FEDERATED INSURANCE SERIES, N-30D, 1997-08-21

FEDERATED INSURANCE SERIES
N-30D, 1997-08-21

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PRESIDENT'S MESSAGE

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
American Leaders Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1997, through June 30,
1997. It begins with a commentary by the fund's portfolio manager, which is
followed by a complete listing of the fund's stock holdings and the fund's
financial statements.

At the end of the reporting period, the selected high-quality stocks included 77
holdings that represent major industry groups and include leaders such as
Bristol-Myers Squibb, Chevron, Exxon, General Motors, Intel, ITT,
Kimberly-Clark, Merck, Mobil, PepsiCo, Rubbermaid and Wal-Mart. The fund's
holdings performed very well in a stock market that was highly favorable during
most of the reporting period.

The fund achieved a six-month total return of 17.98% through income of $0.10 per
share, capital gains of $0.36 per share, and a net asset value increase of
14.68%.* On June 30, 1997, total net assets reached $222.2 million.

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

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1997

* Performance quoted represents past performance and is not indicative of future
results. 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 U.S. stock market continues to show surprising strength in 1997. However,
the volatility on a daily basis has increased as investors remain uncertain with
regard to the direction of the economy and interest rates. Our focus on quality
and strict valuation parameters should continue to benefit our shareholders.

The dangers of "market timing" were apparent during the second quarter of 1997.
In early April, the conventional wisdom was that the economy was too strong,
which would force the Federal Reserve Board (the "Fed") to increase interest
rates in an effort to thwart inflation. Many investors began reducing their
exposure to U.S. equities. What followed was an apparent slowdown in the economy
which convinced investors that there would be no need to change current interest
rates. This renewed optimism led to a market increase from the low single digits
to a 20% total return by June 30, 1997.

While we do believe that there are some industries and numerous stocks that are
overvalued, we do not believe that market timing is a logical way to help
protect our shareholders. We believe our valuation disciplines which force us to
exit overpriced securities and focus on undervalued situations are in our
shareholders best interests. Given current valuations, our recent emphasis has
been on high-quality, well-run companies which for various reasons have not
fully participated in the unprecedented bull market of the past two and a half
years.

Our largest industry underweight continues to be Technology as the valuations
continue at all time highs and the fundamental picture is not as robust as it
was two years ago. Conversely, we remain overweight in Energy as we believe
global industrialization should continue to expand demand while historic under
investment has kept supply constrained.

COMMENTS ON TRANSACTIONS:

SUN COMPANY, INC.-- The largest refiner in the United States which is in the
midst of a company restructuring, as well as an improving fundamental outlook
for its industry. Additionally, its yield is 50% greater than the market
overall.

LEXMARK INTERNATIONAL GROUP "A"-- An IBM spinoff which manufactures printers for
personal computers. Lexmark, along with Hewlett Packard, have been gaining
market share in the laser printer market at the expense of their Japanese
competitors.

VIACOM, INC. -- Dominant franchises such as MTV and Blockbuster Video in the
Entertainment industry, allow us to diversify and do so at unprecedented low
valuations.

READERS DIGEST ASSOCIATION, INC. -- Has high-quality, globally recognized
products which have been under pressure as management has had a flawed strategy
of trying to sell more products to their existing clients versus increasing
their client base. The stock currently trades at valuations, we believe, reflect
investors emotions, not the value of the company. While we admit this is a
turnaround situation, the current yield of 6.3% gives us incentive to be
patient.

DOW CHEMICAL CO.-- Has been shunned by investors who are concerned about the
"polyethelene cycle." Current valuations are extremely low for this dominant
company. They have been behind competitors in restructuring efforts, allowing
for more future potential.

FEDERATED AMERICAN LEADERS FUND II
PORTFOLIO OF INVESTMENTS

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--92.7%
BASIC INDUSTRY--5.2%
31,500 Betz Laboratories, Inc. $ 2,079,000
28,000 Consolidated Papers, Inc. 1,512,000
26,500 Dow Chemical Co. 2,308,812
65,000 Morton International, Inc. 1,962,188
106,500 USX-U.S. Steel Group, Inc. 3,734,156
Total 11,596,156
CONSUMER DURABLES--5.4%
71,000 Borg-Warner Automotive, Inc. 3,838,437
49,000 Centex Corp. 1,990,625
30,000 General Motors Corp. 1,670,625
149,500 Rubbermaid, Inc. 4,447,625
Total 11,947,312
CONSUMER NON-DURABLES--10.0%
34,500 CPC International, Inc. 3,184,781
42,000 Kimberly-Clark Corp. 2,089,500
99,500 PepsiCo, Inc. 3,737,469
40,000 Philip Morris Cos., Inc. 1,775,000
52,500 RJR Nabisco Holdings Corp. 1,732,500
105,500 Russell Corp. 3,125,438
37,500 Tambrands, Inc. 1,870,313
20,500 Unilever N.V., ADR 4,469,000
Total 21,984,001
ENERGY MINERALS--12.6%
39,000 Amerada-Hess Corp. 2,166,937
35,500 Chevron Corp. 2,624,781
45,500 Exxon Corp. 2,798,250
40,000 Mobil Corp. 2,795,000
</TABLE>

FEDERATED AMERICAN LEADERS FUND II

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY MINERALS--CONTINUED
103,400 Occidental Petroleum Corp. $ 2,592,221
45,200 Royal Dutch Petroleum Co., ADR 2,457,750
144,000 Sun Co., Inc. 4,464,000
20,000 Texaco, Inc. 2,175,000
136,000 USX Corp. 3,927,000
53,000 Unocal Corp. 2,057,063
Total 28,058,002
FINANCE--12.4%
29,000 Allstate Corp. 2,117,000
62,900 Bear Stearns Cos., Inc. 2,150,394
36,000 (a)Boston Properties, Inc. 990,000
26,000 CIGNA Corp. 4,615,000
44,000 Federal National Mortgage Association 1,919,500
66,000 Marsh & McLennan Cos., Inc. 4,710,750
54,500 Morgan Stanley, Dean Witter, Discover & 2,346,906
Co.
32,500 National City Corp. 1,706,250
76,000 Nationwide Financial Services, Inc., 2,018,750
Class A
27,000 Republic New York Corp. 2,902,500
33,533 Travelers Group, Inc. 2,114,675
Total 27,591,725
HEALTH CARE--9.9%
42,500 Abbott Laboratories 2,836,875
33,500 American Home Products Corp. 2,562,750
91,500 (a)Biomet, Inc. 1,704,187
50,500 Bristol-Myers Squibb Co. 4,090,500
58,000 Columbia/HCA Healthcare Corp. 2,280,125
87,500 Healthsource, Inc. 1,897,656
20,500 Merck & Co., Inc. 2,121,750
</TABLE>

FEDERATED AMERICAN LEADERS FUND II

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
45,500 United Healthcare Corp. $ 2,366,000
53,000 (a)Vencor, Inc. 2,239,250
Total 22,099,093
PRODUCER MANUFACTURING--6.0%
157,500 ITT Industries, Inc. 4,055,625
77,500 Ingersoll-Rand Co. 4,785,625
89,000 (a)Lexmark Intl. Group, Class A 2,703,375
18,500 Loews Corp. 1,852,313
Total 13,396,938
RETAIL TRADE--5.3%
83,200 Dayton-Hudson Corp. 4,425,200
243,500 (a)K Mart Corp. 2,982,875
126,500 Wal-Mart Stores, Inc. 4,277,281
Total 11,685,356
SERVICES--4.9%
71,500 Block (H&R), Inc. 2,305,875
96,500 Browning-Ferris Industries, Inc. 3,208,625
111,500 Readers Digest Association, Inc., Class 3,198,656
A
44,400 (a)Viacom, Inc., Class A 1,307,025
31,500 (a)Viacom, Inc., Class B 945,000
Total 10,965,181
TECHNOLOGY--8.5%
66,500 AMP, Inc. 2,776,375
57,500 (a)Cabletron Systems, Inc. 1,627,969
42,000 General Motors Corp., Class H 2,425,500
20,500 Hewlett-Packard Co. 1,148,000
8,500 Intel Corp. 1,205,406
28,000 International Business Machines Corp. 2,525,250
</TABLE>

FEDERATED AMERICAN LEADERS FUND II

<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
50,000 Lucent Technologies, Inc. $ 3,603,125
78,500 (a)Storage Technology Corp. 3,493,250
Total 18,804,875
TRANSPORTATION--2.2%
32,000 (a)AMR Corp. 2,960,000
62,000 CNF Transportation, Inc. 1,999,500
Total 4,959,500
UTILITIES--10.3%
41,000 Coastal Corp. 2,180,687
30,000 Columbia Gas System, Inc. 1,957,500
35,500 GTE Corp. 1,557,563
101,000 Houston Industries, Inc. 2,165,188
95,300 MCI Communications Corp. 3,648,203
135,500 P G & E Corp. 3,285,875
61,000 SBC Communications, Inc. 3,774,375
295,000 (a)Tele-Communications, Inc., Class A 4,388,125
Total 22,957,516
TOTAL COMMON STOCKS (IDENTIFIED COST 206,045,655
$167,118,349)
(B)REPURCHASE AGREEMENT--7.3%
$ 16,195,000 BT Securities Corporation, 6.00%, dated
6/30/1997, due 7/1/1997
(AT AMORTIZED COST) 16,195,000
TOTAL INVESTMENTS (IDENTIFIED COST $ 222,240,655
$183,313,349)(C)
</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 $183,313,914.
The net unrealized appreciation of investments on a federal tax basis
amounts to $38,926,741 which is comprised of $39,687,323 appreciation and
$760,582 depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($222,178,742) at June 30, 1997.

The following acronym is used throughout this portfolio:

ADR --American Depositary Receipt

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

FEDERATED AMERICAN LEADERS FUND II
STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost
$183,313,349 and tax cost $183,313,914) $222,240,655
Income receivable 334,640
Total assets 222,575,295
LIABILITIES:
Payable for investments purchased $ 340,771
Payable to Bank 13,030
Payable for taxes withheld 5,509
Accrued expenses 37,243
Total liabilities 396,553
NET ASSETS for 12,694,935 shares outstanding $222,178,742
NET ASSETS CONSIST OF:
Paid in capital $176,611,281
Net unrealized appreciation of investments 38,927,306
Accumulated net realized gain on investments 6,593,041
Undistributed net investment income 47,114
Total Net Assets $222,178,742
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$222,178,742 / 12,694,935 shares outstanding $17.50
</TABLE>

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

FEDERATED AMERICAN LEADERS FUND II
STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)

<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $13,015) $ 1,628,438
Interest 197,878
Total income 1,826,316
EXPENSES:
Investment advisory fee $ 653,872
Administrative personnel and services fee 67,341
Custodian fees 12,150
Transfer and dividend disbursing agent fees and expenses 10,370
Directors'/Trustees' fees 1,027
Auditing fees 6,500
Legal fees 2,302
Portfolio accounting fees 32,512
Share registration costs 27,232
Printing and postage 15,743
Insurance premiums 1,991
Miscellaneous 7,193
Total expenses 838,233
Waivers--
Waiver of investment advisory fee (93,342)
Net expenses 744,891
Net investment income 1,081,425
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 6,597,074
Net change in unrealized appreciation of investments 22,015,130
Net realized and unrealized gain on investments 28,612,204
Change in net assets resulting from operations $ 29,693,629
</TABLE>

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

FEDERATED AMERICAN LEADERS FUND II
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,081,425 $ 1,422,431
Net realized gain (loss) on investments ($6,597,074 and
$3,738,194, respectively, as computed for federal tax purposes) 6,597,074 3,780,324
Net change in unrealized appreciation 22,015,130 12,783,766
Change in net assets resulting from operations 29,693,629 17,986,521
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,145,629) (1,311,113)
Distributions from net realized gains (3,728,320) (450,672)
Change in net assets resulting from distributions to shareholders (4,873,949) (1,761,785)
SHARE TRANSACTIONS--
Proceeds from sale of shares 70,594,437 89,014,893
Net asset value of shares issued to shareholders in payment of
distributions declared 4,873,946 1,761,418
Cost of shares redeemed (20,325,785) (13,298,117)
Change in net assets resulting from share transactions 55,142,598 77,478,194
Change in net assets 79,962,278 93,702,930
NET ASSETS:
Beginning of period 142,216,464 48,513,534
End of period (including undistributed net investment income
of $47,114 and $111,318, respectively) $ 222,178,742 $ 142,216,464
</TABLE>

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

FEDERATED AMERICAN LEADERS FUND II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.26 $12.80 $ 9.74 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.09 0.19 0.20 0.19
Net realized and unrealized gain (loss) on 2.61 2.54 3.06 (0.26)
investments
Total from investment operations 2.70 2.73 3.26 (0.07)
LESS DISTRIBUTIONS
Distributions from net investment income (0.10) (0.18) (0.19) (0.19)
Distributions in excess of net investment income(b) -- -- (0.01) --
Distributions from net realized gain on investments (0.36) (0.09) -- --
Total distributions (0.46) (0.27) (0.20) (0.19)
NET ASSET VALUE, END OF PERIOD $17.50 $15.26 $12.80 $ 9.74
TOTAL RETURN(C) 17.98% 21.58% 33.71% (0.70%)
Ratios to average net assets
Expenses 0.85%* 0.85% 0.85% 0.54%*
Net investment income 1.23%* 1.54% 2.03% 2.58%*
Expense waiver(d) 0.11%* 0.22% 1.36% 25.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $222,179 $142,216 $48,514 $2,400
Average commission rate paid(e) $0.06 $0.0012 -- --
Portfolio turnover 31% 90% 43% 32%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 10, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (start of business) to January 31, 1994, the fund had no investment
activity.

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

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

(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

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

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

FEDERATED AMERICAN LEADERS FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated 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.

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.

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

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

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

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

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

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

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
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
Shares sold 4,334,883 6,346,064
Shares issued to shareholders in payment of distributions declared 304,670 124,400
Shares redeemed (1,266,853) (938,427)
Net change resulting from share transactions 3,372,700 5,532,037
</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.

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 start-up administrative service
expenses of $47,855 were borne initially by Adviser. The Fund has agreed to
reimburse Adviser for the organizational and start-up administrative expenses
during the five-year period following effective date. For the period ended June
30, 1997, the Fund paid $12,761 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, 1997, were as follows:

PURCHASES $98,187,761
SALES $57,377,549

TRUSTEES

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

OFFICERS
John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

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

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

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

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1997

FEDERATED INSURANCE SERIES

[Graphic]
Federated Investors
Federated Securities Corp., Distributor

Cusip 313916405
G00433-04 (8/97)

[Graphic]

FEDERATED EQUITY INCOME FUND II

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

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

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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

* Computed on an annualized basis.

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

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

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

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

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

"As of July 7, 1997, Aetna Retirement Services Central Valuation Unit, Hartford,
Connecticut owned 100.00% of the voting securities of Federated Equity Income
Fund II, and therefore, may for certain purposes be deemed to control the Fund
and be able to affect the outcome of certain matters presented for a vote of
shareholders."

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

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

FEDERATED EQUITY INCOME FUND II
PORTFOLIO OF INVESTMENTS

JUNE 30, 1997 (UNAUDITED)

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

FEDERATED EQUITY INCOME FUND II

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

FEDERATED EQUITY INCOME FUND II

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

FEDERATED EQUITY INCOME FUND II

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

FEDERATED EQUITY INCOME FUND II

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

(a) Non-income producing security.

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

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

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

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

The following acronyms are used throughout this portfolio:

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

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

FEDERATED EQUITY INCOME FUND II
STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997 (UNAUDITED)

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

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

FEDERATED EQUITY INCOME FUND II
STATEMENT OF OPERATIONS

PERIOD ENDED JUNE 30, 1997* (UNAUDITED)

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

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

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

FEDERATED EQUITY INCOME FUND II
STATEMENT OF CHANGES IN NET ASSETS

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

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

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

FEDERATED EQUITY INCOME FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

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

2. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

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

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

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

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

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

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

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

3. SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:

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

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

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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

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

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

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

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

5. INVESTMENT TRANSACTIONS

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

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

TRUSTEES

OFFICERS

John F. Donahue
Chairman

J. Christopher Donahue
President

Edward C. Gonzales
Executive Vice President

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

Richard B. Fisher
Vice President

Matthew S. Hardin
Assistant Secretary

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

FEDERATED EQUITY INCOME FUND II

SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS

DATED APRIL 22, 1997

JUNE 30, 1997

[Graphic]
Federated Investors
Federated Securities Corp., Distributor

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

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Growth Strategies Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1997, through June 30,
1997. It begins with a commentary by the fund's portfolio managers, which is
followed by a complete listing of the fund's growth stock holdings and the
financial statements.

Federated Growth Strategies Fund II is managed to pursue long-term investment
growth through a highly diversified portfolio of common stocks issued by large,
quality companies. At the end of the reporting period, the fund's 130 holdings
included well-known names such as Allstate, Avon, Coca-Cola, Dell Computer,
General Electric, Home Depot, Intel, Johnson & Johnson, Microsoft, Nike, Pfizer,
Sony and Travelers Group.

This diversified portfolio performed very well in the continued favorable stock
market environment during the six-month reporting period. The fund's total
return of 14.60% was due to a net asset value increase of 14%, a capital gains
distribution of $0.07 per share, and an income distribution totaling $0.02 per
share.* On June 30, 1997, total net assets reached $31.4 million.

