
CORPORATE BONDS -- 0.2%
JAPAN -- 0.2%
BANKING -- 0.2%
2,000,000 Sumitomo Bank Ltd., Osaka, Conv. Bond, 0.75%, 5/31/2001
(IDENTIFIED COST $18,360) 19,750
(b)REPURCHASE AGREEMENT -- 11.9%
1,260,000 BT Securities Corporation, 5.50%, dated 6/28/1996, due 7/1/1996
(AT AMORTIZED COST) 1,260,000
TOTAL INVESTMENTS (IDENTIFIED COST $10,603,515)(c) $ 11,146,101
</TABLE>

(a) Non-income producing security.

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

(c) The cost of investments for federal tax purposes amounts to $10,603,515.
The net unrealized appreciation of investments on a federal tax basis
amounts to $538,756 which is comprised of $685,364 appreciation and $146,608
depreciation at June 30, 1996.

Note: The categories of investments are shown as a percentage of net assets
($10,609,160) at June 30, 1996.

The following acronyms are used throughout this portfolio:

ADR -- American Depository Receipt

GDR -- Global Depository Receipts

PLC -- Public Limited Company

SA -- Sociedad Anonima

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

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 1,260,000
Investments in securities 9,886,101
Total investments in securities, at value
(identified and tax cost $10,603,515) $ 11,146,101
Cash 16,653
Cash denominated in foreign currencies (identified
cost $22,318) 22,408
Income receivable 25,744
Receivable for investments sold 275,844
Total assets 11,486,750
LIABILITIES:
Payable for investments purchased $ 879,971
Payable for taxes withheld 3,465
Accrued expenses (5,846)
Total liabilities 877,590
Net Assets for 967,545 shares outstanding $ 10,609,160
NET ASSETS CONSIST OF:
Paid in capital $ 10,042,692
Net unrealized appreciation of investments and
translation of
assets and liabilities in foreign currency 538,756
Accumulated net realized loss on investments and foreign currency
transactions (6,812)
Undistributed net investment income 34,524
Total Net Assets $ 10,609,160
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$10,609,160 / 967,545 shares outstanding $10.97
</TABLE>

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

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $11,267) $ 71,414
Interest 8,516
Total income 79,930
EXPENSES:
Investment advisory fee $ 36,119
Administrative personnel and services fee 62,158
Custodian fees 31,500
Transfer and dividend disbursing agent fees and
expenses 7,742
Directors'/Trustees' fees 1,456
Auditing fees 4,130
Legal fees 1,456
Portfolio accounting fees 28,209
Share registration costs 1,218
Printing and postage 12,390
Insurance premiums 1,806
Miscellaneous 2,618
Total expenses 190,802
Waivers and reimbursements --
Waiver of investment advisory fee $ (36,119)
Reimbursement of other operating expenses (109,376)
Total waivers and reimbursements (145,495)
Net expenses 45,307
Net investment income 34,623
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign
currency transactions 11,929
Net change in unrealized appreciation of investments
and translation
of assets and liabilities in foreign currency 424,487
Net realized and unrealized gain on
investments and foreign currency 436,416
Change in net assets resulting from
operations $ 471,039
</TABLE>

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

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

SIX MONTHS PERIOD
ENDED ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995*
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 34,623 $ 20,303
Net realized gain (loss) on investments and foreign currency
transactions ($11,929 and ($17,096) respectively, as computed for
federal tax purposes) 11,929 (10,299)
Net change in unrealized appreciation (depreciation) of
investments and translation of assets and liabilities in foreign
currency 424,487 114,269
Change in net assets resulting from
operations 471,039 124,273
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (31,496) --
SHARE TRANSACTIONS --
Proceeds from sale of shares 5,516,692 4,707,043
Net asset value of shares issued to shareholders in
payment of
distributions declared 31,448 --
Cost of shares redeemed (138,082) (71,757)
Change in net assets resulting from share
transactions 5,410,058 4,635,286
Change in net assets 5,849,601 4,759,559
NET ASSETS:
Beginning of period 4,759,559 --
End of period (including undistributed net
investment income
of $34,524 and $31,397, respectively) $ 10,609,160 $ 4,759,559
</Table
* For the period from May 5, 1995 (date of
initial public investment) to December 31,1995.

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

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS PERIOD
ENDED ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995(a)*
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.07
Net realized and unrealized gain (loss) on
investments and
foreign currency 0.65 0.28
Total from investment operations 0.67 0.35
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) --
NET ASSET VALUE, END OF PERIOD $10.97 $10.35
TOTAL RETURN(b) 6.48% 3.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.25%* 1.22%*
Net investment income 0.96%* 1.63%*
Expense waiver/reimbursement(c) 4.03%* 11.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $10,609 $4,760
Average commission rate paid $ 0.002 $ --
Portfolio turnover 44% 34%
</TABLE>

* Computed on an annualized basis.

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

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

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

FEDERATED INTERNATIONAL EQUITY FUND II
(FORMERLY, INTERNATIONAL STOCK FUND)
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1996 (UNAUDITED)

1. ORGANIZATION

Insurance Management Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of seven portfolios. The financial
statements included herein are only those of Federated International Equity
Fund II (the "Fund"), a diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio
are segregated and a shareholder's interest is limited to the portfolio in
which shares are held. The primary investment objective of the Fund is to
achieve long-term growth of capital. The Fund's secondary objective is to
provide income.
Effective April 15, 1996, the Board of Trustees ("Trustees") changed the
name of the Trust from Insurance Management Series to Federated Insurance
Series and the name of the Fund from Corporate Bond Fund to Federated High
Income Bond Fund II.

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS -- Listed equity foreign securities are valued at the
last sale price reported on a national securities exchange. Short-term
securities are valued at the prices provided by an independent pricing
service. However, short-term securities with remaining maturities of sixty
days or less at the time of purchase may be valued at amortized cost, which
approximates fair market value.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Certain dividends from foreign securities may be recorded
after the ex-dividend date based upon when information becomes available
to the Fund.

FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary. However, federal taxes may be
imposed on the Fund upon the disposition of certain investments in passive
foreign investment companies. Withholding taxes on foreign dividends have
been provided for in accordance with the Fund's understanding of the
applicable country's tax rules and rates. At December 31, 1995, the Fund,
for federal tax purposes, had a capital loss carryforward of $17,096, which
will reduce the Fund's taxable income arising from future net realized gain
on investments, if any, to the extent permitted by the Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise
be necessary to relieve the Fund of any liability for federal tax. Pursuant
to the Code, such capital loss carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
2003 $17,096
</TABLE>

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

3. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX PERIOD
MONTHS ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995(A)
<S> <C> <C>
Shares sold 517,946 466,748
Shares issued to shareholders in payment of distributions declared 3,009 --
Shares redeemed (13,062) (7,096)
Net change resulting from share transactions 507,893 459,652
</TABLE>

(a) For the Period from May 5, 1995 (date of initial public investment) to
December 31, 1995.

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Global Research Corp., the Fund's
investment adviser, (the "Adviser"), receives for its services an annual
investment advisory fee equal to 1.00% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its fee
and/or reimburse certain operating expenses of the Fund. The Adviser can
modify or terminate this voluntary waiver and/or reimbursement at any time
at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- "FServ," through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.

PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES -- Organizational expenses of $15,465 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five-year period following the
effective date. For the period ended June 30, 1996, the Fund paid $2,578
pursuant to this agreement.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities for the
period ended June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $2,905,361
SALES $8,277,662
</TABLE>

TRUSTEES

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

OFFICERS
John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President and Treasurer

John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President

Douglas L. Hein
Assistant Treasurer

S. Elliott Cohan
Assistant Secretary

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

FEDERATED
INTERNATIONAL
EQUITY FUND II

(formerly, International Stock Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)
[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
G00433-06 (8/96)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to Shareholders for Federated
Prime Money Fund II, formerly named Prime Money Fund. "Federated" has been
added to the name to make it easy for investors to locate all Federated
Funds in mutual fund listings of newspapers and other publications.

The report covers the six-month period from January 1, 1996, through June
30, 1996. It begins with an investment review by the fund's portfolio
manager, which is followed by a complete listing of the fund's holdings and
its financial statements.

As a shareholder in this high-quality money market mutual fund, you are
putting your cash to work pursuing daily income while keeping your principal
stable.* You have convenient, daily access to your money.

To help provide a competitive daily yield, the fund invests in a diversified
portfolio of high-quality money market securities. During the reporting
period, the fund paid a total of $0.02 per share in dividends to
shareholders. On June 30, 1996, net assets stood at $24.4 million.

Thank you for choosing Federated Prime Money Fund II to put your cash to
work pursuing income every day. We will continue to keep you up-to-date on
your investment, and welcome your comments and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1996

* Although money market funds seek to maintain a share value of $1.00, there
is no guarantee that they will do so. An investment in the fund is neither
insured nor guaranteed by the U.S. government.

INVESTMENT REVIEW

Federated Prime Money Fund II invests in money market instruments maturing
in thirteen months or less. The average maturity of these securities,
computed on a dollar-weighted basis, is restricted to 90 days or less.
Portfolio securities must be rated in one of the two highest short-term
rating categories by one or more nationally recognized statistical rating
organizations or be of comparable quality to securities having such ratings.
Typical security types include, but are not limited to, commercial paper,
certificates of deposit, time deposits, variable rate instruments and
repurchase agreements.

Since the beginning of 1996, the pace of the economic expansion seems to
have quickened. Gross Domestic Product ("GDP") growth for the first quarter
of 1996 rebounded to 2.0%, with growth in overall employment leading the
expansion. This growth was achieved despite several dampening factors
including severe winter weather during much of January, a United Auto
Workers strike at General Motors that shut down the automotive giant's
operations for 2-1/2 weeks, and a government closure for a week related to
budget negotiations. The second quarter pace accelerated with GDP expanding
at a 4.2% rate. Throughout this time period, inflation held steady. Overall
wage gains remained moderate, and material costs were subdued.

Budget negotiations also played a role in the market during the reporting
period. As negotiations failed and temporary "fixes" were devised for
meeting the U.S. Treasury's scheduled debt obligations, fixed income
investors became nervous and yields began to rise.

Thirty-day commercial paper started the reporting period at 5.53% on January
1, 1996, reflecting a 5.50% federal funds target rate established by the
Federal Reserve Board (the "Fed") on December 19, 1995. Rates fell
throughout the month of January until the Fed acted again on January 31,
1996, lowering the federal funds target rate to 5.25%. Commercial paper
rates have been hovering in the 5.25% area since that time.

The money market yield curve steepened dramatically throughout the reporting
period. One month commercial paper rates declined 14 basis points while
six-month rates rose by 24 basis points reflecting the concern in the market
about the more rapid economic growth.
The target average maturity range for Federated Prime Money Fund II that
began the period at 40-50 days, was subsequently lengthened to a 45-55 day
range in February and then shortened back to the
40-50 day range in May, reflecting the changing economic and monetary
sentiment. In structuring the fund, there is continued emphasis placed on
positioning 30-35% of the fund's core assets in variable rate demand notes
and accomplishing a modest barbell structure.

During the six-month reporting period ended June 30, 1996, the net assets of
the fund increased from $17.7 million to $24.4 million while the 7-day yield
decreased from 4.93% to 4.59%.* The effective average maturity of the fund
on June 30, 1996, was 44 days.

* Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Performance information does not reflect
the charges and expenses of a variable annuity or variable life insurance
contract.

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
BANK NOTES -- 4.1%
BANKING -- 4.1%
$ 1,000,000 Harris Trust & Savings Bank, Chicago, 5.500%, 3/26/1997 $ 999,577
(a)COMMERCIAL PAPER -- 32.7%
BANKING -- 11.1%
300,000 ABN AMRO N.A., Finance, Inc., (Guaranteed by ABN AMRO Bank
N.V., Amsterdam), 5.267%, 7/18/1996 299,273
1,000,000 Royal Bank of Canada, Montreal, 5.259%, 7/8/1996 999,003
400,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska
Handelsbanken, Stockholm), 5.233%, 7/22/1996 398,810
1,000,000 SALTS II Cayman Islands Corp., (Bankers Trust International,
PLC Swap Agreement), 5.763%, 9/20/1996 1,000,000
Total 2,697,086
ENTERTAINMENT -- 2.0%
500,000 Disney (Walt) Holding Co., 5.336%, 9/6/1996 495,161
FINANCE - COMMERCIAL -- 11.4%
500,000 Beta Finance, Inc., 5.003%, 8/8/1996 497,425
300,000 CIESCO, Inc., 4.992%, 8/7/1996 298,498
1,000,000 Falcon Asset Securitization Corp., 5.474%, 9/10/1996 989,350
1,000,000 General Electric Capital Corp., 5.128% - 5.323%,
7/29/1996 - 9/27/1996 993,523
Total 2,778,796
FINANCE - RETAIL -- 8.2%
800,000 American Express Credit Corp., 5.022% - 5.231%,
7/19/1996 - 8/2/1996 797,599
1,200,000 Associates Corp. of North America, 5.322% - 5.377%,
8/19/1996 - 9/26/1996 1,190,311
Total 1,987,910
TOTAL COMMERCIAL PAPER 7,958,953
</TABLE>