Thank you for putting your money to work in quality 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,

[Graphic]

J. Christopher Donahue
President
August 15, 1997

* Performance quoted reflects past performance and is not indicative of future
results. 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 stock market was a great place to be in the second quarter of 1997. Stock
prices rose more than many had expected, largely owing to positive surprises
with regard to both inflation, which was lower than forecasted, and profits,
which exceeded consensus expectations. The price to earnings ratio of the
Standard & Poor's Index of 500 Common Stocks* ("S&P 500") has risen as consensus
expectations for inflation have been reduced, and confidence that profits will
continue to grow has risen. This confidence has been augmented by recent data
suggesting that the pace of economic growth has moderated. The second quarter of
the year, we believe, can be summarized in four points:

* bond yields started the quarter at nearly 7.10%, traded up to almost 7.20%,
then drifted lower to end the quarter at 6.78%,

* big and small stocks alike (as measured by S&P 500 and the Standard & Poor's
600 Small Cap Index*, respectively) did great, up 17.5% and 18.1%,
respectively, as did the NASDAQ Over-the-Counter Composite Index,** which rose
18.6%,

* market breadth was much broader than in the first quarter, as positive
earnings releases were spread out across stocks of all sizes and

* the quarter altered investors' opinions with regard to the strength of the
economy, as weaker economic statistics combined with decelerating inflation
indicators to ebb fears of higher interest rates, helping both stocks and
bonds to start pricing in a moderating economy for the rest of 1997.

The moderating economic data helped the TECHNOLOGY sector become the strongest
performer for the quarter, as investors moved into high-growth areas. Other
outperforming sectors included HEALTH CARE (aided again by large drug
companies), PRODUCER MANUFACTURING (heavily weighted with GENERAL ELECTRIC) and
FINANCE. The sectors that lagged notably included the most economically
sensitive sectors, namely, BASIC INDUSTRY, TRANSPORTATION and CONSUMER DURABLES.

We maintain our conviction that the economy will grow more slowly than expected
throughout the second half of 1997. Recent declines in indicators of consumer
purchases, the continued lack of core price inflation at either the producer or
consumer level and the absence of growth in capital goods orders (excluding
defense and aircraft orders) all tell us the current pace of economic growth is
not sustainable. As consensus views on the economy shift to reflect more
moderation, money should flow into stocks that are less sensitive to the
strength of the economy. Consequently, as we have for the last several quarters,
we continue to favor, with modest overweights, sectors that offer the potential
for stronger secular growth namely TECHNOLOGY, FINANCE and HEALTH CARE. We are
also modestly underweight in economically sensitive sectors such as PRODUCER
MANUFACTURING, BASIC INDUSTRY, CONSUMER DURABLES and UTILITIES.

* Standard & Poor's Index of 500 Common Stocks and Standard & Poor's 600 Small
Cap Index are unmanaged composite indices of common stocks in industrial,
transportation and financial and public utility companies, and can be used to
compare 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
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--96.7%
BASIC INDUSTRY--3.9%
5,600 BMC Industries, Inc. $ 191,800
5,500 Freeport-McMoRan Copper & Gold, Inc., Class B 171,187
5,400 Monsanto Co. 232,537
2,700 Praxair, Inc. 151,200
9,500 (a)Royal Group Technologies Ltd. 251,750
9,200 (a)Steel Dynamics, Inc. 230,000
Total 1,228,474
CONSUMER DURABLES--3.1%
6,100 Carlisle Cos., Inc. 212,737
4,600 Honda Motor Co. Ltd., ADR 276,862
6,300 Leggett and Platt, Inc. 270,900
2,300 Sony Corp., ADR 202,400
Total 962,899
CONSUMER NON-DURABLES--9.5%
3,800 Avon Products, Inc. 268,137
4,000 Campbell Soup Co. 200,000
3,900 Coca-Cola Co. 263,250
2,400 Colgate-Palmolive Co. 156,600
1,900 Gillette Co. 180,025
4,500 Interstate Bakeries Corp. 266,906
3,900 (a)Jones Apparel Group, Inc. 186,225
4,400 Kimberly-Clark Corp. 218,900
2,700 Nike, Inc., Class B 157,612
7,700 Philip Morris Cos., Inc. 341,687
1,900 Procter & Gamble Co. 268,375
6,000 (a)Tommy Hilfiger Corp. 241,125
7,000 Universal Corp. 222,250
Total 2,971,092
</TABLE>
FEDERATED GROWTH STRATEGIES FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
ENERGY MINERALS--8.6%
4,400 (a)BJ Services Co. $ 235,950
8,100 Baker Hughes, Inc. 313,369
2,826 British Petroleum Co. PLC, ADR 211,656
4,100 (a)Diamond Offshore Drilling, Inc. 320,312
3,300 (a)ENSCO International, Inc. 174,075
5,200 (a)Global Marine, Inc. 120,900
7,000 (a)Nabors Industries, Inc. 175,000
8,900 (a)Oryx Energy Co. 188,012
4,100 (a)Petroleum Geo-Services, ADR 200,387
5,800 (a)Rowan Companies, Inc. 163,487
3,200 Royal Dutch Petroleum Co., ADR 174,000
4,000 (a)Smith International, Inc. 243,000
4,500 Unocal Corp. 174,656
Total 2,694,804
FINANCE--18.9%
1,650 Aegon N.V. 115,654
5,550 Aflac, Inc. 262,237
6,800 Ahmanson (H.F.) & Co. 292,400
3,900 Allstate Corp. 284,700
1,600 American International Group, Inc. 239,000
6,100 Bank of New York Co., Inc. 265,350
4,500 BankAmerica Corp. 290,531
9,100 (a)Catellus Development Corp. 164,937
3,200 Citicorp 385,800
7,600 Conseco, Inc. 281,200
13,425 MBNA Corp. 491,691
2,500 MGIC Investment Corp. 119,844
5,500 Mellon Bank Corp. 248,187
3,200 Merrill Lynch & Co., Inc. 190,800
</TABLE>
FEDERATED GROWTH STRATEGIES FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED

FINANCE--CONTINUED
4,525 Morgan Stanley, Dean Witter, Discover & Co. $ 194,858
6,000 NationsBank Corp. 387,000
300 Providian Corp. 9,637
3,800 Providian Financial Corp. 122,075
8,300 Schwab (Charles) Corp. 337,706
6,900 SunAmerica, Inc. 336,375
3,800 T. Rowe Price Associates 196,175
7,466 Travelers Group, Inc. 470,825
6,400 Travelers Group, Inc., Class A 255,200
Total 5,942,182
HEALTH CARE--13.8%
6,600 (a)BioChem Pharma, Inc. 146,850
6,300 (a)Centocor, Inc. 195,694
4,000 Guidant Corp. 340,000
4,600 HBO & Co. 316,825
10,200 (a)HEALTHSOUTH Corp. 254,362
3,700 Johnson & Johnson 238,187
5,700 Jones Medical Industries, Inc. 270,750
2,600 Lilly (Eli) & Co. 284,213
4,600 (a)Liposome Co., Inc. 41,113
3,600 Merck & Co., Inc. 372,600
2,800 (a)Oxford Health Plans, Inc. 200,900
3,700 Pfizer, Inc. 442,150
3,600 (a)Quintiles Transnational Corp. 250,650
7,900 (a)Safeskin Corp. 232,556
2,900 Teva Pharmaceutical Industries, Ltd., ADR 187,775
6,000 (a)Universal Health Services, Inc., Class B 231,000
4,000 (a)Vencor, Inc. 169,000
1,300 Warner-Lambert Co. 161,525
Total 4,336,150
</TABLE>
FEDERATED GROWTH STRATEGIES FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--6.1%
9,100 (a)Cable Design Technologies, Class A $ 267,881
3,800 (a)EVI, Inc. 159,600
6,800 General Electric Co. 444,550
4,300 Precision Castparts Corp. 256,388
3,900 Tyco International, Ltd. 271,294
7,700 (a)U.S. Filter Corp. 209,825
10,100 (a)U.S. Office Products Co. 308,681
Total 1,918,219
RETAIL TRADE--4.1%
5,200 (a)Bed Bath & Beyond, Inc. 157,950
9,200 (a)General Nutrition Cos., Inc. 257,600
2,200 Home Depot, Inc. 151,663
12,100 Pier 1 Imports, Inc. 320,650
3,200 (a)Safeway, Inc. 147,600
9,900 TJX Cos., Inc. 261,113
Total 1,296,576
SERVICES--3.0%
3,500 (a)HFS, Inc. 203,000
5,400 New York Times Co., Class A 267,300
13,500 (a)Philip Services Corp. 214,313
6,500 (a)USA Waste Services, Inc. 251,063
Total 935,676
TECHNOLOGY--19.4%
5,600 (a)ADC Telecommunications, Inc. 186,900
6,400 (a)Advanced Micro Devices, Inc. 230,400
2,900 (a)Altera Corp. 146,450
5,500 (a)Applied Materials, Inc. 389,469
2,200 (a)Ascend Communications 86,625
5,300 (a)Cadence Design Systems, Inc. 177,550
</TABLE>
FEDERATED GROWTH STRATEGIES FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
1,800 (a)Cisco Systems, Inc. $ 120,825
3,200 (a)Compaq Computer Corp. 317,600
1,900 (a)Dell Computer Corp. 223,131
9,100 (a)FORE Systems, Inc. 123,988
5,400 (a)HNC Software 205,875
3,100 Intel Corp. 439,619
18,100 (a)Iomega Corp. 359,738
7,200 (a)LSI Logic Corp. 230,400
4,800 Lucent Technologies, Inc. 345,900
8,600 (a)Mastech Corp. 173,075
5,100 (a)Microsoft Corp. 644,513
2,700 (a)Netscape Communications 86,569
3,300 (a)Oracle Corp. 166,238
3,300 (a)Qualcomm, Inc. 167,888
4,800 (a)Rambus, Inc. 223,200
7,700 (a)Sun Microsystems, Inc. 286,584
4,900 Telefonaktiebolaget LM Ericsson, Class B 192,938
3,300 (a)Tellabs, Inc. 184,388
1,700 Texas Instruments, Inc. 142,906
2,900 United Technologies Corp. 240,700
Total 6,093,469
TRANSPORTATION--0.8%
8,700 Expeditors International Washington, Inc. 246,863
UTILITIES--5.5%
6,500 (a)CalEnergy Co., Inc. 247,000
11,900 Cincinnati Bell, Inc. 374,850
6,200 (a)IXC Communications, Inc. 162,750
3,400 (a)Qwest Communications International, Inc. 92,650
4,800 Sonat, Inc. 246,000
</TABLE>
FEDERATED GROWTH STRATEGIES FUND II
<TABLE>
<CAPTION>
SHARES OR
PAR VALUE VALUE
<C> <S> <C>
COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
3,300 Telefonos de Mexico, Class L, ADR $ 157,575
13,700 (a)WorldCom, Inc. 438,400
Total 1,719,225
TOTAL COMMON STOCKS (IDENTIFIED COST $26,001,814) 30,345,629
PREFERRED STOCKS--0.4%
TRANSPORTATION--0.4%
1,600 Continental Airlines, Inc., Conv. Pfd., $4.25 (IDENTIFIED COST $102,125) 126,411
(B)REPURCHASE AGREEMENT--5.3%
$ 1,670,000 BT Securities Corporation, 6.00%, dated 6/30/1997, due 7/1/1997
(AT AMORTIZED COST) 1,670,000
TOTAL INVESTMENTS (IDENTIFIED COST $27,773,939)(C) $ 32,142,040
</TABLE>

(a) Non-income producing security.

(c) The cost of investments for federal tax purposes amounts to $27,773,939. The
net unrealized appreciation of investments on a federal tax basis amounts to
$4,368,101 which is comprised of $4,646,528 appreciation and $278,427
depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($31,377,323) at June 30, 1997.

The following acronyms are used throughout this portfolio:

ADR --American Depositary Receipt
PLC --Public Limited Company

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

FEDERATED GROWTH STRATEGIES FUND II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $27,773,939) $ 32,142,040
Cash 2,594
Income receivable 10,720
Receivable for investments sold 439,910
Total assets 32,595,264
LIABILITIES:
Payable for investments purchased $ 1,185,524
Payable for taxes withheld 140
Accrued expenses 32,277
Total liabilities 1,217,941
NET ASSETS for 2,153,533 shares outstanding $ 31,377,323
NET ASSETS CONSIST OF:
Paid in capital $ 26,329,707
Net unrealized appreciation of investments 4,368,101
Accumulated net realized gain on investments 561,022
Undistributed net investment income 118,493
Total Net Assets $ 31,377,323
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$31,377,323 / 2,153,533 shares outstanding $14.57
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND II
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $1,295) $ 97,442
Interest 48,118
Total income 145,560
EXPENSES:
Investment advisory fee $ 86,319
Administrative personnel and services fee 61,987
Custodian fees 6,445
Transfer and dividend disbursing agent fees and expenses 10,640
Directors'/Trustees' fees 715
Auditing fees 4,620
Legal fees 1,085
Portfolio accounting fees 24,443
Share registration costs 3,926
Printing and postage 9,935
Insurance premiums 1,901
Miscellaneous 2,439
Total expenses 214,455
Waivers and reimbursements --
Waiver of investment advisory fee $ (64,048)
Reimbursement of other operating expenses (51,988)
Total waivers and reimbursements (116,036)
Net expenses 98,419
Net investment income 47,141
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 569,166
Net change in unrealized appreciation of investments 2,848,564
Net realized and unrealized gain on investments 3,417,730
Change in net assets resulting from operations $ 3,464,871
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND II
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 47,141 $ 37,473
Net realized gain on investments and foreign currency
transactions ($569,166 and $110,051, respectively, as computed for
federal tax purposes) 569,166 101,778
Net change in unrealized appreciation of investments 2,848,564 1,511,965
Change in net assets resulting from operations 3,464,871 1,651,216
NET EQUALIZATION CREDITS (DEBITS)-- 71,396 72,517
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (37,404) (700)
Distributions from net realized gains on investments and foreign
currency transactions (109,556) --
Change in net assets resulting from distributions to
shareholders (146,960) (700)
SHARE TRANSACTIONS (EXCLUSIVE OF AMOUNTS ALLOCATED TO NET
INVESTMENT INCOME) --
Proceeds from sale of shares 11,630,124 15,118,252
Net asset value of shares issued to shareholders in payment of
distributions declared 146,049 698
Cost of shares redeemed (773,006) (224,666)
Change in net assets resulting from share transactions 11,003,167 14,894,284
Change in net assets 14,392,474 16,617,317
NET ASSETS:
Beginning of period 16,984,849 367,532
End of period (including undistributed net investment income of
$118,493 and $37,360, respectively) $ 31,377,323 $16,984,849
</TABLE>

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

FEDERATED GROWTH STRATEGIES FUND II
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED DECEMBER 31,
JUNE 30, 1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.80 $10.30 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.03
Net realized and unrealized gain (loss)
on investments 1.81 2.45 0.27
Total from investment operations 1.86 2.50 0.30
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.004) --
Distributions from net realized gain on investments (0.07) -- --
Total distributions (0.09) (0.004) --
NET ASSET VALUE, END OF PERIOD $14.57 $12.80 $10.30
TOTAL RETURN(B) 14.60% 24.32% 3.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.66%* 0.85% 0.85%*
Net investment income 0.32%* 0.55% 1.91%*
Expense waiver/reimbursement(c) 0.78%* 3.87% 76.95%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $31,377 $16,985 $368
Average commission rate paid(d) $0.0574 $0.0376 --
Portfolio turnover 70% 96% 4%
</TABLE>

* Computed on an annualized basis.

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

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

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

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

FEDERATED GROWTH STRATEGIES FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated 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. The investment objective of the Fund is capital appreciation.

2. SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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.

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 per value).
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
<S> <C> <C>
Shares sold 872,823 1,310,281
Shares issued to shareholders in payment of distributions declared 11,312 64
Shares redeemed (57,407) (19,226)
Net change resulting from share transactions 826,728 1,291,119
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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.

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

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1997, were as follows:
<TABLE>
<S> <C>
PURCHASES $26,766,710
SALES $15,365,114
</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
Matthew S. Hardin
Assistant Secretary

Variable 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 variable funds involves investment
risk, including the 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 GROWTH STRATEGIES FUND II
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1997

FEDERATED INSURANCE SERIES

[Graphic]

FEDERATED INVESTORS
Federated Securities Corp., Distributor

Cusip 313916702
G00433-08 (8/97)
[Graphic]

PRESIDENT'S MESSAGE

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
High Income Bond Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1997, through June 30,
1997. It begins with a commentary by the fund's portfolio manager, which is
followed by a complete listing of the fund's high-yield bond holdings and the
financial statements.

Amid a strong economic environment, the fund's broadly diversified, carefully
researched portfolio of more than 220 high-yield, lower-rated bonds* rewarded
shareholders with a total return of 6.07%.** Contributing to this total return
were a very healthy income stream totaling $0.46 per share, capital gains
totaling $0.04 per share, and an $0.11 increase in net asset value. On June 30,
1997, total net assets reached $101.4 million.

Thank you for participating in the income opportunities of high-yield corporate
bonds through the diversification and professional management of Federated High
Income Bond Fund II. We trust you were pleased with the performance of your
investment. As always, we welcome your comments and suggestions.

Very sincerely yours,

[Graphic]

J. Christopher Donahue
President
August 15, 1997

* Lower rated bonds involve a higher degree of risk than investment grade bonds
in return for higher yield potential.

**Performance quoted reflects past performance and is not indicative of future
results. 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

High-yield bonds delivered outstanding returns in the first half of 1997 on both
a relative and absolute basis. These returns were driven by an almost ideal
economic performance by the domestic economy. First quarter growth was very
strong while second quarter slowed to a respectable but perhaps more sustainable
pace. From a high-yield bond perspective, the continued strong performance of
the economy resulted in low default rates and modestly tighter yield spreads
between high-yield bonds and treasury securities. Perhaps more remarkable, this
strong economic growth occurred without rekindling inflationary pressures.
Despite a 25 basis point increase in the Federal funds rate by the Federal
Reserve Board (the "Fed"), interest rates on 10-year treasury securities rose
only seven basis points. Strong economic growth, good corporate earnings growth,
and low inflation drove stock prices to record levels. The strong equity market
provided high-yield issuers with increased financial flexibility and provided
increased equity value "protection" to high-yield securities. Finally,
high-yield bonds benefited from extremely strong demand during the reporting
period which offset a record amount of new issue activity. Mutual funds
continued to have inflows while insurance companies and pension funds continued
to allocate money to the high-yield market. Also, structured products such as
collateralized bond obligations allocated substantial dollars to the high-yield
sector. These factors contributed to the outstanding returns for the high-yield
sector. For example, the Lehman Brothers High Yield Bond Index* returned 5.82%
over the reporting period, outperforming the Lehman Brothers Aggregate Bond
Index,* a measure of high-quality bond performance, which returned 3.09% over
the reporting period.

The fund, with a return of 6.07%,** performed very well over the reporting
period outperforming both the Lehman Brothers High Yield Bond Index and the
Lipper High Current Yield Fund Average which returned 5.99%.*** The fund
benefited from good security selection during the reporting period avoiding most
of the deteriorating credit situation in the quarter such as PENN TRAFFIC,
HARVARD INDUSTRIES and GRAND UNION. Several sector and specific holdings
performed well above the overall market. The fund's holdings in the Australian
cable TV market rebounded strongly from depressed year end levels. The fund's
radio holdings, especially preferred stocks of AMERICAN RADIO and CHANCELLOR
BROADCASTING, performed very well as investors' comfort level with the
consolidation occurring in the radio industry increased. The fund's holdings in
the domestic cable area such as CABLEVISION SYSTEMS and COMCAST performed very
well as investors focused on the value in well-run, highly clustered cable
operators. This was highlighted by Microsoft's $1 billion equity investment in
Comcast. Finally, specific holdings such as JOHNSTOWN AMERICA, BAYOU STEEL,
MILLICOM INTERNATIONAL, NEXTEL and CURTICE-BURNS FOODS turned in good
performance during the reporting period based on company specific events. On the
negative side, the fund's position in WIRELESS ONE, a microwave cable TV
operator underperformed as questions about this technology's competitiveness
continued. Also, the fund's position in ROYAL OAK, a gold mining company
underperformed due to weak gold prices.

* 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 Investors Service. 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.

** Performance quoted represents past performance and is not indicative of
future results. 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.

*** Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.

Our outlook for the high-yield market continues to be optimistic, especially as
we look out over the balance of 1997. We see nothing to alter our outlook for
steady economic growth and modest inflation. From a portfolio perspective, the
fund's largest sector exposures continue to be telecommunications, cable TV, and
broadcasting. Many of the fund's telecommunications positions such as TELEPORT
and QWEST COMMUNICATIONS are benefiting from technology advances and
deregulation. The domestic cable TV market is rapidly changing as new delivery
devices such as satellite broadcasters attempt to gain subscribers. We believe
that the new entrants will expand the overall market while large well managed,
well clustered traditional operators will continue to do well. The fund also has
exposure to the United Kingdom cable TV and telecommunication market which is in
its early stage of development. We think these issuers will gain market share
and eventually consolidate benefiting high-yield issuers. Recently, the fund has
increased exposure in the oil and gas industry focusing on the drilling sector
and producers who will benefit from expanding production. Finally, the fund has
modestly increased the overall quality of the portfolio in response to the
spread tightening that has occurred over the past six months.