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE NOTES -- 1.2%
FINANCE - EQUIPMENT -- 0.3%
$ 63,852 Navistar Financial 1995-A Owner Trust, 5.750%, 11/15/1996 $ 63,851
INSURANCE -- 0.9%
223,175 Olympic Automobile Receivables Trust 1996-A, (Guaranteed by
Financial Security Assurance, Inc.), 5.250%, 3/15/1997 223,175
TOTAL CORPORATE NOTES 287,026
(b)NOTES - VARIABLE -- 30.8%
BANKING -- 18.5%
180,000 Alabama State IDA, (Wellborn Cabinet, Inc.), Tax Revenue Bonds,
(Amsouth Bank N.A., Birmingham LOC), 5.600%, 7/3/1996 180,000
200,000 Capital One Funding Corp., SERIES 1995-A, (Bank One, Indianapolis,
IN LOC), 5.500%, 7/4/1996 200,000
200,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque Paribas,
Paris LOC), 5.750%, 7/4/1996 200,000
200,000 Franklin County, OH, (Edison Wielding), (Series 1995), (Huntington
National Bank, Columbus, OH LOC), 5.700%, 7/4/1996 200,000
300,000 KBL Capital Fund, Series 1995-C, (Old Kent Bank & Trust Co., Grand
Rapids LOC), 5.470%, 7/4/1996 300,000
450,000 KBL Capital Fund, Series 1996-A, (Old Kent Bank & Trust Co., Grand
Rapids LOC), 5.470%, 7/4/1996 450,000
1,000,000 Kenny, Donald R. and Cheryl A., Series 1996-C, (Star Bank, NA,
Cincinnati LOC), 5.630%, 7/4/1996 1,000,000
800,000 PNC Bank, N.A., 5.320%, 7/2/1996 799,781
185,000 Southeast Regional Holdings, LLC, (Series 1995-A), (Columbus Bank
and Trust Co., GA LOC), 5.780%, 7/4/1996 185,000
1,000,000 SMM Trust, Series 1996-V, (Morgan Guaranty Trust Co., New York
Swap Agreement), 5.616%, 9/26/1996 1,000,000
Total 4,514,781
</TABLE>

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(b)NOTES - VARIABLE -- CONTINUED

INSURANCE -- 8.2%
$ 1,000,000 Transamerica Occidental Life Insurance Company, 5.438%, 8/1/1996 $ 1,000,000
1,000,000 General American Life Insurance Co., 5.638%, 7/22/1996 1,000,000
Total 2,000,000
SOVEREIGN GOVERNMENT -- 4.1%
1,000,000 Short Term Asset Corp., Secured Class F-1 Bonds, (European Bank for
Reconstruction and Development LIQ), 5.516%, 7/15/1996 1,000,000
TOTAL NOTES -- VARIABLE 7,514,781
GOVERNMENT AGENCY OBLIGATIONS -- 3.3%
U.S. TREASURY NOTES -- 3.3%
800,000 6.875%, 2/28/1997 - 3/31/1997 808,234
(c)REPURCHASE AGREEMENTS -- 28.0%
1,000,000 Chase Securities, Inc., 5.450%, dated 6/28/1996, due 7/1/1996 1,000,000
1,000,000 PaineWebber, Inc., 5.500%, dated 6/28/1996, due 7/1/1996 1,000,000
2,579,000 UBS Securities, Inc, 5.480%, dated 6/28/1996, due 7/1/1996 2,579,000
2,242,000 UBS Securities, Inc., 5.450%, dated 6/28/1996, due 7/1/1996 2,242,000
TOTAL REPURCHASE AGREEMENTS 6,821,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(d) $ 24,389,571
</TABLE>

(a) Each issue shows the rate of discount at the time of purchase for
discount issues.
(b) Current rate and next reset date shown.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($24,352,138) at June 30, 1996.

The following acronym(s) are used throughout this portfolio:

IDA -- Industrial Development Authority
LIQ -- Liquidity Agreement
LLC -- Limited Liability Corporation
LOC -- Letter of Credit
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 6,821,000
Investments in securities 17,568,571
Total investments in securities, at amortized
cost and value $ 24,389,571
Income receivable 81,212
Total assets 24,470,783
LIABILITIES:
Income distribution payable 90,568
Payable to Bank 14,284
Accrued expenses 13,793
Total liabilities 118,645
NET ASSETS for 24,352,138 shares outstanding $ 24,352,138
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$24,352,138/24,352,138 shares outstanding $1.00
</TABLE>

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

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 741,545
EXPENSES:
Investment advisory fee $ 67,835
Administrative personnel and services fees 62,158
Custodian fees 14,680
Transfer and dividend disbursing agent fees and expenses 12,612
Directors'/Trustees' fees 1,215
Auditing fees 3,100
Legal fees 1,215
Portfolio accounting fees 20,172
Share registration costs 387
Printing and postage 9,949
Insurance premiums 2,002
Miscellaneous 2,978
Total expenses 198,303
Waivers and reimbursements --
Waiver of investment advisory fee $ (67,835)
Reimbursement of other operating expenses by Adviser (21,336)
Total waivers and reimbursements (89,171)
Net expenses 109,132
Net investment income $ 632,413
</TABLE>

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

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 632,413 $ 415,530
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (632,413) (415,530)
SHARE TRANSACTIONS --
Proceeds from sale of shares 123,623,229 39,232,023
Net asset value of shares issued to
shareholders in
payment of distributions declared 541,441 414,549
Cost of shares redeemed (117,650,436) (22,360,936)
Change in net assets resulting from share transactions 6,514,234 17,285,636
Change in net assets 6,514,234 17,285,636
NET ASSETS:
Beginning of period 17,837,904 552,268
End of period $ 24,352,138 $ 17,837,904
</TABLE>

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

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, 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 0.02 0.05 .01
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.05) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(b) 2.32% 5.20% 0.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%* 0.80% 0.80%*
Net investment income 4.66%* 5.12% 4.26%*
Expense waiver/reimbursement(c) 0.66%* 2.69% 71.84%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $24,352 $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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)

FEDERATED PRIME MONEY FUND II
(FORMERLY, PRIME MONEY FUND)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of seven portfolios. The financial
statements included herein are only those of Federated Prime Money Fund II
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The investment objective of the Fund is to provide current
income consistent with stability of principal and liquidity.