FEDERATED HIGH INCOME BOND FUND II
PORTFOLIO OF INVESTMENTS

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--89.6%
AEROSPACE & DEFENSE--0.3%
$ 250,000 Tracor, Inc., Sr. Sub. Note, 8.50%, 3/1/2007 $ 254,375
AUTOMOBILE--2.8%
225,000 Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 252,000
8/1/2004
350,000 Aftermarket Technology Co., Sr. Sub. Note, Series D,
12.00%,
8/1/2004 392,000
825,000 Collins & Aikman Products Co., Sr. Sub. Note, 11.50%, 938,437
4/15/2006
350,000 Exide Corp., Sr. Note, 10.00%, 4/15/2005 364,875
450,000 Lear Corp., Sub. Note, 9.50%, 7/15/2006 480,375
100,000 Lear Seating Corp., Sr. Sub. Note, 11.25%, 7/15/2000 101,000
100,000 Lear Seating Corp., Sub. Note, 8.25%, 2/1/2002 100,750
250,000 (a)Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 252,813
6/15/2007
Total 2,882,250
BANKING--1.2%
1,125,000 First Nationwide Escrow Corp., Sr. Sub. Note, 1,240,313
10.625%, 10/1/2003
BEVERAGE & TOBACCO--0.8%
450,000 Dimon, Inc., Sr. Note, 8.875%, 6/1/2006 469,687
400,000 Dr. Pepper Bottling Holdings Co., Sr. Disc. Note,
0/11.625%,
2/15/2003 396,000
Total 865,687
BROADCAST RADIO & TV--5.2%
200,000 (a)Capstar Radio Broadcasting Partners, Sr. Sub. Note,
9.25%,
7/1/2007 195,000
250,000 (a)Chancellor Radio Broadcasting Co., Sr. Sub. Note, 250,000
8.75%, 6/15/2007
250,000 Chancellor Radio Broadcasting Co., Sr. Sub. Note,
9.375%,
10/1/2004 260,625
200,000 Jacor Communications, Inc., Sr. Sub. Note, 9.75%, 208,500
12/15/2006
550,000 Lamar Advertising Co., Sr. Sub. Note, 9.625%, 567,875
12/1/2006
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
BROADCAST RADIO & TV--CONTINUED
$ 500,000 (a)Outdoor Systems, Inc., Sr. Sub. Note, 8.875%, $ 490,000
6/15/2007
400,000 SCI Television, Inc., Sr. Secd. Note, 11.00%, 424,084
6/30/2005
525,000 SFX Broadcasting, Inc., Sr. Sub. Note, 10.75%, 574,875
5/15/2006
150,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 155,250
10.00%, 12/15/2003
575,000 Sinclair Broadcast Group, Inc., Sr. Sub. Note, 595,125
10.00%, 9/30/2005
250,000 (a)Sinclair Broadcast Group, Inc., Sr. Sub. Note, 243,750
9.00%, 7/15/2007
50,000 Sullivan Broadcast Holdings Inc., Deb., 13.25%, 49,250
12/15/2006
600,000 Sullivan Broadcast Holdings Inc., Sr. Sub. Note, 615,000
10.25%, 12/15/2005
475,000 Young Broadcasting, Inc., Sr. Sub. Note, 10.125%, 501,125
2/15/2005
150,000 Young Broadcasting, Inc., Sr. Sub. Note, 9.00%, 148,125
1/15/2006
Total 5,278,584
BUILDING & DEVELOPMENT--0.4%
250,000 (a)American Builders & Contractors Supply Co., Inc.,
Sr. Sub. Note,
10.625%, 5/15/2007 258,750
150,000 Building Materials Corp. of America, Sr. Note, 153,375
8.625%, 12/15/2006
Total 412,125
BUSINESS EQUIPMENT & SERVICES--1.7%
300,000 (a)Electronic Retailing Systems International, Inc.,
Sr. Disc. Note,
0/13.00%, 2/1/2004 208,500
325,000 Knoll Inc., Sr. Sub. Note, 10.875%, 3/15/2006 361,156
500,000 Outsourcing Solutions, Inc., Sr. Sub. Note, 11.00%, 547,500
11/1/2006
500,000 United Stationers Supply Co., Sr. Sub. Note, 12.75%, 570,625
5/1/2005
Total 1,687,781
CABLE TELEVISION--12.5%
200,000 Australis Holdings Pty Limited, Unit, 0/15.00%, 148,000
11/1/2002
275,000 Australis Media Limited, Unit, 0/14.00%, 5/15/2003 200,093
550,000 Bell Cablemedia PLC, Sr. Disc. Note, 0/11.95%, 497,750
7/15/2004
200,000 CF Cable TV, Inc., Sr. Secd. 2nd Priority Note, 228,000
11.625%, 2/15/2005
150,000 Cablevision Systems Corp., Sr. Sub. Deb., 9.875%, 157,500
2/15/2013
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CABLE TELEVISION--CONTINUED
$ 100,000 Cablevision Systems Corp., Sr. Sub. Note, 10.50%, $ 109,500
5/15/2016
375,000 Cablevision Systems Corp., Sr. Sub. Note, 9.25%, 390,000
11/1/2005
650,000 Cablevision Systems Corp., Sr. Sub. Note, 9.875%, 692,250
5/15/2006
425,000 Charter Communications Southeast, L.P., Sr. Note,
11.25%,
3/15/2006 456,875
900,000 Comcast Corp., Sr. Sub. Deb., 9.375%, 5/15/2005 949,500
600,000 Comcast UK Cable, Deb., 0/11.20%, 11/15/2007 459,048
2,000,000 (a)Diamond Cable Communications PLC, Sr. Disc. Note,
0/10.75%,
2/15/2007 1,160,000
1,000,000 EchoStar Satellite Broadcasting Corp., Sr. Disc.
Note, 0/13.125%,
3/15/2004 715,000
1,100,000 International Cabletel, Inc., Sr. Defd. Cpn. Note, 761,750
0/11.50%, 2/1/2006
475,000 International Cabletel, Inc., Sr. Disc. Note, 368,125
0/12.75%, 4/15/2005
400,000 Le Groupe Videotron Ltee, Sr. Note, 10.625%, 448,000
2/15/2005
400,000 Lenfest Communications Inc., Sr. Note, 8.375%, 395,000
11/1/2005
300,000 Pegasus Media, Note, 12.50%, 7/1/2005 325,500
400,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority
Note, 10.00%,
12/1/2007 432,000
400,000 Rogers Cablesystems Ltd., Sr. Secd. 2nd Priority
Note, 10.00%,
3/15/2005 436,000
400,000 Rogers Cablesystems Ltd., Sr. Sub. Gtd. Note, 11.00%, 439,000
12/1/2015
750,000 Tele-Communications, Inc., Sr. Note, 6.875%, 2/15/2006 710,903
225,000 (a)TCI Satellite Entertainment, Inc., Sr. Sub. Disc.
Note, 0/12.25%,
2/15/2007 133,875
200,000 (a)TCI Satellite Entertainment, Inc., Sr. Sub. Note, 200,500
10.875%, 2/15/2007
1,800,000 TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007 1,314,000
650,000 UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 396,500
5/15/2006
150,000 Wireless One, Inc., Sr. Note, 13.00%, 10/15/2003 96,000
100,000 Wireless One, Inc., Unit, 0/13.50%, 8/1/2006 27,500
Total 12,648,169
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CHEMICALS & PLASTICS--3.9%
$ 350,000 Astor Corp., Sr. Sub. Note, 10.50%, 10/15/2006 $ 372,750
300,000 Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 315,000
9/15/2008
200,000 Crain Industries, Inc., Sr. Sub. Note, 13.50%, 229,000
8/15/2005
100,000 (a)Foamex L.P., Sr. Sub. Note, 9.875%, 6/15/2007 103,000
600,000 Harris Chemical North America, Inc., Sr. Note, 618,000
10.25%, 7/15/2001
500,000 ISP Holding, Inc., Sr. Note, 9.00%, 10/15/2003 520,625
150,000 ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002 159,750
383,000 Polymer Group, Inc., Sr. Note, 12.25%, 7/15/2002 428,205
450,000 RBX Corp., Sr. Sub. Note, Series B, 11.25%, 400,500
10/15/2005
975,000 Sterling Chemicals Holdings, Inc., Sr. Disc. Note,
0/13.50%,
8/15/2008 650,813
150,000 Uniroyal Technology Corp., Sr. Secd. Note, 11.75%, 150,000
6/1/2003
Total 3,947,643
CLOTHING & TEXTILES--3.1%
200,000 (a)Collins & Aikman Floorcoverings, Inc., Sr. Sub.
Note, 10.00%,
1/15/2007 203,500
450,000 (a)GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007 455,625
450,000 (a)Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007 473,625
250,000 Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006 262,500
1,650,000 WestPoint Stevens, Inc., Sr. Sub. Deb., 9.375%, 1,724,250
12/15/2005
Total 3,119,500
CONSUMER PRODUCTS--3.6%
400,000 American Safety Razor Co., Sr. Note, 9.875%, 8/1/2005 420,000
150,000 Herff Jones, Inc., Sr. Sub. Note, 11.00%, 8/15/2005 162,750
150,000 Hosiery Corp. of America, Inc., Sr. Sub. Note, 164,250
13.75%, 8/1/2002
450,000 ICON Fitness Corp., Sr. Disc. Note, 0/14.00%, 247,500
11/15/2006
150,000 ICON Health & Fitness, Inc., Sr. Sub. Note, 13.00%, 169,500
7/15/2002
525,000 Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 534,188
12/15/2003
450,000 Renaissance Cosmetics, Inc., Sr. Note, 11.75%, 475,875
2/15/2004
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
CONSUMER PRODUCTS--CONTINUED
$ 50,000 Revlon Consumer Products Corp., Note, 9.375%, $ 51,688
4/1/2001
625,000 Revlon Consumer Products Corp., Sr. Sub. Note, 670,313
10.50%, 2/15/2003
450,000 Simmons Co., Sr. Sub. Note, 10.75%, 4/15/2006 477,000
300,000 Syratech Corp., Sr. Note, 11.00%, 4/15/2007 320,250
Total 3,693,314
CONTAINER & GLASS PRODUCTS--1.6%
575,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.75%, 8/15/2004 605,906
450,000 Owens-Illinois, Inc., Sr. Sub. Note, 9.95%, 478,125
10/15/2004
300,000 Packaging Resources Inc., Sr. Note, 11.625%, 5/1/2003 313,500
250,000 Plastic Containers, Inc., Sr. Secd. Note, 10.00%, 260,625
12/15/2006
Total 1,658,156
ECOLOGICAL SERVICES & EQUIPMENT--1.7%
700,000 (a)Allied Waste Industries, Inc., Sr. Disc. Note, 442,750
0/11.30%, 6/1/2007
850,000 (a)Allied Waste North America, Inc., Sr. Sub. Note, 912,687
10.25%, 12/1/2006
200,000 ICF Kaiser International, Inc., Sr. Sub. Note, 207,000
13.00%, 12/31/2003
225,000 (b)Mid-American Waste Systems, Inc., Sr. Sub. Note,
12.25%,
2/15/2003 115,875
Total 1,678,312
ELECTRONICS--1.4%
500,000 Advanced Micro Devices, Inc., Sr. Secd. Note, 11.00%, 558,750
8/1/2003
500,000 (a)Fairchild Semiconductor Corp., Sr. Sub. Note, 530,000
10.125%, 3/15/2007
50,000 (a)Therma-Wave, Inc., Sr. Note, 10.625%, 5/15/2004 53,500
225,000 (a)Viasystems, Inc., Sr. Sub. Note, 9.75%, 6/1/2007 229,500
Total 1,371,750
FINANCIAL INTERMEDIARIES--0.7%
375,000 ContiFinancial Corp., Sr. Note, 8.375%, 8/15/2003 384,787
300,000 Olympic Financial Ltd., Unit, 11.50%, 3/15/2007 306,000
Total 690,787
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
FOOD & DRUG RETAILERS--1.3%
$ 375,000 Carr-Gottstein Foods Co., Sr. Sub. Note, 12.00%, $ 417,187
11/15/2005
150,000 (a)DiGiorgio Corp., Sr. Note, 10.00%, 6/15/2007 149,250
725,000 Ralph's Grocery Co., Sr. Note, 10.45%, 6/15/2004 781,188
Total 1,347,625
FOOD PRODUCTS--1.9%
400,000 Curtice-Burns Foods, Inc., Sr. Sub. Note, 12.25%, 441,000
2/1/2005
650,000 International Home Foods, Inc., Sr. Sub. Note, 671,125
10.375%, 11/1/2006
300,000 (a)MBW Foods Inc., Sr. Sub. Note, 9.875%, 2/15/2007 305,250
100,000 Specialty Foods Corp., Sr. Sub. Note, 11.25%, 87,000
8/15/2003
350,000 Van de Kamp's, Inc., Sr. Sub. Note, 12.00%, 9/15/2005 392,000
Total 1,896,375
FOREST PRODUCTS--2.8%
50,000 Container Corp. of America, Sr. Note, 11.25%, 54,750
5/1/2004
100,000 Container Corp. of America, Sr. Note, 9.75%, 4/1/2003 105,500
450,000 Four M Corp., Sr. Note, 12.00%, 6/1/2006 466,875
200,000 Repap New Brunswick, 2nd Priority Sr. Secd. Note,
10.625%,
4/15/2005 190,000
200,000 Riverwood International Corp., Sr. Sub. Note, 181,000
10.875%, 4/1/2008
500,000 S. D. Warren Co., Sr. Sub. Note, 12.00%, 12/15/2004 562,500
100,000 Stone Container Corp., Sr. Note, 11.50%, 10/1/2004 104,500
800,000 Stone Container Corp., Sr. Note, 12.58%, 8/1/2016 848,000
400,000 Uniforet Inc., Sr. Note, 11.125%, 10/15/2006 376,000
Total 2,889,125
HEALTHCARE--3.1%
675,000 Dade International, Inc., Sr. Sub. Note, 11.125%, 756,000
5/1/2006
250,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.25%, 255,000
10/1/2006
200,000 Genesis Health Ventures, Inc., Sr. Sub. Note, 9.75%, 208,000
6/15/2005
200,000 Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005 202,000
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
HEALTHCARE--CONTINUED
$ 900,000 Tenet Healthcare Corp., Sr. Sub. Note, 10.125%, $ 990,000
3/1/2005
700,000 Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 714,000
1/15/2007
Total 3,125,000
HOME PRODUCTS & FURNISHINGS--0.3%
300,000 (a)Falcon Building Products, Inc., Sr. Sub. Disc.
Note, 0/10.50%,
6/15/2007 181,500
150,000 (a)Falcon Building Products, Inc., Sr. Sub. Note, 150,750
9.50%, 6/15/2007
Total 332,250
HOTELS, MOTELS, INNS & CASINOS--0.4%
350,000 Courtyard by Marriott II LP, Sr. Note, 10.75%, 378,875
2/1/2008
INDUSTRIAL PRODUCTS & EQUIPMENT--4.2%
150,000 Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007 155,625
400,000 Cabot Safety Acquisition Corp., Sr. Sub. Note, 442,000
12.50%, 7/15/2005
300,000 (a)Continental Global Group, Inc., Sr. Note, 11.00%, 315,750
4/1/2007
400,000 Euramax International PLC, Sr. Sub. Note, 11.25%, 432,000
10/1/2006
250,000 Fairfield Manufacturing Co., Inc., Sr. Sub. Note, 267,500
11.375%, 7/1/2001
300,000 Hawk Corp., Sr. Note, 10.25%, 12/1/2003 309,750
300,000 International Knife & Saw, Inc., Sr. Sub. Note, 323,250
11.375%, 11/15/2006
100,000 Johnstown America Industries, Inc., Sr. Sub. Note,
11.75%,
8/15/2005 105,250
525,000 (a)MMI Products, Inc., Sr. Sub. Note, 11.25%, 559,125
4/15/2007
250,000 Mettler-Toledo, Inc., Sr. Sub. Note, 9.75%, 10/1/2006 266,250
400,000 (a)Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007 426,000
125,000 (a)Roller Bearing Co. of America, Inc., Sr. Sub. Note, 127,813
9.625%, 6/15/2007
500,000 Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003 522,500
Total 4,252,813
LEISURE & ENTERTAINMENT--4.9%
1,150,000 AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 822,250
3/15/2006
100,000 AMF Group, Inc., Sr. Sub. Note, 10.875%, 3/15/2006 108,500
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
LEISURE & ENTERTAINMENT--CONTINUED
$ 300,000 Cobblestone Golf Group, Inc., Sr. Note, 11.50%, $ 316,500
6/1/2003
150,000 (a)KSL Recreation Group, Inc., Sr. Sub. Note, 10.25%, 156,750
5/1/2007
150,000 Premier Parks, Inc., Sr. Note, 12.00%, 8/15/2003 166,875
175,000 Premier Parks, Inc., Sr. Note, 9.75%, 1/15/2007 182,875
1,225,000 Six Flags Theme Parks, Sr. Sub. Disc. Note, 0/12.25%, 1,261,750
6/15/2005
2,000,000 Viacom, Inc., Sub. Deb., 8.00%, 7/7/2006 1,955,000
Total 4,970,500
MACHINERY & EQUIPMENT--1.8%
500,000 Alvey Systems, Inc., Sr. Sub. Note, 11.375%, 517,500
1/31/2003
600,000 Clark Material Handling Corp., Sr. Note, 10.75%, 631,500
11/15/2006
233,000 Primeco Inc., Sr. Sub. Note, 12.75%, 3/1/2005 277,270
400,000 Tokheim Corp., Sr. Sub. Note, 11.50%, 8/1/2006 442,000
Total 1,868,270
METALS & MINING--0.4%
400,000 Royal Oak Mines, Inc., Sr. Sub. Note, 11.00%, 388,000
8/15/2006
OIL & GAS--4.8%
775,000 Abraxas Petroleum Corp., Sr. Note, 11.50%, 11/1/2004 846,687
325,000 DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007 321,750
100,000 Falcon Drilling Co., Inc., Sr. Note, 8.875%, 101,500
3/15/2003
150,000 Falcon Drilling Co., Inc., Sr. Note, 9.75%, 1/15/2001 156,000
50,000 Falcon Drilling Co., Inc., Sr. Sub. Note, 12.50%, 55,750
3/15/2005
350,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 343,000
8.50%, 2/15/2007
600,000 Forcenergy Gas Exploration, Inc., Sr. Sub. Note, 622,500
9.50%, 11/1/2006
100,000 Giant Industries, Inc., Sr. Sub. Note, 9.75%, 103,000
11/15/2003
250,000 Mesa Operating Company, Sr. Sub. Note, 10.625%, 285,313
7/1/2006
100,000 (a)Pacalta Resources Ltd., Sr. Note, 10.75%, 6/15/2004 101,500
150,000 (a)Petsec Energy, Inc., Sr. Sub. Note, 9.50%, 150,000
6/15/2007
500,000 Pride Petroleum Services, Inc., Sr. Note, 9.375%, 518,750
5/1/2007
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
OIL & GAS--CONTINUED
$ 675,000 United Meridian Corp., Sr. Sub. Note, 10.375%, $ 734,063
10/15/2005
300,000 (a)United Refining Co., Sr. Note, 10.75%, 6/15/2007 298,500
250,000 (a)XCL, Ltd., Unit, 13.50%, 5/1/2004 256,250
Total 4,894,563
PRINTING & PUBLISHING--2.3%
750,000 Affiliated Newspaper Investments, Inc., Sr. Disc.
Note, 0/13.25%,
7/1/2006 680,625
150,000 Garden State Newspapers, Inc., Sr. Sub. Note, 12.00%, 167,250
7/1/2004
200,000 Hollinger International Publishing, Inc., Sr. Sub.
Note, 9.25%,
2/1/2006 205,000
350,000 Hollinger International Publishing, Inc., Sr. Sub.
Note, 9.25%,
3/15/2007 360,500
250,000 K-III Communications Corp., Company Guarantee, Series
B, 8.50%,
2/1/2006 252,825
450,000 Petersen Publishing Co., L.L.C., Sr. Sub. Note, 504,000
11.125%, 11/15/2006
125,000 (a)Von Hoffmann Press, Inc., Sr. Sub. Note, 10.375%, 130,625
5/15/2007
Total 2,300,825
REAL ESTATE--0.4%
335,000 Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005 378,550
RETAILERS--0.8%
425,000 Brylane Capital Corp., Sr. Sub. Note, 10.00%, 456,875
9/1/2003
325,000 (a)Leslie's Poolmart, Inc., Sr. Note, 10.375%, 334,750
7/15/2004
Total 791,625
SERVICES--1.4%
300,000 Coinmach Corp., Sr. Note, 11.75%, 11/15/2005 332,250
600,000 Intertek Finance PLC, Sr. Sub. Note, 10.25%, 628,500
11/1/2006
450,000 KinderCare Learning Centers, Inc., Sr. Sub. Note, 435,375
9.50%, 2/15/2009
Total 1,396,125
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
STEEL--2.1%
$ 375,000 Acme Metals, Inc., Sr. Secd. Disc. Note, 0/13.50%, $ 418,125
8/1/2004
300,000 Bayou Steel Corp., 1st Mtg. Note, 10.25%, 3/1/2001 304,500
400,000 EnviroSource, Inc., Sr. Note, 9.75%, 6/15/2003 393,000
500,000 GS Technologies Operating Co., Inc., Sr. Note, 540,000
12.00%, 9/1/2004
225,000 GS Technologies Operating Co., Inc., Sr. Note, 246,938
12.25%, 10/1/2005
200,000 Republic Engineered Steel, Inc., 1st Mtg. Note, 186,750
9.875%, 12/15/2001
Total 2,089,313
SURFACE TRANSPORTATION--2.8%
425,000 AmeriTruck Distribution Corp., Sr. Sub. Note, 12.25%, 434,562
11/15/2005
350,000 (a)Chemical Leaman Corp., Sr. Note, 10.375%, 6/15/2005 357,875
500,000 Gearbulk Holding Limited, Sr. Note, 11.25%, 12/1/2004 555,000
500,000 Statia Terminals International N.V., 1st Mtg. Note,
11.75%,
11/15/2003 530,000
750,000 Stena AB, Sr. Note, 10.50%, 12/15/2005 823,125
200,000 Trism, Inc., Sr. Sub. Note, 10.75%, 12/15/2000 193,000
Total 2,893,562
TELECOMMUNICATIONS & CELLULAR--10.8%
350,000 American Communications Services Inc., Sr. Disc.
Note, 0/12.75%,
4/1/2006 197,750
250,000 Arch Communications Group, Inc., Sr. Disc. Note,
0/10.875%,
3/15/2008 133,125
1,050,000 Brooks Fiber Properties, Inc., Sr. Disc. Note, 719,250
0/10.875%, 3/1/2006
525,000 Brooks Fiber Properties, Inc., Sr. Disc. Note, 343,875
0/11.875%, 11/1/2006
575,000 Cellular Communications International, Inc., Sr.
Disc. Note, 13.25%
accrual, 8/15/2000 442,750
350,000 (a)Cellular Communications of Puerto Rico, Inc., Sr.
Sub. Note, 10.00%,
2/1/2007 346,500
500,000 (a)Comcast Cellular Holdings, Inc., Sr. Note, 9.50%, 506,250
5/1/2007
1,400,000 Intermedia Communications of Florida, Inc., Sr. Disc.
Note,
0/12.50%, 5/15/2006 980,000
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS--CONTINUED
TELECOMMUNICATIONS & CELLULAR--CONTINUED
$ 900,000 (a)McLeod, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007 $ 576,000
1,000,000 Millicom International Cellular S.A., Sr. Disc. Note,
0/13.50%,
6/1/2006 723,750
175,000 NEXTEL Communications, Inc., Sr. Disc. Note, 153,125
0/11.50%, 9/1/2003
600,000 NEXTEL Communications, Inc., Sr. Disc. Note, 0/9.75%, 465,000
8/15/2004
250,000 Nextlink Communications, L.L.C., Sr. Note, Series AI,
12.50%,
4/15/2006 268,750
425,000 Paging Network, Inc., Sr. Sub. Note, 10.00%, 410,125
10/15/2008
500,000 Paging Network, Inc., Sr. Sub. Note, 10.125%, 487,500
8/1/2007
400,000 PanAmSat, L.P., Sr. Sub. Disc. Note, 0/11.375%, 390,000
8/1/2003
300,000 PhoneTel Technologies, Inc., Sr. Note, 12.00%, 305,250
12/15/2006
650,000 (a)Qwest Communications International, Inc., Sr. Note,
10.875%,
4/1/2007 708,500
450,000 Sygnet Wireless, Inc., Sr. Note, 11.50%, 10/1/2006 452,250
1,350,000 Teleport Communications Group, Inc., Sr. Disc. Note,
0/11.125%,
7/1/2007 968,625
75,000 Teleport Communications Group, Inc., Sr. Note, 79,875
9.875%, 7/1/2006
500,000 (a)Telesystem International Wireless, Inc., Sr. Disc.
Note, 0/13.25%,
6/30/2007 266,875
350,000 USA Mobile Communications, Inc., Sr. Note, 9.50%, 329,000
2/1/2004
700,000 Vanguard Cellular Systems, Inc., Deb., 9.375%, 710,500
4/15/2006
Total 10,964,625
UTILITIES--2.2%
325,000 CalEnergy Co., Inc., Sr. Note, 9.50%, 9/15/2006 349,375
1,400,000 California Energy Co., Inc., Sr. Note, 10.25%, 1,515,500
1/15/2004
350,000 El Paso Electric Co., 1st Mtg. Note, 9.40%, 5/1/2011 387,446
Total 2,252,321
TOTAL CORPORATE BONDS (IDENTIFIED COST $87,639,287) 90,839,088
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
PREFERRED STOCKS--4.5%
BANKING--0.3%
10,000 California Federal Preferred Capital Corp., REIT
Perpetual Pfd.
Stock, Series A, $2.28 $ 258,125
BROADCAST RADIO & TV--2.5%
6,298 American Radio Systems Corp., Cumulative Exchangeable
Pfd.
Stock, $11.38 673,924
2,500 (a)Capstar Broadcasting Partners, Sr. Pfd., $12.00 252,500
2,500 Chancellor Broadcasting Co., Cumulative PIK Pfd., 326,250
12.25%
5,700 (a)Chancellor Broadcasting Co., Exchangeable Pfd. 655,500
Stock, $12.00
1,000 SFX Broadcasting, Inc., Exchangeable Pfd. Stock, 108,500
Series E
4,400 (a)Sinclair Broadcast Group, Inc., Pfd., Series A, 466,400
$11.63
Total 2,483,074
CABLE TELEVISION--0.4%
400 Pegasus Communications Corp., Unit, Series A, 12.75% 394,000
INDUSTRIAL PRODUCTS & EQUIPMENT--0.1%
150 (a)Fairfield Manufacturing Co., Inc., Exchangeable
Pfd. Stock,
Series A, $11.25 151,500
PRINTING & PUBLISHING--0.7%
3,551 K-III Communications Corp., Cumulative PIK Pfd., 388,865
Series B, 11.625%
3,500 K-III Communications Corp., Pfd., Series D, $10.00 356,125
Total 744,990
TELECOMMUNICATIONS & CELLULAR--0.2%
170 PanAmSat Corp., PIK Pfd., 12.75% 208,321
UTILITIES--0.3%
2,866 El Paso Electric Co., PIK Pfd., Series A, 11.40% 323,966
TOTAL PREFERRED STOCKS (IDENTIFIED COST $4,148,230) 4,563,976
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS--0.0%
BROADCAST RADIO & TV--0.0%
800 (b)Sullivan Broadcast Holdings Inc., Class B $ 8,000
BUSINESS EQUIPMENT & SERVICES--0.0%
300 (a)Electronic Retailing Systems International, Inc., 1,200
Warrants, 2/1/2004
CABLE TELEVISION--0.0%
200 Australis Holdings Pty Limited, Warrants 0
338 (b)Pegasus Communications Corp. 3,765
450 (b)Wireless One, Inc., Warrants, 10/19/2000 0
Total 3,765
CHEMICALS & PLASTICS--0.0%
425 (b)Sterling Chemicals Holdings, Inc., Warrants, 14,874
1/1/2008
CONSUMER PRODUCTS--0.0%
50 (b)Hosiery Corp. of America, Inc. 375
ECOLOGICAL SERVICES & EQUIPMENT--0.0%
960 (b)ICF Kaiser International, Inc., Warrants, 240
12/31/1998
PRINTING & PUBLISHING--0.0%
50 (b)Affiliated Newspaper Investments, Inc. 5,025
STEEL--0.0%
100 (a)(b)Bar Technologies, Inc., Warrants, 4/1/2001 4,500
TELECOMMUNICATIONS & CELLULAR--0.0%
375 (b)Cellular Communications International, Inc., 3,750
Warrants, 1/1/2000
TOTAL COMMON STOCKS (IDENTIFIED COST $11,483) 41,729
</TABLE>

FEDERATED HIGH INCOME BOND FUND II
<TABLE>
<CAPTION>
PRINICPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY--1.4%
TREASURY NOTES--1.4%
$ 1,500,000 5.75%, 8/15/2003 (IDENTIFIED COST $1,414,453) $ 1,448,670
(C)REPURCHASE AGREEMENT--3.1%
3,165,000 BT Securities Corporation, 6.00%, dated 6/30/1997,
due 7/1/1997
(AT AMORTIZED COST) 3,165,000
TOTAL INVESTMENTS (IDENTIFIED COST $96,378,453)(D) $ 100,058,463

</TABLE>

(a) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1997, these securities amounted
to $14,734,788 which represents 14.5% of total net assets.

(b) Non-income producing security.

Mid-American and certain of it subsidiaries ( the "Debtors") filed for
relief under the provisions of Chapter 11 Bankruptcy Code on January 21,
1997. The Debtors and USA Waste Services, Inc. ("USA") and certain of its
affiliates subsequently closed on an Asset Purchase Agreement pursuant to
which USA acquired substantially all the Debtors' assets. A proposed
liquidating plan of reorganization has been filed. In addition, a group of
subordinated bondholders, which includes various funds managed by Federated,
has retained counsel and has filed suit for legal claims involving fraud,
misrepresentations and securities law violations regarding Mid-American.

(d) The cost of investments for federal tax purposes amounts to $96,378,453. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,680,010 which is comprised of $4,201,466 appreciation and $521,456
depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($101,382,187) at June 30, 1997.

The following acronyms are used throughout this portfolio:

LLC --Limited Liability Corporation
LP --Limited Partnership
PIK --Payment in Kind
PLC --Public Limited Company
REIT --Real Estate Investment Trust

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

FEDERATED HIGH INCOME BOND FUND II
STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and
tax cost $96,378,453) $ 100,058,463
Cash 39,713
Income receivable 1,786,239
Receivable for investments sold 52,092
Total assets 101,936,507
LIABILITIES:
Payable for investments purchased $ 536,956
Accrued expenses 17,364
Total liabilities 554,320
NET ASSETS for 9,796,234 shares outstanding $ 101,382,187
NET ASSETS CONSIST OF:
Paid in capital $ 97,381,220
Net unrealized appreciation of investments 3,680,010
Accumulated net realized gain on investments 226,201
Undistributed net investment income 94,756
Total Net Assets $ 101,382,187
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$101,382,187 / 9,796,234 shares outstanding $10.35
</TABLE>

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

FEDERATED HIGH INCOME BOND FUND II
STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 88,699
Interest 3,846,123
Total income 3,934,822
EXPENSES:
Investment advisory fee $ 239,427
Administrative personnel and services fee 61,987
Custodian fees 5,007
Transfer and dividend disbursing agent fees and expenses 12,619
Directors'/Trustees' fees 980
Auditing fees 5,133
Legal fees 1,549
Portfolio accounting fees 31,435
Share registration costs 6,710
Printing and postage 20,000
Insurance premiums 1,749
Miscellaneous 7,500
Total expenses 394,096
Waiver of investment advisory fee (73,065)
Net expenses 321,031
Net investment income 3,613,791
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 228,400
Net change in unrealized appreciation of investments 1,300,295
Net realized and unrealized gain on investments 1,528,695
Change in net assets resulting from operations $ 5,142,486
</TABLE>

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

FEDERATED HIGH INCOME BOND FUND II
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 3,613,791 $ 3,695,706
Net realized gain on investments ($228,400 and $290,512,
net gain, respectively, as computed for federal tax 228,400 290,512
purposes)
Net change in unrealized appreciation/depreciation 1,300,295 2,051,764
Change in net assets resulting from operations 5,142,486 6,037,982
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (3,628,830) (3,613,374)
Distributions from net realized gains (286,147) --
Change in net assets resulting from distributions to
shareholders (3,914,977) (3,613,374)
SHARE TRANSACTIONS--
Proceeds from sale of shares 44,619,298 55,826,183
Net asset value of shares issued to shareholders in
payment of
distributions declared 3,914,975 3,612,247
Cost of shares redeemed (14,422,905) (15,984,743)
Change in net assets resulting from share transactions 34,111,368 43,453,687
Change in net assets 35,338,877 45,878,295
NET ASSETS:
Beginning of period 66,043,310 20,165,015
End of period (including undistributed net investment
income of $94,756 and $109,795, respectively) $ 101,382,187 $ 66,043,310
</TABLE>

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

FEDERATED HIGH INCOME BOND FUND II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.24 $ 9.79 $ 8.87 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.45 0.88 0.85 0.75
Net realized and unrealized gain (loss) on investments 0.16 0.45 0.89 (1.12)
Total from investment operations 0.61 1.33 1.74 (0.37)
LESS DISTRIBUTIONS
Distributions from net investment income (0.46) (0.88) (0.82) (0.75)
Distributions in excess of net investment income(d) -- -- -- (0.01)
Distributions from net realized gain on investments (0.04) -- -- --
Total distributions (0.50) (0.88) (0.82) (0.76)
NET ASSET VALUE, END OF PERIOD $10.35 $10.24 $ 9.79 $ 8.87
TOTAL RETURN(B) 6.07% 14.31% 20.38% (3.73%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%* 0.80% 0.80% 0.41%*
Net investment income 9.06%* 9.23% 9.27% 9.11%*
Expense waiver/reimbursement(c) 0.18%* 0.59% 3.40% 10.01%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $101,382 $66,043 $20,165 $1,457
Portfolio turnover 17% 51% 48% 18%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 2, 1994 (date of initial
public investment) to December 31, 1994. For the period from December 9,
1993 (the start of business) to February 1, 1994, the fund had no public
investment.

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

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

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

FEDERATED HIGH INCOME BOND FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated High Income Bond 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 is to seek high current income.

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.

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

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

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

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

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

<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <S> <C>
Allied Waste Industries, Inc. 5/1/1997 - 5/8/1997 $ 416,707
Allied Waste North America, Inc. 11/25/1996 - 4/23/1997 881,000
American Builders & Contractors Supply Co., Inc. 5/2/1997 - 5/8/1997 250,750
Bar Technologies, Inc. 8/28/1996 5,588
Capstar Broadcasting Partners, Prf. 6/11/1997 250,000
Capstar Radio Broadcasting Partners 6/11/1997 199,212
Cellular Communications of Puerto Rico, Inc. 1/18/1997 - 2/3/1997 350,375
Chancellor Broadcasting Co., Prf. 1/17/1997 - 6/2/1997 590,700
Chancellor Radio Broadcasting Co. 6/18/1997 247,218
Chemical Leaman Corp. 1/10/1997 356,156
Collins & Aikman Floorcoverings, Inc. 1/29/1997 - 1/30/1997 201,625
Comcast Cellular Holdings, Inc. 5/5/1997 499,185
Continental Global Group, Inc. 3/26/1997 300,000
DiGiorgio Corp. 6/13/1997 150,000
Diamond Cable Communications, PLC 2/27/1997 - 5/1/1997 1,223,810
Electronic Retailing Systems International, Inc.
Warrants 6/17/1997 0
Electronic Retailing Systems International, Inc. 1/21/1997 215,448
Fairchild Semiconductor Corp. 3/6/1997 - 4/28/1997 502,813
Fairfield Manufacturing Co., Inc. 6/20/1995 - 1/16/1997 250,563
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <S> <C>
Falcon Building Products, Inc., 0/10.50% 6/5/1997 $ 180,671
Falcon Building Products, Inc., 9.50% 6/5/1997 150,000
Foamex L.P. 5/29/1997 100,000
GFSI, Inc. 2/20/1997 - 5/20/1997 454,125
Glenoit Corp. 3/16/1997 - 6/18/1997 457,490
KSL Recreation Group, Inc. 4/24/1997 150,000
Leslie's Poolmart, Inc. 6/6/1997 - 6/10/1997 328,563
MBW Foods, Inc. 2/5/1997 - 2/6/1997 303,750
MMI Products, Inc. 4/11/1997 - 5/23/1997 536,750
McLeod, Inc. 2/27/1997 - 5/1/1997 543,600
Neenah Corp. 4/23/1997 - 4/30/1997 407,250
Outdoor Systems, Inc. 6/17/1997 495,920
Oxford Automotive, Inc. 6/19/1997 250,777
Pacalta Resources Ltd. 6/13/1997 100,000
Petsec Energy, Inc. 6/6/1997 149,426
Qwest Communications International, Inc. 3/25/1997 - 4/18/1997 654,250
Roller Bearing Co. of America, Inc. 6/18/1997 125,000
Sinclair Broadcast Group, Inc., Pfd. 3/5/1997 - 4/17/1997 438,800
Sinclair Broadcast Group, Inc. 6/25/1997 243,575
TCI Satellite Entertainment, Inc., 0/12.25% 2/14/1997 129,884
TCI Satellite Entertainment, Inc., 10.875% 3/27/1997 176,500
Telesystem International Wireless, Inc. 6/24/1997 263,357
Therma-Wave, Inc. 5/9/1997 50,000
United Refining Co. 6/4/1997 300,875
Viasystems, Inc. 6/2/1997 225,000
Von Hoffmann Press, Inc. 5/15/1997 125,000
XCL, Ltd. 5/13/1997 250,000
</TABLE>

INVESTMENT RISKS-- Although the Fund has a diversified portfolio, the Fund has
89.6% 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 great for the holders of
high-yielding securities because such securities are generally unsecured and
are often subordinated to other creditors of the issuer. The Fund held a
defaulted security with the value of $115,875, representing 0.11% of the
Fund's net assets at June 30, 1997.

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 DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
Shares sold 4,366,366 5,638,009
Shares issued to shareholders in payment of distributions declared 382,982 365,049
Shares redeemed (1,403,122) (1,611,816)
Net change resulting from share transactions 3,346,226 4,391,242
</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. The Adviser can modify or
terminate this voluntary waiver 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 Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.

ORGANIZATIONAL EXPENSES-- Organizational expenses of $16,313 and start-up
administrative service expenses of $31,507 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, 1997, the Fund paid $4,350 and
$8,402, respectively, 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, 1997, were as follows:

PURCHASES $43,034,589
SALES $13,018,697

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

Matthew S. Hardin
Assistant Secretary

FEDERATED HIGH INCOME BOND FUND II

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1997

FEDERATED INSURANCE SERIES

[Graphic]
Federated Investors
Federated Securities Corp., Distributor

Cusip 313916306
G00433-02 (8/97)

[Graphic]

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
International Equity Fund II, a portfolio of Federated Insurance Series.

The report covers the six-month period from January 1, 1997, through June 30,
1997. 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.

This international stock fund is managed for capital appreciation by investing
in large, successful corporations outside the United States.* At the end of the
reporting period, the fund's $27.8 million portfolio was invested in 26
countries across more than 183 issues. Corporations in Japan represented
approximately 27% of the portfolio, and corporations in the United Kingdom
represented approximately 14% of fund assets. These were the two largest
commitments made by the fund's manager.

During the reporting period, the international stock market and Federated
International Equity Fund II continued to turn in solid total return
performances, although not matching that of the soaring U.S. equity market. The
fund's total return was 11.97% over the six-month reporting period.**
Contributing to the total return were dividends totaling $0.01 per share and a
net asset value increase of 12%.

Thank you for joining the growing number of Federated International Equity Fund
II shareholders who have broadened their equity assets internationally.

As always, we welcome your comments and suggestions.

Sincerely,
[Graphic]
J. Christopher Donahue
President
August 15, 1997

* 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 and is not indicative of
future results. 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

During the six-month reporting period, international stocks continued to
experience positive performance, but lagged the spectacular returns of U.S.
stocks. The international stock markets performed particularly well during the
last three months of the six-month reporting period, with the Morgan Stanley
Capital International Europe, Australia, and Far East Index ("EAFE")* showing a
gain of 12.98% for the April-June period following a decline of 1.6% in the
January-March period. Major events during the last three months of strong
performance included a good showing by the Japanese equity market, which rose
14.3% in local currency terms and by 23.7% in U.S.
dollar terms.

In this environment, Federated International Equity Fund II produced a six-month
total return of 11.97%.** These returns were slightly higher than the 11.21%
return of the fund's benchmark, the EAFE index, for the same period.

The fund's performance was strong across most of its portfolio, with notable
gains from the fund's holdings in Japan and Latin America. Our strategy of
seeking out fundamentally strong companies trading at attractive valuations has
remained consistent. This search led us to add MATSUSHITA COMMUNICATION
INDUSTRIAL, a leading supplier of cellular phones and other telecommunications
equipment to the Japanese market, to the fund. We also purchased RHONE POULENC
RORER, the pharmaceutical subsidiary of the French chemical giant RHONE POULENC,
which bid for the remainder of the company near the end of the quarter.

At the end of the reporting period, the fund's portfolio was diversified across
the following countries.

PERCENTAGE PERCENTAGE
COUNTRY OF PORTFOLIO COUNTRY OF PORTFOLIO
Japan 27.17% Portugal 1.71%
United Kingdom 13.98% Singapore 1.34%
Germany 8.11% Korea 1.17%
Switzerland 7.35% Norway 1.16%
United States 5.98% Argentina 1.13%
France 5.80% Malaysia 1.02%
Hong Kong 4.46% Denmark 0.56%
Sweden 3.03% Finland 0.45%
Italy 2.80% New Zealand 0.43%
Brazil 2.74% Belgium 0.22%
Australia 2.47% Colombia 0.13%
Mexico 2.26% Indonesia 0.13%
Spain 2.20% Chile 0.10%
Netherlands 2.10%

* The Morgan Stanley Capital International Europe, Australia, and Far East Index
is a market capitalization weighted foreign securities index, which is widely
used to measure the performance of European, Australian, New Zealand, and Far
Eastern stock markets. The index covers approximately 1,020 companies drawn
from 18 countries in the above regions. The index values its securities daily
in both U.S. dollars and local currency and calculates total returns monthly.
This index is unmanaged and investments cannot be made in an index.

The top ten holdings were as follows:

PERCENTAGE
NAME COUNTRY OF ASSETS
Nippon Telegraph & Telephone Corp. Japan 1.66%
Shokoh Fund & Co. Japan 1.63%
Astra AB, Class A Sweden 1.40%
China EB-IHD Holdings Ltd. Hong Kong 1.35%
Woodside Petroleum Ltd. Australia 1.30%
Volkswagen AG Germany 1.24%
UBS - Union Bank of Switzerland Switzerland 1.23%
Matsushita Communication Japan 1.21%
Bridgestone Corp. Japan 1.17%
Groupe Danon BSN SA France 1.15%

Total Percentage of Portfolio (Assets) 13.34%

Looking ahead, the economic recovery in Europe, accompanied by continued slow
growth in Japan -- as well as strong growth throughout the developing economies
- -- should bode well for company earnings in most parts of the world. We believe
that inflation should remain low and interest rates, with a few exceptions like
the U.K., will remain subdued. Politics are an issue, with the coming to power
of the Labour Party in the U.K. and the socialists in France, but left leaning
politicians will find the current financial environment very unforgiving of
policies that violate market principles.

With the rise in equity markets around the world, valuations have increased
virtually everywhere, but this should not be surprising in an environment of
declining inflation. We will continue to focus the fund on fundamentally strong
companies that are attractively valued given the long-term prospects for the
business. One of the areas that has continued to attract our attention is
Continental Europe, where corporations are continuing to restructure their
businesses and managements are paying increasing attention to shareholder value.