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS -- The Fund's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.

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

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

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

3. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value). At
June 30, 1996, capital paid-in aggregated $24,352,138. Transactions in
shares were as follows:
<TABLE>
<CAPTION>

SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
Shares sold 123,623,229 39,232,023
Shares issued to shareholders in payment of distributions
declared 541,441 414,549
Shares redeemed (117,650,436) (22,360,936)
Net change resulting from share transactions 6,514,234 17,285,636
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Advisors, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.50% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.

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

PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES -- Organizational and/or start-up administrative
service expenses for the Fund of $22,431 were borne initially by the
Adviser. The Fund has agreed to reimburse the Adviser for the organizational
and/or start-up administrative expenses during the five-year period
following the Fund's effective date. For the six months ended June 30, 1996,
the Fund paid $4,486 pursuant to this agreement.

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

TRUSTEES

FEDERATED
PRIME MONEY
FUND II
(formerly, Prime Money Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1996

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)

[LOGO]

Federated Investors
Since 1955

Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.

[RECYCLE LOGO]

Cusip 313916504
G00433-05 (8/96)

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Utility Fund II, formerly named Utility Fund. "Federated" has been added to
the name to make it easy for investors to locate all Federated Funds in
mutual fund listings of newspapers and other publications. In addition, the
fund's new name reflects the fact that it has always been managed in the
same style as Federated Utility Fund, Inc., a mutual fund that has been
serving investors since 1988.

Despite a relatively weak environment for utility stocks during the
six-month reporting period (the total returns for Standard & Poor's Utility
Index* and Dow Jones Utility Index** were (0.01%) and 0.45%, respectively)
the fund produced a total return of 4.54%.*** Contributing to the total
return was $0.18 per share in income and net asset value growth of 2.00%. On
June 30, 1996, net assets reached
$50.7 million.

Thank you for participating in the income and growth opportunities of
utility stocks through Federated Utility Fund II. As always, we welcome your
comments and suggestions.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue

President

August 15, 1996

* Standard & Poor's Utility Index is an unmanaged index of common stocks
from forty different utilities indicating daily changes in the price of the
stocks. Investments cannot be made in an index.

** Dow Jones Utility Index is an unmanaged index comprised of fifteen
utility stocks that track changes in price daily and over a six-month
period. Investments cannot be made in an index.

*** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.

INVESTMENT REVIEW

The market is beginning to take an interest in utilities. During the last
two weeks of June the Standard & Poor's Utility Index ("S&P Utility Index")
and the Dow Jones Utility Index delivered total returns of 5.64% and 6.62%,
respectively, while the broad Standard & Poor's 500 Stock Index ("S&P 500
Index") returned only 0.86%. There are three reasons for this recent
outperformance. First, as the broad market indices continued to march
forward in 1996, utilities began to appear extremely undervalued on relative
dividend yield, book value and price per earnings bases. Specifically, the
dividend yield on the S&P Utility Index is 4.75% as compared to only 2.13%
on the S&P 500 Index*. The relative yield of 2.2 times has never been so
high. The Dow Jones Industrial Average ("DJIA")+ is trading at 4.26 times
1995's book value while the S&P 500 Index* is trading at 4.00 times 1995's
book value, both historically high levels. Compare this to the 1.39 times
book value level at which the Dow Jones Utility Index is trading. On a price
per earnings basis, the Dow Jones Utility Index looks cheap at 10.4 times
its 52-week earnings, as compared to the lofty 18.3 times and 19.6 times for
the DJIA+ and S&P 500 Index, respectively.

A second reason for the recent outperformance of utilities is that the
interest rate on the 30-year U.S. Treasury bond began to drop (and the price
rose) from its 13-month high of 7.20% in mid-June, 1996, to 6.89% at June
30, 1996, as the indicators continue to mount that inflation is benign and
that the Federal Reserve Board will likely not raise short-term interest
rates in July. As an interest rate sensitive sector, utilities have rallied
with the bond. Finally, utility companies are enjoying healthy earnings
growth rates. For example, the electric utility sector's earnings rose 8% in
1995, the third straight year of earnings growth, a string that had not been
experienced in well over a decade. Further earnings growth is expected this
year. In the telephone sector, most companies reported double digit earnings
growth rates for the first quarter, a trend which is expected to continue.
Natural gas companies are also enjoying an impressive year with earnings
growth bolstered by favorable weather, higher gas prices, and reduced costs.

We believe that investors will increasingly turn to utilities for their
defensive qualities as nervousness grows over the extended age and high
valuations of the current general bull market.

For the year-to-date, the fund has performed well with a total return of
4.54% compared to (0.01%) for the S&P Utility Index and 0.45% for the Dow
Jones Utility Index. The fund benefited from a 10% weight in the natural gas
sector, which was the best performing subsector of the S&P Utility Index
this year returning 14.6% as compared to 0.2% for the electric sector and
(2.5%) for the telephone sector. The fund also enjoyed excellent performance
in its diversified international utilities which represent 8% of the fund++.

* Standard & Poor's 500 Stock Index is an unmanaged composite index of
common stocks in industrial, transportation, and financial and public
utility companies, and can be used to compare the total returns of funds
whose portfolios are invested primarily in common stocks. Investments cannot
be made in an index.

+ Dow Jones Industrial Average represents share prices of major industrial
corporations, public utilities, and transportation companies.

++ Foreign investing involves special risks including currency risk,
increased volatility of foreign securities, and differences in auditing and
other financial standards.

Major themes in the current portfolio are:

1) High quality domestic utilities which we believe are positioned to thrive
in the future competitive environment and offer good dividend growth
prospects.

2) Increasingly defensive non-utility holdings in a wide variety of
industries. In this area, we are buying relatively high yielding convertible
bonds and preferred stocks with excellent downside protection.

3) Diversified international utility holdings with excellent dividend growth
and total return potential.

Comments regarding selected holdings or purchases:

TECO

Teco represents the potentially ideal electric utility. It is non-nuclear,
low cost, and very competitive. Operating in Florida, it enjoys a good
regulatory environment with fully 27% of operating earnings non-regulated.
The company recently increased its dividend 5.7%.

AT&T

A core holding in the fund, AT&T should flex its marketing muscle in the
months ahead as it competes for local telephone service in both wireline and
wireless. Late 1996 spinoffs of Lucent Technologies and NCR should reveal
the undervalued nature of its core telephone service.