FEDERATED INTERNATIONAL EQUITY FUND II
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- 92.5%
ARGENTINA -- 1.1%
METALS - STEEL -- 0.2%
21,000 (a)Acindar Industria Argentina de Aceros SA $ 53,768
REAL ESTATE -- 0.1%
502 (a)IRSA Inversiones y Representaciones S.A., GDR 21,963
TELECOMMUNICATIONS -- 0.8%
2,200 (a)Telecom Argentina S.A., ADR 115,500
3,600 Telefonica de Argentina S.A., ADR 124,650
Total 240,150
TOTAL ARGENTINA 315,881
AUSTRALIA -- 2.5%
BANKING -- 0.4%
18,616 St. George Bank Ltd. 123,948
BROADCASTING & PUBLISHING -- 0.0%
238 (a)News Corp., Ltd. 1,142
ENERGY - OIL & GAS -- 0.7%
43,875 Santos Limited 184,693
ENERGY SOURCES -- 1.3%
42,000 Woodside Petroleum Ltd. 361,853
LEISURE & TOURISM -- 0.1%
11,000 (a)Aristocrat Leisure Ltd. 21,864
TOTAL AUSTRALIA 693,500
BELGIUM -- 0.2%
MERCHANDISING -- 0.2%
1,200 Delhaize-Le Lion 63,035
TOTAL BELGIUM 63,035
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
BRAZIL -- 0.7%
TELECOMMUNICATIONS -- 0.7%
1,458,000 (a)Telecomunicacoes Brasileiras SA $ 197,731
15,034 (a)Telecomunicacoes de Sao Paulo SA 4,909
TOTAL BRAZIL 202,640
CHILE -- 0.1%
BANKING -- 0.1%
400 (a)Banco BHIF, ADR 8,450
300 (a)Banco de A. Edwards, ADR 6,263
Total 14,713
ENERGY EQUIPMENT & SERVICES -- 0.0%
250 (a)(b)Chilectra S.A., ADR 7,195
METALS - NON FERROUS -- 0.0%
100 Sociedad Quimica Y Minera De Chile, ADR 6,613
TOTAL CHILE 28,521
COLOMBIA -- 0.1%
BANKING -- 0.1%
700 Banco Ganadero SA, ADR 25,200
700 Banco Industrial Colombiano, ADR 12,600
TOTAL COLOMBIA 37,800
DENMARK -- 0.6%
BANKING -- 0.4%
530 Den Danske Bank 51,564
900 Unidanmark, Class A 50,558
Total 102,122
HEALTH & PERSONAL CARE -- 0.2%
500 Novo-Nordisk, Class B 54,519
TOTAL DENMARK 156,641
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
FINLAND -- 0.5%
ELECTRICAL & ELECTRONICS -- 0.5%
1,700 Nokia AB-A $ 126,991
TOTAL FINLAND 126,991
FRANCE -- 5.9%
BANKING -- 1.6%
720 CLF-Dexia France 70,080
4,526 Compagnie Financiere de Paribas, Class A 312,685
1,346 Credit Commerical De France 57,031
Total 439,796
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.3%
1,518 Schneider SA 80,799
ENERGY SOURCES -- 0.3%
800 Total SA-B 80,862
FOOD & HOUSEHOLD PRODUCTS -- 1.2%
1,940 Group Danon 320,544
HEALTH & PERSONAL CARE -- 1.3%
2,100 Rhone-Poulenc Rorer, Inc. 190,838
1,300 Synthelabo 169,228
Total 360,066
INSURANCE -- 0.9%
2,300 AXA 143,048
3,060 Scor SA 123,198
Total 266,246
LEISURE & TOURISM -- 0.3%
528 Accor SA 79,065
TOTAL FRANCE 1,627,378
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
GERMANY -- 7.9%
AUTOMOBILE -- 2.1%
2,780 (a)Daimler Benz AG $ 225,543
450 Volkswagen AG 344,963
Total 570,506
BANKING -- 1.9%
8,700 Bankgesellschaft Berlin AG 182,071
3,750 (a)Commerzbank AG, Frankfurt 106,215
1,860 Deutsche Bank, AG 108,672
3,280 Dresdner Bank Ag, Frankfurt 113,402
Total 510,360
CHEMICALS -- 0.3%
2,300 Bayer AG 88,381
ELECTRICAL & ELECTRONICS -- 0.3%
1,630 Siemens AG 96,776
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.3%
3,800 (a)Rofin-Sinar Technologies, Inc. 72,675
FOOD & HOUSEHOLD PRODUCTS -- 0.0%
58 (a)Henkel KGAA 3,076
HEALTH & PERSONAL CARE -- 0.7%
1,750 Schering AG 186,980
MACHINERY & ENGINEERING -- 1.7%
120 Linde AG 91,853
227 Mannesmann SA 101,129
1,200 Thyssen AG 284,158
Total 477,140
UNASSIGNED -- 0.5%
310 Viag AG 140,949
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
GERMANY -- CONTINUED
UTILITIES - ELECTRICAL & GAS -- 0.1%
950 RWE AG $ 40,852
TOTAL GERMANY 2,187,695
HONG KONG -- 4.5%
BANKING -- 0.3%
3,000 HSBC Holdings PLC 90,225
ENGINEERING -- 0.3%
262,000 (a)Jiangsu Expressway, Class H 93,000
MERCHANDISING -- 1.4%
126,000 China EB-IHD Holdings Ltd. 376,505
MULTI-INDUSTRY -- 0.4%
12,000 Hutchison Whampoa 103,778
REAL ESTATE -- 2.1%
16,000 (a)Cheung Kong 157,991
23,000 China Resources Enterprises Ltd. 112,813
35,000 Great Eagle Holdings 115,427
18,000 (a)New World Development Co. Ltd. 107,341
88,000 Sino Land Co. 95,414
Total 588,986
TOTAL HONG KONG 1,252,494
INDONESIA -- 0.1%
FINANCIAL SERVICES -- 0.1%
23,500 (a)PT Putra Surya Multidana 37,443
TOTAL INDONESIA 37,443
ITALY -- 2.8%
AUTOMOBILE -- 0.8%
140,000 Magneti Marelli SPA 236,413
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
ITALY -- CONTINUED
BANKING -- 0.1%
6,500 Bca Pop Di Milano $ 38,952
FINANCIAL SERVICES -- 0.5%
68,000 Credito Italiano 124,431
MERCHANDISING -- 0.5%
25,500 La Rinascente S.P.A. 141,711
TELECOMMUNICATIONS -- 0.9%
22,000 Stet Societa Finanziaria Telefonica SPA 128,150
36,000 Telecom Italia Mobile SpA 116,500
Total 244,650
TOTAL ITALY 786,157
JAPAN -- 27.4%
AUTOMOBILE -- 0.7%
23,000 Sanden Corp. 192,637
BANKING -- 2.5%
8,000 Mitsubishi Trust & Banking Corp., Tokyo 126,330
18,000 Sumitomo Bank Ltd., Osaka 295,236
26,000 (a)Sumitomo Trust & Banking 279,009
Total 700,575
BROADCASTING & PUBLISHING -- 0.1%
7,000 Ikegami Tsushinki 40,612
CONSTRUCTION & HOUSING -- 0.5%
13,000 Hitachi Construction Machinery Co. Ltd. 125,894
DATA PROCESSING & REPRODUCTION -- 1.4%
19,000 Fujitsu Ltd. 263,567
4,000 I-O Data Device, Inc. 132,612
Total 396,179
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
ELECTRICAL & ELECTRONICS -- 3.0%
12,000 Aiwa Co. Ltd. $ 275,345
12,000 Hitachi Ltd. 134,008
12,000 Japan Radio Co. 131,914
14,000 NEC Corp. 195,428
1,000 Rohm Co. 102,949
Total 839,644
ELECTRONIC COMPONENTS, INSTRUMENTS -- 3.7%
3,000 Hirose Electric 205,723
4,000 Kyocera Corp. 317,571
4,800 Noritsu Koki Co. Ltd. 236,608
16,000 Taiyo Yuden Co. 263,828
Total 1,023,730
FINANCIAL SERVICES -- 1.6%
1,500 Shokoh Fund & Co. 454,109
HEALTH & PERSONAL CARE -- 1.6%
6,000 Sankyo Co. Ltd. 201,536
9,000 Takeda Chemical Industries 252,835
Total 454,371
INDUSTRIAL COMPONENTS -- 1.2%
14,000 (a)Bridgestone Corp. 324,900
INSURANCE -- 1.0%
41,000 Yasuda Fire & Marine Insurance Co. 275,432
MERCHANDISING -- 2.3%
1,600 (a)Autobacs Seven Co. 126,749
4,000 Ito-Yokado Co., Ltd. 232,071
8,000 Ministop Co. Ltd. 272,204
Total 631,024
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
JAPAN -- CONTINUED
PHARMACEUTICALS -- 0.7%
11,000 Daiichi Pharmaceutical Co. $ 193,858
REAL ESTATE -- 1.5%
29,000 Sumitomo Reality & Dev. 255,540
39,000 Tokyu Land Corp. 161,621
Total 417,161
RECREATION, OTHER CONSUMER GOODS -- 1.9%
6,000 Fuji Photo Film Co. 241,319
3,500 Nintendo Corp. Ltd. 293,143
Total 534,462
TELECOMMUNICATIONS -- 1.7%
10,000 Matsushita Communication 337,637
48 Nippon Telegraph & Telephone Corp. 460,653
Total 798,290
TRANSPORTATION - SHIPPING -- 0.8%
110,000 (a)Mitsui Osk Lines 226,487
UNASSIGNED -- 1.2%
TOTAL JAPAN 7,629,365
KOREA -- 1.2%
AUTOMOBILE -- 0.1%
346 (a)Dongah Tire Ind. 20,534
BEVERAGE & TOBACCO -- 0.1%
270 Lotte Chilsung Beverage Co. 33,294
BUILDING MATERIALS & COMPONENTS -- 0.5%
5,200 (a)Hyundai Engineering & Construction Co. 133,514
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.4%
2,200 (a)Samsung Display Devices 123,349
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
KOREA -- CONTINUED
TELECOMMUNICATIONS -- 0.1%
1,854 (a)SK Telecom Co. Ltd., ADR $ 18,656
TOTAL KOREA 329,347
MALAYSIA -- 1.0%
ENERGY SOURCES -- 0.4%
27,000 Malakoff Bhd 117,670
FINANCIAL SERVICES -- 0.4%
20,000 AMMB Holdings Bhd 124,406
MACHINERY & ENGINEERING -- 0.2%
10,000 UMW Holdings Bhd 47,147
TOTAL MALAYSIA 289,223
MEXICO -- 2.3%
BANKING -- 0.5%
260,000 (a)Grupo Financiero Bancomer, S.A. de C.V., Class B 124,970
BEVERAGE & TOBACCO -- 0.5%
11,000 Fomento Economico Mexicano, SA de C.V., Class B 65,467
2,200 Pan American Beverage, Class A 72,325
Total 137,792
METALS - STEEL -- 0.3%
5,000 (a)Tubos de Acero de Mexico SA, ADR 92,188
TELECOMMUNICATIONS -- 1.0%
9,000 (a)Grup Iusacell S.A., ADR 165,375
2,400 Telefonos de Mexico, Class L, ADR 114,600
Total 279,975
TOTAL MEXICO 634,925
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
NETHERLANDS -- 2.1%
CHEMICALS -- 0.4%
740 Akzo Nobel NV $ 101,411
ENERGY SOURCES -- 0.6%
3,440 Royal Dutch Petroleum 178,931
MULTI-INDUSTRY -- 0.3%
1,127 (a)Hunter Douglas N.V. 95,883
RECREATION, OTHER CONSUMER GOODS -- 0.8%
4,100 PolyGram NV 215,141
TOTAL NETHERLANDS 591,366
NEW ZEALAND -- 0.4%
TELECOMMUNICATIONS -- 0.4%
24,000 Telecom Corp. of New Zealand 122,265
TOTAL NEW ZEALAND 122,265
NORWAY -- 1.2%
ENERGY SOURCES -- 0.6%
9,000 Saga Petroleum A.S., Class A 170,687
UTILITIES - ELECTRICAL & GAS -- 0.6%
6,300 Smedvig ASA, Class B 154,724
TOTAL NORWAY 325,411
PORTUGAL -- 1.7%
ELECTRICAL & ELECTRONICS -- 0.7%
10,750 (a)Electricidade de Portugal SA 197,276
TELECOMMUNICATIONS -- 1.0%
3,400 (a)(b)Telecel - Comunicacoes Pessoai 282,029
TOTAL PORTUGAL 479,305
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SINGAPORE -- 1.4%
BROADCASTING & PUBLISHING -- 0.1%
1,000 Singapore Press Holdings Ltd. $ 20,144
ELECTRONIC COMPONENTS, INSTRUMENTS -- 0.5%
8,000 (a)Creative Technology Ltd. 136,000
FOOD & HOUSEHOLD PRODUCTS -- 0.5%
40,800 (a)(b)Want Want Holdings 135,456
REAL ESTATE -- 0.3%
7,000 City Developments Ltd. 68,546
6,000 (a)Straits Steamship Land Ltd. 15,947
1,500 (a)Straits Steamship Land Ltd., Warrants 1,364
Total 85,857
TOTAL SINGAPORE 377,457
SPAIN -- 2.2%
BEVERAGE & TOBACCO -- 0.5%
3,300 Aguas De Barcelona 135,046
CONSTRUCTION & HOUSING -- 0.4%
880 Fomento de Construcciones y Contratas SA 112,217
ENERGY SOURCES -- 0.8%
4,940 Repsol SA 208,865
INSURANCE -- 0.1%
760 Corp Mapfre SA 40,437
MACHINERY & ENGINEERING -- 0.2%
385 Zardoya-Otis SA 50,663
TELECOMMUNICATIONS -- 0.2%
2,400 Telefonica de Espana 69,386
TOTAL SPAIN 616,614
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SWEDEN -- 3.1%
BANKING -- 0.5%
12,000 Skand Enskilda BKN, Class A $ 129,533
BROADCASTING & PUBLISHING -- 0.4%
4,250 Marieberg Tidnings AB, Class A 105,488
HEALTH & PERSONAL CARE -- 1.4%
20,986 Astra AB, Class A 390,677
INDUSTRIAL COMPONENTS -- 0.1%
900 Autoliv, Inc. 35,212
INSURANCE -- 0.4%
2,680 Skandia Forsakrings AB 98,740
METALS - STEEL -- 0.3%
7,800 Avesta Sheffield AB, Class 90,246
TOTAL SWEDEN 849,896
SWITZERLAND -- 7.4%
BANKING -- 1.5%
500 Credit Suisse Group 64,212
300 UBS - Union Bank of Switzerland 343,151
Total 407,363
BEVERAGE & TOBACCO -- 0.7%
136 Richemont (Cie Fin) 196,548
CHEMICALS -- 0.9%
400 Clariant AG 258,904
FOOD & HOUSEHOLD PRODUCTS -- 0.2%
51 Nestle SA 67,278
HEALTH & PERSONAL CARE -- 1.8%
163 Novartis AG 260,577
25 (a)Roche Holding AG 226,113
Total 486,690
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
SWITZERLAND -- CONTINUED
INSURANCE -- 1.4%
180 Schw Rueckversicherungs $ 254,589
315 Zurich Versicherungsgesellschaft 125,353
Total 379,942
LEISURE & TOURISM -- 0.4%
32 Reiseburo Kuoni AG, Class B 109,589
MULTI-INDUSTRY -- 0.1%
300 Oerlikon-Buhrle Holding AG 35,137
TRANSPORTATION - AIRLINES -- 0.4%
100 (a)Sairgroup 112,055
TOTAL SWITZERLAND 2,053,506
UNITED KINGDOM -- 14.1%
AEROSPACE & MILITARY TECHNOLOGY -- 0.4%
26,353 Rolls-Royce 100,498
BANKING -- 2.5%
35,000 Bank of Scotland, Edinburgh 224,982
11,500 Barclays PLC 228,279
24,000 Lloyds TSB Group PLC 246,598
Total 699,859
BEVERAGE & TOBACCO -- 0.7%
17,000 Scottish & Newcastle PLC 182,883
BUSINESS & PUBLIC SERVICES -- 0.4%
7,700 Hyder PLC 103,865
CONSTRUCTION & HOUSING -- 0.4%
7,400 Berkeley Group PLC 86,386
6,583 Redland PLC 37,273
Total 123,659
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
ELECTRICAL & ELECTRONICS -- 0.2%
9,800 General Electric Co. PLC $ 58,589
ENERGY SOURCES -- 0.9%
20,600 British Petroleum Co. PLC 256,260
FOOD & HOUSEHOLD PRODUCTS -- 0.7%
157 Grand Metropolitan PLC 1,514
13,000 Reckitt & Colman PLC 194,191
Total 195,705
HEALTH & PERSONAL CARE -- 0.7%
4,549 Smithkline Beecham Corp. 83,747
3,000 Zeneca Group 99,219
Total 182,966
LEISURE & TOURISM -- 0.9%
7,000 Airtours PLC 135,455
20,000 Rank Group PLC 126,729
Total 262,184
MISCELLANEOUS MATERIALS & COMMODITIES -- 0.3%
10,170 Morgan Crucible Co. PLC 75,535
MULTI-INDUSTRY -- 0.8%
8,392 Tomkins PLC 36,336
24,000 Unigate 193,042
Total 229,378
PHARMACEUTICALS -- 0.8%
55,000 Medeva PLC 235,390
TELECOMMUNICATIONS -- 1.1%
25,200 British Telecommunication PLC 187,165
23,000 Vodafone Group PLC 112,225
Total 299,390
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS -- CONTINUED
UNITED KINGDOM -- CONTINUED
UNASSIGNED -- 0.4%
36,000 (a)LucasVarity PLC $ 124,698
UTILITIES - ELECTRICAL & GAS -- 2.9%
51,000 National Grid Group PLC 184,299
15,000 National Power Co. PLC 130,393
37,000 Scottish Power PLC 240,303
32,600 Southern Electric PLC 239,957
Total 794,952
TOTAL UNITED KINGDOM 3,925,811
TOTAL COMMON STOCKS (IDENTIFIED COST $22,597,329) 25,740,667
PREFERRED STOCKS -- 2.4%
BRAZIL -- 2.0%
ENERGY SOURCES -- 1.1%
1,055,000 (a)Petroleo Brasileiro SA, Preference 293,024
TELECOMMUNICATIONS -- 0.4%
345,000 (a)Telecomunicacoes de Sao Paulo SA, Preference 112,644
UTILITIES - ELECTRICAL & GAS -- 0.5%
270,000 Centrais Eletricas Brasileiras SA, Preference, Series B 161,014
TOTAL BRAZIL 566,682
GERMANY -- 0.4%
FOOD & HOUSEHOLD PRODUCTS -- 0.1%
322 Henkel KGAA, Pfd. 18,278
MACHINERY & ENGINEERING -- 0.3%
180 Gea AG, Vorzugsaktien 69,767
TOTAL GERMANY 88,045
TOTAL PREFERRED STOCKS (IDENTIFIED COST $389,445) 654,727
</TABLE>

FEDERATED INTERNATIONAL EQUITY FUND II
<TABLE>
<CAPTION>

VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
(C)REPURCHASE AGREEMENT -- 6.0%
$ 1,680,000 BT Securities Corporation, 6.00%, dated 6/30/1997, due 7/1/1997
(AT AMORTIZED COST) $ 1,680,000
TOTAL INVESTMENTS (IDENTIFIED COST $24,666,774)(D) $ 28,075,394
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1997, these securities amounted
to $424,680 which represents 1.5% of net assets.

(d) The cost of investments for federal tax purposes amounts to $24,666,774. The
net unrealized appreciation of investments on a federal tax basis amounts to
$3,408,620 which is comprised of $3,685,954 appreciation and $277,334
depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($27,831,518) at June 30, 1997.

The following acronyms are used throughout this portfolio:

ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
PLC -- Public Limited Company
SPA -- Standby Purchase Agreement

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

FEDERATED INTERNATIONAL EQUITY FUND II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $24,666,774) $ 28,075,394
Cash 5,493
Income receivable 104,784
Receivable for investments sold 458,316
Total assets 28,643,987
LIABILITIES:
Payable for investments purchased $ 742,916
Net payable for foreign currency exchange contracts purchased 5,932
Payable for taxes withheld 9,215
Accrued expenses 54,406
Total liabilities 812,469
NET ASSETS for 2,230,237 shares outstanding $ 27,831,518
NET ASSETS CONSIST OF:
Paid in capital $ 24,063,257
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 3,408,116
Accumulated net realized gain on investments and foreign currency transactions 208,015
Undistributed net investment income 152,130
Total Net Assets $ 27,831,518
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$27,831,518 / 2,230,237 shares outstanding $12.48
</TABLE>

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

FEDERATED INTERNATIONAL EQUITY FUND II
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $36,475) $ 241,971
Interest 46,673
Total income 288,644
EXPENSES:
Investment advisory fee $ 106,760
Administrative personnel and services fee 61,987
Custodian fees 43,905
Transfer and dividend disbursing agent fees and expenses 9,724
Directors'/Trustees' fees 676
Auditing fees 6,284
Legal fees 6,155
Portfolio accounting fees 29,534
Share registration costs 1,624
Printing and postage 17,254
Insurance premiums 1,000
Miscellaneous 4,804
Total expenses 289,707
Waivers and reimbursements --
Waiver of investment advisory fee $ (106,760)
Reimbursement of other operating expenses (48,950)
Total waivers and reimbursements (155,710)
Net expenses 133,997
Net investment income 154,647
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency transactions (net of foreign
taxes withheld of $152) 389,308
Net change in unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 2,283,548
Net realized and unrealized gain on investments and foreign currency 2,672,856
Change in net assets resulting from operations $ 2,827,503
</TABLE>

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

FEDERATED INTERNATIONAL EQUITY FUND II
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 154,647 $ 94,720
Net realized gain (loss) on investments and foreign currency
transactions ($389,308 net gain and $155,662 net loss, respectively,
as computed for federal tax purposes) 389,308 (231,600)
Net change in unrealized appreciation/depreciation of investments
and translation of assets and liabilities in foreign currency 2,283,548 1,010,299
Change in net assets resulting from operations 2,827,503 873,419
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (25,486) (31,449)
SHARE TRANSACTIONS--
Proceeds from sale of shares 8,515,855 12,772,774
Net asset value of shares issued to shareholders in payment of
distributions declared 25,486 31,448
Cost of shares redeemed (1,263,556) (654,035)
Change in net assets resulting from share transactions 7,277,785 12,150,187
Change in net assets 10,079,802 12,992,157
NET ASSETS:
Beginning of period 17,751,716 4,759,559
End of period (including undistributed net investment income
of $152,130 and $22,969, respectively) $ 27,831,518 $ 17,751,716
</TABLE>

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

FEDERATED INTERNATIONAL EQUITY FUND II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>

SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JUNE 30, DECEMBER 31,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.16 $10.35 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.06 0.11** 0.07
Net realized and unrealized gain on investments and
foreign currency 1.27 0.75 0.28
Total from investment operations 1.33 0.86 0.35
LESS DISTRIBUTIONS
Distributions from net investment income (0.01) (0.05) --
NET ASSET VALUE, END OF PERIOD $12.48 $11.16 $10.35
TOTAL RETURN(B) 11.97% 8.32% 3.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.25%* 1.25% 1.22%*
Net investment income 1.44%* 0.89% 1.63%*
Expense waiver/reimbursement(c) 1.45%* 3.05% 11.42%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $27,832 $17,752 $4,760
Average commission rate paid(d) $0.0047 $0.0030 --
Portfolio turnover 115% 103% 34%
</TABLE>

* Computed on an annualized basis.