NORAM ENERGY 6.25% CONVERTIBLE PREFERRED

The third largest gas distribution company in the U.S., Noram is a low-cost
producer working to increase its share of non-regulated earnings and expects
earnings to grow around 15% annually. The convertible security provides
downside protection for the portfolio.

SUNAMERICA 7.25% STRYPES

This extremely well-managed company boasts the seventh highest share of the
growing variable annuities market. This is another convertible preferred
stock with a potentially great coupon.

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- 79.5%
CONSUMER DURABLES -- 1.0%
16,300 Ford Motor Co. $ 527,713
CONSUMER NON-DURABLES -- 1.7%
8,300 Philip Morris Cos., Inc. 863,200
ELECTRIC UTILITIES: CENTRAL -- 10.6%
42,000 CMS Energy Corp. 1,296,750
15,900 Cinergy Corp. 508,800
53,100 DPL, Inc. 1,294,312
43,800 Illinova Corp. 1,259,250
25,400 NIPSCO Industries, Inc. 1,022,350
Total 5,381,462
ELECTRIC UTILITIES: EAST -- 5.3%
40,100 DQE, Inc. 1,102,750
20,700 General Public Utilities 729,675
32,400 Peco Energy Co. 842,400
Total 2,674,825
ELECTRIC UTILITIES: SOUTH -- 14.6%
37,900 Duke Power Co. 1,942,375
45,900 FPL Group, Inc. 2,111,400
44,300 Southern Co. 1,090,888
39,200 TECO Energy, Inc. 989,800
30,000 Texas Utilities Co. 1,282,500
Total 7,416,963
</TABLE>

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ELECTRIC UTILITIES: WEST -- 4.1%
33,000 Pacificorp $ 734,250
44,100 Pinnacle West Capital Corp. 1,339,538
Total 2,073,788
ENERGY MINERALS -- 1.8%
10,700 Exxon Corp. 929,563
FINANCE -- 2.7%
25,700 Meditrust, REIT 857,738
8,500 Mellon Bank Corp. 484,500
Total 1,342,238
MAJOR U.S. TELECOMMUNICATIONS -- 24.2%
32,500 AT&T Corp. 2,015,000
29,100 Ameritech Corp. 1,727,812
51,700 BellSouth Corp. 2,190,788
45,900 GTE Corp. 2,054,025
48,400 MCI Communications Corp. 1,240,250
31,400 Pacific Telesis Group 1,059,750
40,000 SBC Communications, Inc. 1,970,000
Total 12,257,625
NATURAL GAS DISTRIBUTION -- 4.0%
41,300 MCN Corp. 1,006,688
3,400 New Jersey Resources Corp. 97,750
30,700 Pacific Enterprises 909,488
Total 2,013,926
NON-U.S. UTILITIES -- 4.9%
4,700 Compania Telecomunicacion Chile, ADR 461,188
23,400 Iberdrola SA 240,389
</TABLE>

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
NON-U.S. UTILITIES -- CONTINUED
18,800 (a) Korea Electric Power Corp., ADR $ 455,900
32,600 (a) National Power Co. PLC, ADR 794,625
7,400 Telecomunicacoes Brasileras, ADR 515,225
Total 2,467,327
OIL/GAS TRANSMISSION -- 3.4%
23,200 Enron Corp. 948,300
10,300 Panenergy Corp. 338,613
9,000 Williams Cos., Inc. (The) 445,500
Total 1,732,413
TECHNOLOGY -- 0.7%
6,190 (a) Electronic Data Systems Corp. 332,713
WATER SUPPLY -- 0.5%
6,400 American Water Works Co., Inc. 257,600
TOTAL COMMON STOCKS (IDENTIFIED COST
$37,370,720) 40,271,356
PREFERRED STOCKS -- 9.4%
BASIC INDUSTRY -- 1.5%
21,400 Coeur d'Alene Mines Corp., Conv. Pfd. 422,650
3,000 International Paper Co., Cumulative 133,467
Conv. Pfd., $2.63
4,700 (b) International Paper Co., Cumulative 209,098
Conv. Pfd., Series 144A, $2.63
Total 765,215
CABLE-0.3%
7,900 Merill Lynch & Co., Inc., STRYPES, 174,788
Series Cox, 7.25%
ENERGY MINERALS -- 0.3%
6,000 Sun Co., Inc., Conv. Pfd., Series A, 177,000
$1.80
FINANCE -- 4.3%
4,500 Merrill Lynch & Co., Inc., STRYPES, 254,813
Series SunAmerica, 6.00%
15,400 Merrill Lynch & Co., Inc., STRYPES, 831,600
Series MGIC, $3.12
</TABLE>

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL OR
FOREIGN PAR VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
PREFERRED STOCKS -- CONTINUED
FINANCE -- CONTINUED
7,400 Salomon, Inc., Conv. Pfd., Series FSA, $ 204,425
7.625%
11,600 Sunamerica, Inc., Conv. Pfd., Series 867,100
E, $3.10
Total 2,157,938
NATURAL GAS DISTRIBUTION -- 0.7%
6,100 Noram Financing, Conv. Pfd., 6.25% 330,925
OIL/GAS TRANSMISSION -- 1.3%
8,000 Williams Cos., Inc. (The), Conv. Pfd., 633,000
$7.00
SERVICES -- 1.0%
16,200 Browning-Ferris Industries, Inc., 514,350
ACES, $2.58
TOTAL PREFERRED STOCKS (IDENTIFIED
COST $4,627,796) 4,753,216
CORPORATE BONDS -- 7.2%
HEALTH CARE -- 0.9%
$ 470,000 Alza Corp., Conv. Bond, 5.00%, 460,309
5/1/2006
NON-U.S. UTILITIES -- 2.8%
450,000 New World Infrastructure, Conv. Bond, 432,563
5.00%, 7/15/2001
1,000,000,000 Softe SA, Conv. Bond, 4.25%, 7/30/1998 994,280
Total 1,426,843
RETAIL TRADE -- 0.8%
380,000 Federated Department Stores, Inc., 429,164
Conv. Bond, 5.00%, 10/1/2003
TECHNOLOGY -- 2.7%
160,000 (b) 3Com Corp., Conv. Bond, 10.25%, 248,200
11/1/2001
455,000 (b) Altera Corp., Conv. Bond, 5.75%, 455,996
6/15/2002
190,000 Analog Devices, Inc., Conv. Bond, 213,513
3.50%, 12/1/2000
470,000 (b) Solectron Corp., Conv. Bond, 6.00%, 431,098
3/1/2006
Total 1,348,807
TOTAL CORPORATE BONDS (IDENTIFIED
COST $3,590,394) 3,665,123
</TABLE>

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
<TABLE>
<CAPTION>
PRINCIPAL VALUE IN
AMOUNT U.S. DOLLARS
<C> <S> <C>
(c) REPURCHASE AGREEMENT -- 3.5%

$ 1,800,000 BT Securities Corporation, 5.50%,
dated 6/28/1996, due 7/1/1996
(AT AMORTIZED COST) $ 1,800,000
TOTAL INVESTMENTS (IDENTIFIED COST
$47,388,910)(d) $ 50,489,695
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1996, these securities amounted
to $1,344,392 which represents 2.7% of net assets.