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

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

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

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

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

FEDERATED INTERNATIONAL EQUITY FUND II
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated 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 investment objective of the Fund is to obtain a total return on its
assets.

2. SIGNIFICANT ACCOUNTING POLICIES

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. With respect to valuation of foreign securities, trading in
foreign cities may be completed at times which vary from the closing of the
New York Stock Exchange. Therefore, foreign securities are valued at the
latest closing price on the exchange on which they are traded prior to the
closing of the New York Stock Exchange. Foreign securities quoted in foreign
currencies are translated into U.S. dollars at the foreign exchange rate in
effect at noon, Eastern time, on the day the value of the foreign security is
determined.

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

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

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

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

However, federal taxes may be imposed on the Fund upon the disposition of
certain investments in passive foreign investment companies. 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.

At last fiscal year-end date, the Fund, for federal tax purposes, had a
capital loss carryforward of $172,758, 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:

EXPIRATION YEAR EXPIRATION AMOUNT
2003 $ 17,096
2004 $ 155,662

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.

FOREIGN EXCHANGE CONTRACTS -- The Fund may enter into foreign currency
exchange contracts as a way of managing foreign exchange risk. The Fund may
enter into foreign currency exchange contracts as purchase or sale of a
specific foreign currency at a fixed price on a future date as a hedge or
crosshedge against either specific transactions or portfolio positions. The
objective of the Fund's foreign currency hedging transactions is to reduce the
risk that the U.S. dollar value of the Fund's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All foreign currency exchange contracts are "marked to market" daily at
the applicable translation rates resulting in unrealized gains or losses.
Realized gains or losses are recorded at the time the foreign currency
exchanged contract is offset into a closing transaction or by delivery or
receipt of the currency. Risk may arise upon entering into these contracts
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar.

At June 30, 1997, the Fund had outstanding foreign exchange contracts set
forth below:
<TABLE>
<CAPTION>

IN UNREALIZED
SETTLEMENT CONTRACTS TO EXCHANGE CONTRACTS APPRECIATION
CONTRACTS PURCHASED DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Italian Lira 7/1/1997 - 467,651,918 $ 278,398 $ 275,159 $ (3,239)
7/2/1997
Japanese Yen 7/1/1997 14,597,172 129,064 127,353 (1,711)
Portuguese Escudo 7/1/1997 7,699,662 44,123 43,745 (378)
$ 451,585 $ 446,257 $ (5,328)
CONTRACTS SOLD
French Franc 7/1/1997 5,879 $ 1,001 $ 1,000 $ 1
British Pound 7/1/1997 - 256,639 426,720 427,381 (661)
Sterling 7/2/1997
Singapore Dollar 7/3/1997 44,225 30,989 30,933 56
$ 458,710 $ 459,314 $ (604)
Net Unrealized
Depreciation on
Foreign Exchange
Contracts $ (5,932)
</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.

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.

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 reseals. The Fund's restricted securities are valued at the price
provided by dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing committee.

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

SECURITY ACQUISITION DATE ACQUISITION COST
Chilectra S.A., ADR 2/28/1996 $ 5,428
Telecel -- Comunicacoes Pessoai 3/11/1997 -
4/24/1997 $ 287,906
Want Want Holdings 4/21/1997 -
4/22/1997 $ 116,200

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,
1997 1996
<S> <C> <C>
Shares sold 748,682 1,188,525
Shares issued to shareholders in payment of distributions declared 2,349 3,009
Shares redeemed (111,081) (60,899)
Net change resulting from share transactions 639,950 1,130,635
</TABLE>

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.

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.

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 Adviser. The Fund has agreed to reimburse Adviser for the
organizational expenses during the five year period following effective date.
For the period ended June 30, 1997, the Fund paid $2,835 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, 1997, were as follows:

PURCHASES $29,815,867
SALES $23,127,989

6. 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.

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

FEDERATED INTERNATIONAL EQUITY FUND II
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JUNE 30, 1997

Federated Insurance Series
[Graphic]
Federated Securities Corp., Distributor
Cusip 313916603
G00433-06 (8/97)
[Graphic]

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Prime Money Fund II, a portfolio of Federated Insurance Series.

This high-quality money market mutual fund keeps your ready cash pursuing daily
income while keeping your principal stable.* And, you have convenient, daily
access to your money.

To provide a competitive daily yield, the fund invests in a diversified
portfolio of high-quality money market securities. At the end of the reporting
period, the portfolio was invested in commercial paper (38%), repurchase
agreements (26.2%), variable rate notes (18.6%), certificates of deposit (9.6%)
and short-term notes (7.5%).

During the reporting period, the fund paid a total of $0.02 per share in
dividends to shareholders while maintaining a stable $1.00 share price. On June
30, 1997, total net assets reached $62.4 million.

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

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1997

* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will be able to do so. An investment
in the fund is not insured or 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 of the 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 demand notes and repurchase agreements.

For the first quarter of 1997, nearly all economic statistics showed that an
economic growth spurt continued. Private sector job gains along with some
acceleration in wage gains supported both hefty retail sales and an uptick in
the saving rate. Consumer confidence continued upward to 129.6% while the
manufacturing sector held its own, as evidenced by the capacity utilization rate
of 83.5%. In the second quarter of 1997, however, the consumer seemed to briefly
step to the sidelines despite the unemployment rate reaching a 20-year low of
4.8%.

Although economic growth kept pace, inflation remained benign. Overall the
consumer price index rose just 1.4% during the time period, while the producer
price index actually declined 3.4% on an annualized basis. Energy prices
drastically declined during the period, while news on the wage inflation front
was also positive. The employment cost index during the first quarter rose just
0.8% and rose 0.7% during the second quarter.

Thirty-day commercial paper started the reporting period at 5.39% on January 1,
1997, rose as high as 5.60% in late March, near the time the Federal Reserve
Board (the "Fed") raised rates on March 25, 1997. Since that time, 30-day
commercial paper has been trading in a 5.55% - 5.60% range.

The Fed raised the target federal funds rate on March 25, 1997, from 5.25% to
5.50% in order to prevent a rise in inflation. The increase was largely
anticipated and had been reflected prior to the actual increase.

The target average maturity range for the fund remained in the 35-45 day target
range for the entire reporting period, reflecting a neutral position regarding
Fed policy. Given the concentrated nature of much of the fund's current asset
base, however, the actual average maturity has been somewhat lower. 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, 1997, the net assets of
Federated Prime Money Fund II increased from $45.7 million to $62.4 million
while the 7-day net yield increased from 4.77% to 4.92%.* The effective average
maturity of the fund on June 30, 1997, was 35 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
PORTFOLIO OF INVESTMENTS
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES -- 7.5%
BANKING--4.0%
$ 500,000 Bayerische Landesbank- NY, 6.250%, 4/15/1998 $ 499,885
2,000,000 SALTS II - III Cayman Islands Corp., (Bankers Trust Int'l PLC Swaps
Agmt.) 5.863% - 6.065%, 9/18/1997 - 12/18/1997 2,000,000
Total 2,499,885
BROKERAGE--1.6%
1,000,000 Goldman Sachs Group, LP, 5.850%, 7/28/1997 1,000,000
FINANCE-AUTO--1.6%
1,000,000 Chase Manhattan Auto Owner Trust 1997-B, 5.744%, 7/10/1998 1,000,000
FINANCE - EQUIPMENT--0.3%
188,867 Capita Equipment Receivables Trust 1996-1, 5.600%, 10/15/1997 188,867
TOTAL SHORT-TERM NOTES 4,688,752
CERTIFICATES OF DEPOSIT--9.6%
BANKING--9.6%
1,500,000 National Bank of Canada, Montreal, 5.750%, 7/14/1997 1,500,000
2,500,000 Royal Bank of Canada, Montreal, 5.586% - 6.000%,
9/26/1997 - 4/6/1998 2,501,717
2,000,000 Societe Generale, Paris, 5.590%, 9/3/1997 1,999,959
TOTAL CERTIFICATES OF DEPOSIT 6,001,676
COMMERCIAL PAPER--38.0%
BANKING--8.0%
2,000,000 Bank of Nova Scotia, Toronto, 5.709%, 8/26/1997 1,982,484
2,000,000 Commonwealth Bank of Australia, Sydney, 5.493% - 5.909%,
7/30/1997 - 10/3/1997 1,980,676
1,000,000 ING US Funding, (Guaranteed by Internationale Nederlanden
Bank N.V.), 5.520%, 7/8/1997 998,956
Total 4,962,116
</TABLE>
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMERCIAL PAPER -- CONTINUED
BROKERAGE--8.0%
$ 2,000,000 Goldman Sachs Group, LP, 5.656%, 7/2/1997 $ 1,999,686
3,000,000 Merrill Lynch & Co., Inc., 5.591%, 7/7/1997 2,997,225
Total 4,996,911
ELECTRICAL EQUIPMENT--0.8%
500,000 Whirlpool Financial Corp., (Whirlpool Corp. Support Agreement),
5.786%, 7/25/1997 498,087
FINANCE - AUTOMOTIVE--3.5%
2,200,000 General Motors Acceptance Corp., 5.700% - 5.953%,
7/3/1997 - 10/6/1997 2,196,261
FINANCE - COMMERCIAL--16.1%
1,000,000 Asset Securitization Cooperative Corp., 5.721%, 8/7/1997 994,203
2,000,000 Beta Finance, Inc., 5.867% - 5.888%, 11/14/1997 1,956,858
1,000,000 Corporate Asset Funding Co., Inc. (CAFCO), 5.634%, 7/8/1997 998,911
1,150,000 Falcon Asset Securitization Corp., 5.620%, 7/10/1997 1,148,390
1,000,000 General Electric Capital Corp., 5.440%, 8/6/1997 994,700
3,000,000 Greenwich Funding Corp., 5.624% - 5.779%, 7/1/1997 - 9/22/1997 2,986,951
1,000,000 PREFCO-Preferred Receivables Funding Co., 5.702%, 7/9/1997 998,751
Total 10,078,764
FINANCE - RETAIL--1.6%
1,000,000 New Center Asset Trust, A1+/P1 Series, 5.690%, 9/3/1997 990,027
TOTAL COMMERCIAL PAPER 23,722,166
(A)NOTES - VARIABLE--18.6%
BANKING--13.8%
160,000 Alabama State IDA, (Wellborn Cabinet, Inc.), Tax Revenue Bonds,
(Amsouth Bank N.A., Birmingham LOC), 5.740%, 7/2/1997 160,000
200,000 Capital One Funding Corp., SERIES 1995-A, (Bank One, Indianapolis,
IN LOC), 5.630%, 7/3/1997 200,000
190,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque Paribas,
Paris LOC), 5.950%, 7/3/1997 190,000
</TABLE>
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)NOTES - VARIABLE -- CONTINUED
BANKING -- CONTINUED
$ 185,000 Franklin County, OH, (Edison Wielding), (Series 1995), (Huntington
National Bank, Columbus, OH LOC), 5.840%, 7/3/1997 $ 185,000
1,000,000 Kenny, Donald R. and Cheryl A., Series 1996-C, (Star Bank, N.A.,
Cincinnati LOC), 5.760%, 7/3/1997 1,000,000
2,000,000 Liquid Asset Backed Securities Trust, Series 1997-1, (Westdeutsche
Landesbank Girozentrale Swap Agreement), 5.688%, 7/15/1997 2,000,000
1,000,000 Liquid Asset Backed Securities Trust, Series 1997-3 Senior Notes,
(Westdeutsche Landesbank Girozentrale Swap Agreement,
Guaranteed by AMBAC), 5.751%, 9/27/1997 1,000,000
575,000 Madison, WI Community Development Authority, Series 1997-B
Hamilton Point Apts., (Bank One, Milwaukee, WI N.A. LOC), 5.810%,
7/3/1997 575,000
278,000 Maryland State IDFA, (Human Genome), (Series 1994), (First National
Bank of Maryland, Baltimore LOC), 5.760%, 6/30/1997 278,000
330,000 Mississippi Business Finance Corp., Metalloy Project, (Comerica Bank,
Detroit, MI LOC), 5.710%, 7/3/1997 330,000
375,010 Pelham City, IDB, (Columbus Bank and Trust Co., GA LOC), 5.910%,
7/3/1997 375,010
550,000 REAL I Funding Corp., Casto Realty Investments Series 1996,
(Huntington National Bank, Columbus, OH LOC), 5.710%, 7/3/1997 550,000
984,664 Rabobank Optional Redemption Trust, Series 1997-101 (Rabobank
Guarantee), 5.852%, 7/15/1997 984,664
370,000 Roby Company Ltd. Partnership, (Huntington National Bank,
Columbus, OH LOC), 5.710%, 7/3/1997 370,000
185,000 Southeast Regional Holdings, LLC, (Series 1995-A), (Columbus
Bank and Trust Co., GA LOC), 5.910%, 7/3/1997 185,000
199,000 Vista Funding Corp., (Series 1994-A), (Fifth Third Bank of
Northwestern OH LOC), 5.710%, 7/3/1997 199,000
Total 8,581,674
INSURANCE--4.8%
1,000,000 General American Life Insurance Company, 5.888%, 7/21/1997 1,000,000
1,000,000 Jackson National Life Insurance Company, 5.900%, 7/25/1997 1,000,000
</TABLE>
FEDERATED PRIME MONEY FUND II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)NOTES - VARIABLE -- CONTINUED
INSURANCE -- CONTINUED
$ 1,000,000 Travelers Insurance Company, 5.873%, 7/1/1997 $ 1,000,000
Total 3,000,000
TOTAL NOTES -- VARIABLE 11,581,674
(B)REPURCHASE AGREEMENTS--26.2%
2,000,000 Chase Government Securities, Inc., 6.150%, dated 6/30/1997,
due 7/1/1997 2,000,000
5,000,000 Fuji Government Securities, Inc., 6.000%, dated 6/30/1997,
due 7/1/1997 5,000,000
2,000,000 Goldman Sachs Group, LP, 6.150%, dated 6/30/1997, due 7/1/1997 2,000,000
5,000,000 PaineWebber Group, Inc., 6.000%, dated 6/30/1997, due 7/1/1997 5,000,000
1,972,000 Swiss Bank Capital Markets, 5.930%, dated 6/30/1997, due 7/1/1997 1,972,000
395,000 UBS Securities, Inc., 5.900%, dated 6/30/1997, due 7/1/1997 395,000
TOTAL REPURCHASE AGREEMENTS 16,367,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 62,361,268
</TABLE>

(a) Floating rate note with current rate and next reset date shown.

(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.

Note: The categories of investments are shown as a percentage of net assets
($62,372,613) at June 30, 1997.