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

(d) The cost of investments for federal tax purposes amounts to $47,388,910.
The net unrealized appreciation of investments on a federal tax basis
amounts to $3,100,785 which is comprised of $3,595,283 appreciation and
$494,498 depreciation at June 30, 1996.

Note: The categories of investments are shown as a percentage of net assets
($50,683,838) at June 30, 1996.

The following acronyms are used throughout this portfolio:

ACES -- Adjustable Convertible Extendable Securities

ADR -- American Depository Receipt

PLC -- Public Limited Company

REIT -- Real Estate Investment Trust

STRYPES -- Structured Yield Product Exchangeable for Stock
(See Notes which are an integral part of the Financial Statements)

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities, at value (identified
and tax cost $47,388,910) $ 50,489,695
Cash 3,319
Income receivable 144,765
Receivable for investments sold 107,731
Total assets 50,745,510
LIABILITIES:
Payable for investments purchased $ 49,936
Accrued expenses 11,736
Total liabilities 61,672
NET ASSETS for 4,488,533 shares outstanding $ 50,683,838
NET ASSETS CONSIST OF:
Paid in capital $ 47,043,278
Net unrealized appreciation of investments and
translation of assets and
liabilities in foreign currency 3,100,826
Accumulated net realized gain on investments and foreign
currency transactions 546,466
Distributions in excess of net investment
income (6,732)
Total Net Assets $ 50,683,838
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
$50,683,838 / 4,488,533 shares outstanding $11.29
</TABLE>

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

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of
$812) $ 724,137
Interest 106,257
Total income 830,394
EXPENSES:
Investment advisory fee $ 151,328
Administrative personnel and services fee 62,158
Custodian fees 17,242
Transfer and dividend disbursing agent fees and
expenses 8,571
Directors'/Trustees' fees 816
Auditing fees 5,204
Legal fees 1,416
Portfolio accounting fees 23,633
Share registration costs 6,228
Printing and postage 15,370
Insurance premiums 1,820
Miscellaneous 6,290
Total expenses 300,076
Waivers --
Waiver of investment advisory fee (127,683)
Net expenses 172,393
Net investment income 658,001
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign
currency transactions 554,276
Net change in unrealized appreciation of investments and translation of
assets and liabilities in foreign currency 827,398
Net realized and unrealized gain on
investments and foreign currency 1,381,674
Change in net assets resulting from
operations $ 2,039,675
</TABLE>

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

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 658,001 $ 552,993
Net realized gain (loss) on investments and
foreign currency
transactions ($554,276 and $202,587,
respectively, as computed for federal tax purposes) 554,276 192,681
Net change in unrealized appreciation
(depreciation) of investments and translation of
assets and liabilities in foreign currency 827,398 2,281,446
Change in net assets resulting from
operations 2,039,675 3,027,120
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (670,369) (545,930)
Distributions from net realized gains on
investments and foreign currency transactions (192,047) --
Change in net assets resulting from
distributions to
shareholders (862,416) (545,930)
SHARE TRANSACTIONS --
Proceeds from sale of shares 21,371,730 27,140,255
Net asset value of shares issued to
shareholders in payment of distributions declared 861,118 542,617
Cost of shares redeemed (2,405,675) (1,458,826)
Change in net assets resulting from share
transactions 19,827,173 26,224,046
Change in net assets 21,004,432 28,705,236
NET ASSETS:
Beginning of period 29,679,406 974,170
End of period (including undistributed net
investment income
of $0 and $5,636, respectively) $ 50,683,838 $ 29,679,406
</TABLE>

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

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, DECEMBER 30,
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 0.18 0.45 0.34
Net realized and unrealized gain (loss) on
investments and
foreign currency 0.31 1.74 (0.19)
Total from investment operations 0.49 2.19 0.15
LESS DISTRIBUTIONS
Distributions from net investment income (0.18) (0.45) (0.34)
Distributions from net realized gain on
investments and
foreign currency transactions (0.05) -- --
Total distributions (0.23) (0.45) (0.34)
NET ASSET VALUE, END OF PERIOD $11.29 $11.03 $ 9.29
TOTAL RETURN(b) 4.54% 24.18% 1.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%* 0.85% 0.60%*
Net investment income 3.26%* 4.62% 4.77%*
Expense waiver/reimbursement(c) 0.63%* 2.24% 54.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $50,684 $29,679 $974
Average commission rate paid $0.0478 -- --
Portfolio turnover 33% 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 13, 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.

(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)

FEDERATED UTILITY FUND II
(FORMERLY, UTILITY FUND)
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1996 (UNAUDITED)

1. ORGANIZATION

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

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS -- Listed foreign and domestic corporate bonds, (other
fixed income and asset-backed securities), and unlisted securities and
private placement securities are generally valued at the mean of the latest
bid and asked price as furnished by an independent pricing service. Listed
foreign and domestic equity securities are valued at the last sale price
reported on a national securities exchange. Short-term securities are valued
at the prices provided by an independent pricing service. However,
short-term securities with remaining maturities of sixty days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. The Fund's restricted securities are valued at the price
provided by dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing committee.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Dividend income and distributions to shareholders are recorded on the
ex-dividend date. Certain dividends from foreign securities may be recorded
after the ex-dividend date based upon when information becomes available
to the Fund.

Withholding taxes on foreign interest and dividends have been provided for
in accordance with the Fund's understanding of the applicable country's tax
rules and rates.

CONCENTRATION OF CREDIT RISK -- The Fund invests in securities of non-U.S.
issuers. Although the Fund maintains a diversified investment portfolio, the
political or economic developments within a particular country or region may
have an adverse effect on the ability of domiciled issuers to meet their
obligations. Additionally, political or economic developments may have an
effect on the liquidity and volatility of portfolio securities and currency
holdings.

At June 30, 1996, the portfolio was diversified with the following
countries:
<TABLE>
<CAPTION>
% OF
COUNTRY NET ASSETS
<S> <C>
Brazil 0.9%
Chile 0.9%
China 0.9%
Great Britain 1.5%
Italy 2.0%
Korea 0.9%
Spain 0.5%
</TABLE>

RESTRICTED SECURITIES -- Restricted securities are securities that may only
be resold upon registration under federal securities laws or in transactions
exempt from such registration. In some cases, the issuer of restricted
securities has agreed to register such securities for resale, at the
issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Trustees. The Fund will not incur any
registration costs upon such resales.

Additional information on each restricted security held at June 30, 1996, is
as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATES ACQUISITION COST
<S> <C> <C>
International Paper Co., Cum. Conf. Pref 12/4/95-4/10/96 $214,056
3Com Corp., Conv. Bond 11/30/95-4/10/96 $241,600
Altera Corp., Conv. Bond 3/25/96-6/7/96 $540,477
Solectron Crop., Conv. Bond 2/15/96-5/8/96 $463,859
</TABLE>

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

3. SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX YEAR
MONTHS ENDED
ENDED DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
Shares sold 1,937,559 2,677,407
Shares issued to shareholders in payment of distributions declared 78,204 52,774
Shares redeemed (218,700) (143,617)
Net change resulting from share transactions 1,797,063 2,586,564
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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

ORGANIZATIONAL EXPENSE -- Organizational and start-up administrative service
expenses of $49,266 were borne initially by the Adviser. The Fund has agreed
to reimburse the Adviser for the organizational and start-up administrative
expenses during the five-year period following the effective date. For the
six months ended June 30, 1996, the Fund paid $9,853 pursuant to this
agreement.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
six months ended June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $31,905,012
SALES $12,924,281
</TABLE>

TRUSTEES

OFFICERS
John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

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

Richard B. Fisher
Vice President

Douglas L. Hein
Assistant Treasurer

S. Elliott Cohan
Assistant Secretary

FEDERATED
UTILITY
FUND II

(formerly, Utility Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996

FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)

[LOGO]

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.

[RECYCLE LOGO]

Cusip 313916108
G00433-03 (8/96)

PRESIDENT'S MESSAGE

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Fund for U.S. Government Securities II, formerly named U.S. Government Bond
Fund. "Federated" has been added to the name to make it easy for investors
to locate all Federated Funds in mutual fund listings of newspapers and
other publications. In addition, the fund's new name reflects the fact that
it has always been managed in the same style as Federated Fund for U.S.
Government Securities, Inc., a mutual fund that has been serving investors
since 1969.

To pursue an attractive level of income, the fund invests primarily in
short-to-intermediate-term U.S. government mortgage-backed securities and
U.S. Treasury notes and bonds.

During the reporting period, stronger economic growth caused interest rates
to rise, which caused bond prices to fall. In this environment, the net
total return of Federated Fund for U.S. Government Securities II was
(0.17%).* This compares to a total return of (1.736%) for the Merrill Lynch
5-Year Treasury Index** and (0.80%) for Lipper U.S. Mortgage Funds*** over
the same time period. The fund paid dividends that totaled $0.29 per share.
On June 30, 1996, its net assets stood at $21.7 million.

Thank you for pursuing income opportunities through Federated Fund for U.S.
Government Securities II. We will continue to keep you up-to-date on your
progress. Your comments and suggestions are always welcome.

Sincerely,

/s/ J. Christopher Donahue

J. Christopher Donahue
President
August 15, 1996

* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance information
does not reflect the charges and expenses of a variable annuity or variable
life insurance contract.
** Merrill Lynch 5-Year U.S. Treasury Index is an unmanaged index tracking
current 5-year Treasury notes. The index is produced by Merrill Lynch,
Pierce, Fenner and Smith, Inc. Investments cannot be made in an index.

*** Lipper Analytical Services, Inc. ranks funds in various 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
"U.S. Mortgage Funds" category in advertising and sales literature.

INVESTMENT REVIEW

Federated Fund for U.S. Government Securities II, a portfolio of Federated
Insurance Series, provides shareholders a professionally managed portfolio
of U.S. government securities. The fund is managed for specific maturity
levels according to management's assumptions on market risk and volatility.
Current investment strategy emphasizes a diversified range of mortgage
securities with coupons averaging 7.68% and a weighted average effective
duration of 4.2 years.

The expanding U.S. economy during the first six months of 1996 made for a
challenging time for U.S. bond investors as interest rates increased on
average one percent across the yield curve. The interest rate sensitive
sectors of the economy led the charge as manufacturing, retail, and housing
posted strong numbers. These sectors in combination with strong labor growth
raised the question of whether the Federal Reserve Board would react by
tightening monetary policy.

During this time period, the performance in the mortgage market was stellar.
Positive factors leading to solid mortgage market performance included
limited new mortgage origination, lower prepayment activity, investors'
desire for incremental yield, and tight corporate spreads. The fund during
this semi-annual reporting period continued its overweight in
mortgage-backed securities.

As of June 30, 1996, total net assets were $21.7 million and the average
30-day net yield as calculated under SEC guidelines was 7.00% based upon the
net asset value of $9.94

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS--16.0%
$ 900,000 Federal Farm Credit Bank, 9.00%, 3/7/2000 $ 971,109
2,500,000 Federal Home Loan Bank, 5.94%, 4/30/1998 2,489,200
TOTAL INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $3,469,005) 3,460,309
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--65.5%
3,571,457 Federal Home Loan Mortgage Corp., 7.00% - 9.00%,
6/1/2010 - 3/1/2026 3,553,053
1,200,000 (a)Federal Home Loan Mortgage Corp., 7.50%, 7/1/2026 1,186,488
3,309,606 Federal National Mortgage Association, 7.00% - 8.00%,
11/1/2024 - 11/1/2025 3,227,819
460,000 (a)Federal National Mortgage Association, 7.00%, 7/1/2011 454,820
1,000,000 (a)Federal National Mortgage Association, 7.50%, 7/1/2026 988,110
4,630,013 Government National Mortgage Association, 7.00% - 11.00%,
9/15/2015 - 11/15/2025 4,783,000
TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $14,350,005) 14,193,290
U.S. TREASURY OBLIGATIONS--13.9%
1,320,000 U.S. Treasury Bonds, 9.25%, 2/15/2016 1,632,787
1,320,000 U.S. Treasury Notes, 7.50%, 11/15/2001 1,378,911
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $3,020,508) 3,011,698
(b)REPURCHASE AGREEMENTS--15.6%
725,000 BT Securities Corp., 5.50%, dated 6/28/1996, due 7/1/1996 725,000
460,000 (c)J.P. Morgan Securities, Inc., 5.37%, dated 6/17/1996, due 7/17/1996 460,000
2,200,000 (c)UBS Securities, Inc., 5.36%, dated 6/13/1996, due 7/15/1996 2,200,000
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) 3,385,000
TOTAL INVESTMENTS (IDENTIFIED COST $24,224,518)(d) $ 24,050,297
</TABLE>

(a) Indicates securities subject to dollar roll transactions with a total
market value of $2,629,418.

(b) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.

(c) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days if the creditworthiness of the issuer is
downgraded.

(d) The cost of investments for federal tax purposes amounts to $24,224,518.
The net unrealized depreciation of investments on a federal tax basis
amounts to $174,221 which is comprised of $35,075 appreciation and $209,296
depreciation at June 30, 1996.

Note: The categories of investments are shown as a percentage of net assets
($21,665,362) at June 30, 1996.

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities $ 20,665,297
Investments in repurchase agreements 3,385,000
Total investments in securities, at value
(identified and tax cost $24,224,518) $ 24,050,297
Cash 4,754
Income receivable 203,027
Prepaid expenses 8,062
Total assets 24,266,140
LIABILITIES:
Payable for dollar roll transactions 2,600,256
Capital gain distribution payable 403
Income distribution payable 119
Total liabilities 2,600,778
NET ASSETS for 2,180,660 shares outstanding $ 21,665,362
NET ASSETS CONSIST OF:
Paid in capital $ 21,992,052
Net unrealized depreciation of investments (174,221)
Accumulated net realized loss on investments (160,061)
Undistributed net investment income 7,592
Total Net Assets $ 21,665,362
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$21,665,362 O 2,180,660 shares outstanding $9.94
</TABLE>

(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $13,034) $ 572,644
EXPENSES:
Investment advisory fee $ 50,527
Administrative personnel and services fee 62,158
Custodian fees 10,559
Transfer and dividend disbursing agent fees and expenses 8,352
Directors'/Trustees' fees 796
Auditing fees 3,448
Legal fees 1,098
Portfolio accounting fees 22,677
Share registration costs 4,612
Printing and postage 10,404
Insurance premiums 1,820
Miscellaneous 6,398
Total expenses 182,849
Waivers and reimbursements--
Waiver of investment advisory fee $ (50,527)
Reimbursement of other operating expenses (64,582)
Total waivers and reimbursements (115,109)
Net expenses 67,740
Net investment income 504,904
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss on investments (160,058)
Net change in unrealized depreciation of investments (350,896)
Net realized and unrealized loss on investments (510,954)
Change in net assets resulting from operations $ (6,050)
</TABLE>

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 504,904 $ 304,371
Net realized gain (loss) on investments ($160,058 net loss and
$68,245 net gain, respectively, as computed for federal
tax purposes) (160,058) 68,245
Net change in unrealized appreciation (depreciation) (350,896) 176,675
Change in net assets resulting from operations (6,050) 549,291
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (500,579) (301,104)
Distributions from net realized gains (68,242) --
Change in net assets resulting from distributions
to shareholders (568,821) (301,104)
SHARE TRANSACTIONS--
Proceeds from sale of shares 16,136,945 13,444,158
Net asset value of shares issued to shareholders in
payment of distributions declared 565,138 292,129
Cost of shares redeemed (6,726,079) (2,964,009)
Change in net assets resulting from share transactions 9,976,004 10,772,278
Change in net assets 9,401,133 11,020,465
NET ASSETS:
Beginning of period 12,264,229 1,243,764
End of period (including undistributed net investment
income of $7,592 and $3,267, respectively) $ 21,665,362 $ 12,264,229
</TABLE>

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JUNE 30, 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 0.29 0.54 0.27
Net realized and unrealized gain
(loss) on investments (0.31) 0.30 --
Total from investment operations (0.02) 0.84 0.27
LESS DISTRIBUTIONS
Distributions from net
investment income (0.29) (0.54) (0.27)
Distribution from net realized
gain on investments (0.04) -- --
Total distributions (0.33) (0.54) (0.27)
NET ASSET VALUE, END OF PERIOD $ 9.94 $10.29 $ 9.99
TOTAL RETURN(b) (0.17%) 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) 1.37%* 4.81% 32.83%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $21,665 $12,264 $1,244
Portfolio turnover 79% 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.

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
(FORMERLY, U.S. GOVERNMENT BOND FUND)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of seven portfolios. The financial
statements included herein are only those of Federated Fund for U.S.
Government Securities II (the "Fund"), a diversified portfolio. The
financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated and a shareholder's interest is
limited to the portfolio in which shares are held. The investment objective
of the Fund is to provide current income.
Effective April 15, 1996, the Board of Trustees ("Trustees") changed the
name of the Trust from Insurance Management Series to Federated Insurance
Series and the name of the Fund from U.S. Government Bond Fund to Federated
Fund for U.S. Government Securities II.

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS -- U.S. government securities are generally valued at
the mean of the latest bid and asked price as furnished by an independent
pricing service. Short-term securities are valued at the prices provided by
an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.

DOLLAR ROLL TRANSACTIONS -- The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA, and FHLMC, in
which the Fund sells mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon,
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.

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

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

3. SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
Shares sold 1,603,553 1,332,658
Shares issued to shareholders in payment of distributions declared 56,391 28,952
Shares redeemed (671,177) (294,269)
Net change resulting from Fund share transactions 988,767 1,067,341
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.60% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive any portion of its fee and/or
reimburse certain operating expenses of the Fund. The Adviser can modify
or terminate this voluntary waiver and/or reimbursement at any time at its
sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC
is based on the size, type, and number of accounts and transactions made
by shareholders.

ORGANIZATIONAL EXPENSES -- Organizational expenses of $51,122 were borne
initially by the Adviser. The Fund has agreed to reimburse the Adviser for
the organizational expenses during the five-year period following effective
date. For the period ended June 30, 1996, the Fund paid $6,876 pursuant to
this agreement.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $23,265,687
SALES $12,652,143
</TABLE>

FEDERATED
FUND FOR U.S.
GOVERNMENT
SECURITIES II
(formerly, U.S. Government Bond Fund)

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996
FEDERATED INSURANCE SERIES
(FORMERLY, INSURANCE MANAGEMENT SERIES)

[LOGO]

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.
[RECYCLE LOGO]

Cusip 313916207
G00433-01 (8/96)