The following acronyms are used throughout this portfolio:

AMBAC -- American Municipal Bond Assurance Corporation IDA -- Industrial
Development Authority IDB -- Industrial Development Bond IDFA -- Industrial
Development Finance Authority LOC -- Letter of Credit LP -- Limited Partnership
PLC -- Public Liability Company LLC -- Limited Liability Corporation

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

FEDERATED PRIME MONEY FUND II
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 62,361,268
Cash 5,974
Income receivable 236,839
Total assets 62,604,081
LIABILITIES:
Income distribution payable $231,468
NET ASSETS for 62,372,613 shares outstanding $ 62,372,613
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$62,372,613 / 62,372,613 shares outstanding $1.00
</TABLE>

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

FEDERATED PRIME MONEY FUND II
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 1,618,942
EXPENSES:
Investment advisory fee $ 145,769
Administrative personnel and services fee 61,987
Custodian fees 7,111
Transfer and dividend disbursing agent fees and expenses 11,140
Directors'/Trustees' fees 996
Auditing fees 6,343
Legal fees 1,990
Portfolio accounting fees 19,930
Share registration costs 2,786
Printing and postage 18,097
Insurance premiums 904
Miscellaneous 4,750
Total expenses 281,803
Waivers --
Waiver of investment advisory fee (47,289)
Net expenses 234,514
Net investment income $ 1,384,428
</TABLE>

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

FEDERATED PRIME MONEY FUND II
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 1,384,428 $ 1,446,378
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,384,428) (1,446,378)
SHARE TRANSACTIONS--
Proceeds from sale of shares 117,960,881 214,683,781
Net asset value of shares issued to shareholders in payment of
distributions declared 1,137,886 1,446,378
Cost of shares redeemed (102,381,486) (188,312,731)
Change in net assets resulting from share transactions 16,717,281 27,817,428
Change in net assets 16,717,281 27,817,428
NET ASSETS:
Beginning of period 45,655,332 17,837,904
End of period $ 62,372,613 $ 45,655,332
</TABLE>

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

FEDERATED PRIME MONEY FUND II
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JUNE 30, YEAR ENDED JUNE 30,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.05) (0.05) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.36% 4.75% 5.20% 0.50%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%* 0.80% 0.80% 0.80%*
Net investment income 4.72%* 4.68% 5.12% 4.26%*
Expense waiver(c) 0.16%* 0.57% 2.69% 71.84%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $62,373 $45,655 $17,838 $552
</TABLE>

* Computed on an annualized basis.

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

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

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

FEDERATED PRIME MONEY FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Prime Money Fund II (the
"Fund"). 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 uses the amortized cost method to value its
portfolio securities in accordance with Rule 2a-7 under the Act. Investments
in other open-end regulated investment companies are valued at net asset
value.

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

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

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

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

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

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

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, 1997, capital paid-in aggregated $62,372,613.

Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
JUNE 30, DECEMBER 31,
1997 1996
<S> <C> <C>
Shares sold 117,960,881 214,683,781
Shares issued to shareholders in payment of distributions declared 1,137,886 1,446,378
Shares redeemed (102,381,486) (188,312,731)
Net change resulting from share transactions 16,717,281 27,817,428
</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 0.50% 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.

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 $22,430 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, 1997, the Fund paid $5,981 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
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1997

FEDERATED INSURANCE SERIES

[Graphic]

FEDERATED INVESTORS
Federated Securities Corp., Distributor

Cusip 313916504
G00433-05 (8/97)
[Graphic]

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Utility Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 1997, through June 30,
1997. It begins with a commentary by the fund's portfolio managers, which is
followed by a complete listing of the fund's utility holdings and the fund's
financial statements.

Utilities can be a wise investment because they provide critical, ongoing
services to every civilized society. By investing primarily in the common stocks
of U.S. and foreign utility companies, Federated Utility Fund II helps
shareholders participate in the income and growth opportunities of this staple
market.

Amid a favorable environment for utilities, the fund produced a strong six-month
total return of 8.98%.* Contributing to the total return were dividend income
totaling $0.21 per share, capital gains totaling $0.26 per share, and net asset
value growth of $0.56 per share. On June 30, 1997, total net assets reached
$77.4 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,
[Graphic]
J. Christopher Donahue
President
August 15, 1997

INVESTMENT REVIEW

The second quarter of 1997 was quite positive for the utility sectors, though
not as strong as the overall market. The Standard & Poor's Electric Index had a
total return of 5.3%, Standard & Poor's Telephone Index returned 12.5%, and
Standard & Poor's Natural Gas Index returned 7.7%.* The fund performed well in
comparison, with a total return of 9.1%.**

Second quarter news for the electric industry included unexpected legislative
setbacks in Texas and Illinois as the industry's transition from a regulated
monopoly to a competitive open market hit another snag. There was, however,
positive news in Michigan, which we expect will pass favorable legislation later
this year. Additionally, there are other bright spots. Companies continue to
diversify into other utility sectors and to other parts of the world to attempt
to increase their profit growth. The "convergence" of the electric and gas
industries continues, as companies merge to become regional, and eventually
national, providers of integrated energy services. We continue to position the
fund to benefit from these trends.

DUKE POWER, the fund's largest holding, merged in June with PanEnergy to become
Duke Energy. Duke's promising new market of providing gas and electricity from a
single source doubles the company's expected earnings growth rate from 4% to 8%.

PACIFICORP, another holding of the fund, agreed to acquire The Energy Group of
England. This merger will combine a low-cost electric provider in the western
U.S. with a large, deregulated utility in England and Peabody Coal, the largest
private coal producer in the world. The new company will have a competitive
advantage in providing low-cost power in the U.S., England, and Australia (the
three largest deregulated energy markets in the world).

We remain enthusiastic about the prospects for the fund. All three utility
subsectors--electric, gas, and telephone, appear inexpensive versus the broad
market. The relative dividend yield on electrics, for example, is the highest in
twenty years. Furthermore, the defensive characteristics of utilities should
come back in favor when investors again recognize the value of seeking high and
reliable dividend yields, steady earnings, and moderate growth.

THEMES:

1. High-quality domestic utilities with superior dividend growth prospects.

2. Utilities with astute managers who can capitalize on changes in the
industry.

3. Diversification of the fund's risk by including non-utility companies and
international utilities.

COMMENTS REGARDING SELECTED PURCHASES:

ELECTRICIDADE DE PORTUGAL has excellent earnings and dividend growth potential
from more efficient management, now that the government has made it a private
company.

BOSTON PROPERTIES is a high-quality real estate investment trust that owns
office properties in the northeast. It has a 6.5% yield and is expected to
benefit from the improvement in real estate markets.

PG & E provides exposure to California, the only major state to set definite
rules for transition to competition. The company plans to divest its generating
plants and become a distributor of gas and electric that will generate large
cash flows.

* The Standard & Poor's Utilities (electric power companies) Index, the Standard
& Poor's Telephone Index and the Standard & Poor's Natural Gas Distributors &
Pipe Lines Index are capitalization-weighted indices of all stocks designed to
measure the performance of the electric power utilities company sector, the
telephone sector and the natural gas distributors and pipe line sector,
respectively, of the Standard & Poor's 500 Index. Indices are unmanaged, and
investments cannot be made in an index.

FEDERATED UTILITY FUND II
PORTFOLIO OF INVESTMENTS

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--74.5%
CONSUMER DURABLES--0.5%
9,700 Ford Motor Co. $ 366,175
CONSUMER NON-DURABLES--2.0%
34,100 Philip Morris Cos., Inc. 1,513,188
ELECTRIC UTILITIES: CENTRAL--9.4%
70,500 CMS Energy Corp. 2,485,125
28,100 Cinergy Corp. 978,231
79,700 DPL, Inc. 1,962,612
44,200 NIPSCO Industries, Inc. 1,826,013
Total 7,251,981
ELECTRIC UTILITIES: EAST--3.1%
64,500 DQE, Inc. 1,822,125
15,600 GPU, Inc. 559,650
Total 2,381,775
ELECTRIC UTILITIES: SOUTH--13.1%
65,988 Duke Energy Co. 3,163,300
48,300 FPL Group, Inc. 2,224,819
72,100 Southern Co. 1,577,188
68,000 TECO Energy, Inc. 1,738,250
41,500 Texas Utilities Co. 1,429,156
Total 10,132,713
ELECTRIC UTILITIES: WEST--6.0%
26,000 P G & E Corp. 630,500
53,700 Pacificorp 1,181,400
</TABLE>
FEDERATED UTILITY FUND II
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
ELECTRIC UTILITIES: WEST--CONTINUED
66,300 Pinnacle West Capital Corp. $ 1,993,144
21,900 Portland General Corp. 869,156
Total 4,674,200
ENERGY MINERALS--0.5%
6,800 Exxon Corp. 418,200
FINANCE--3.4%
12,600 (a)Boston Properties, Inc. 346,500
56,900 Meditrust, REIT 2,268,887
Total 2,615,387
MAJOR U.S. TELECOMMUNICATIONS--18.4%
34,900 Ameritech Corp. 2,371,019
54,500 BellSouth Corp. 2,527,437
54,700 GTE Corp. 2,399,962
57,900 MCI Communications Corp. 2,216,484
36,686 SBC Communications, Inc. 2,269,946
46,100 Sprint Corp. 2,426,013
Total 14,210,861
NATURAL GAS DISTRIBUTION--4.3%
53,700 MCN Corp. 1,644,562
5,600 New Jersey Resources Corp. 175,700
44,400 Pacific Enterprises 1,492,950
Total 3,313,212
NON-U.S. UTILITIES--12.1%
174,500 China Light and Power Co. Ltd. 988,803
86,550 (a)Electricidade de Portugal SA 1,588,299
57,200 Empresa Nacional Electricidad SA, ADR 1,290,575
23,000 Korea Electric Power Corp., ADR 429,812
</TABLE>
FEDERATED UTILITY FUND II
<TABLE>
<CAPTION>
VALUE
IN U.S.
SHARES DOLLARS
<C> <S> <C>
COMMON STOCKS--CONTINUED
NON-U.S. UTILITIES--CONTINUED
42,700 National Power Co. PLC, ADR $ 1,502,506
70 Nippon Telegraph & Telephone Corp. 671,785
324,500 Stet Societa Finanziaria Telefonica SPA 1,126,491
11,800 Telecomunicacoes Brasileiras SA, ADR 1,790,650
Total 9,388,921
OIL/GAS TRANSMISSION--1.4%
25,000 Williams Cos., Inc. (The) 1,093,750
WATER SUPPLY--0.3%
12,800 American Water Works Co., Inc. 273,600
TOTAL COMMON STOCKS (IDENTIFIED COST $50,142,993) 57,633,963
CONVERTIBLE PREFERRED STOCKS--18.2%
BASIC INDUSTRY--2.4%
7,800 (a)Amcor Ltd., PRIDES 413,400
41,700 Coeur d'Alene Mines Corp., Conv. Pfd., $1.49 698,475
19,000 Merrill Lynch & Co., Inc., STRYPES, Series IMC Global 712,500
Total 1,824,375
CELLULAR TELEPHONE--1.0%
16,600 Airtouch Communications, Inc., Conv. Pfd., Series C, $2.13 796,800
ENERGY MINERALS--1.1%
15,500 (a)(b)Tosco Corp., Conv. Pfd. 862,963
FINANCE--4.5%
7,300 Merrill Lynch & Co., Inc., STRYPES, $4.09 500,050
16,200 Merrill Lynch & Co., Inc., STRYPES, Series MGIC, $3.12 1,336,500
22,900 National Australia Bank, Ltd., Melbourne, Exchangeable Capital
Unit, $1.97 639,769
14,600 Salomon, Inc., DECS, $2.03 492,750
12,600 SunAmerica, Inc., PERCS, 8.5% 549,675
Total 3,518,744
</TABLE>
FEDERATED UTILITY FUND II
<TABLE>
<CAPTION>
SHARES VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS--CONTINUED
HEALTH CARE--1.0%
7,900 Aetna, Inc., Conv. Pfd., $4.76 $ 740,625
NATURAL GAS DISTRIBUTION--0.2%
3,300 MCN Corp., PRIDES, $8.00 179,437
OIL/GAS TRANSMISSION--1.8%
13,700 Williams Cos., Inc. (The), Conv. Pfd., $3.50 1,411,785
SERVICES--3.2%
25,000 Browning-Ferris Industries, Inc., ACES, $2.58 831,250
6,500 (b)CalEnergy Co., Inc., Conv. Pfd. 368,713
38,000 Hollinger International Publishing, Inc., Conv. Pfd., $.95 437,000
7,800 TCI Communications, Inc., Exchangeable Pfd. Stock, $5.00 803,400
Total 2,440,363
TECHNOLOGY--1.9%
16,500 Microsoft Corp., Cumulative Conv. Pfd., Series A, $2.20 1,435,500
UTILITIES--1.1%
14,200 Salomon, Inc., DECS, Series CSN, $3.48 907,025
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $12,684,009)
14,117,617
CONVERTIBLE CORPORATE BONDS--4.1%
HEALTH CARE--2.6%
$ 800,000 Alza Corp., Conv. Bond, 5.00%, 5/1/2006 811,792
1,800,000 (b)Roche Holdings, Inc., LYON, 5/6/2012 787,500
300,000 Tenet Healthcare Corp., Conv. Bond, 6.00%, 12/1/2005 374,571
Total 1,973,863
NON-U.S. UTILITIES--0.3%
245,000 Korea Electric Power Corp., Conv. Bond, 5.00%, 8/1/2001 242,702
</TABLE>
FEDERATED UTILITY FUND II
<TABLE>
<CAPTION>
SHARES VALUE
OR PRINCIPAL IN U.S.
AMOUNT DOLLARS
<C> <S> <C>
CONVERTIBLE CORPORATE BONDS--CONTINUED
TECHNOLOGY--1.2%
$ 745,000 (b)Solectron Corp., Conv. Bond, 6.00%, 3/1/2006 $ 932,449
TOTAL CONVERTIBLE CORPORATE BONDS (IDENTIFIED COST $2,857,178) 3,149,014
(C)REPURCHASE AGREEMENT--3.6%
2,800,000 BT Securities Corporation, 6.00%, dated 6/30/1997, due 7/1/1997
(AT AMORTIZED COST) 2,800,000
TOTAL INVESTMENTS (IDENTIFIED COST $68,484,180)(D) $ 77,700,594
</TABLE>

(a) Non-income producing security.

(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At June 30, 1997, these securities amounted
to $2,951,625 which represents 3.8% of net assets.

(d) The cost of investments for federal tax purposes amounts to $68,484,180. The
net unrealized appreciation of investments on a federal tax basis amounts to
$9,216,414 which is comprised of $9,702,462 appreciation and $486,048
depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($77,394,033) at June 30, 1997.

The following acronyms are used throughout this portfolio:

ACES --Adjustable Convertible Extendable Securities ADR --American Depositary
Receipt DECS --Dividend Enhanced Convertible Stock LYON --Liquid Yield Option
Note PERCS --Preferred Equity Redemption Cumulative Stock PLC --Public Limited
Company PRIDES --Preferred Redeemable Increased Dividend Equity Securities REIT
- --Real Estate Investment Trust SPA --Standby Purchase Agreement STRYPES
- --Structured Yield Product Exhangeable for Stock

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

FEDERATED UTILITY FUND II
STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $68,484,180) $ 77,700,594
Cash 39,071
Income receivable 243,844
Receivable for investments sold 1,242,289
Total assets 79,225,798
LIABILITIES:
Payable for investments purchased $ 1,821,448
Payable for taxes withheld 10,317
Total liabilities 1,831,765
NET ASSETS for 6,257,442 shares outstanding $ 77,394,033
NET ASSETS CONSIST OF:
Paid in capital $ 67,374,321
Net unrealized appreciation of investments and translation of assets and
liabilities in foreign currency 9,217,210
Accumulated net realized gain on investments and foreign currency transactions 679,020
Undistributed net investment income 123,482
Total Net Assets $ 77,394,033
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$77,394,033 / 6,257,442 shares outstanding $12.37
</TABLE>

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

FEDERATED UTILITY FUND II
STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $21,425) $ 1,418,236
Interest 132,458
Total income 1,550,694
EXPENSES:
Investment advisory fee $ 255,800
Administrative personnel and services fee 61,987
Custodian fees 4,750
Transfer and dividend disbursing agent fees and expenses 12,250
Directors'/Trustees' fees 1,250
Auditing fees 6,344
Legal fees 1,750
Portfolio accounting fees 24,250
Share registration costs 1,240
Printing and postage 20,000
Insurance premiums 2,250
Miscellaneous 8,000
Total expenses 399,871
Waiver--
Waiver of investment advisory fee (108,415)
Net expenses 291,456
Net investment income 1,259,238
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY:
Net realized gain on investments and foreign currency transactions 695,889
Net change in unrealized appreciation of investments and translation of assets
and liabilities in foreign currency 4,185,014
Net realized and unrealized gain on investments and foreign currency 4,880,903
Change in net assets resulting from operations $ 6,140,141
</TABLE>

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

FEDERATED UTILITY FUND II
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,259,238 $ 1,890,779
Net realized gain (loss) on investments and foreign currency
transactions ($695,889 and $1,464,419 net gains, respectively, as
computed for federal tax purposes) 695,889 1,471,710
Net change in unrealized appreciation/depreciation of investments
and translation of assets and liabilities in foreign currency 4,185,014 2,758,768
Change in net assets resulting from operations 6,140,141 6,121,257
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,226,946) (1,821,526)
Distributions from net realized gains on investments and foreign
currency transactions (1,464,468) (192,047)
Change in net assets resulting from distributions to shareholders (2,691,414) (2,013,573)
SHARE TRANSACTIONS--
Proceeds from sale of shares 14,299,254 36,577,954
Net asset value of shares issued to shareholders in payment of
distributions declared 2,691,411 2,013,573
Cost of shares redeemed (6,602,895) (8,821,081)
Change in net assets resulting from share transactions 10,387,770 29,770,446
Change in net assets 13,836,497 33,878,130
NET ASSETS:
Beginning of period 63,557,536 29,679,406
End of period (including undistributed net investment income of
$123,482 and $91,190, respectively) $ 77,394,033 $ 63,557,536
</TABLE>

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

FEDERATED UTILITY FUND II
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.81 $11.03 $ 9.29 $ 9.48
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.21 0.42 0.45 0.34
Net realized and unrealized gain (loss) on investments 0.82 0.82 1.74 (0.19)
Total from investment operations 1.03 1.24 2.19 0.15
LESS DISTRIBUTIONS
Distributions from net investment income (0.21) (0.41) (0.45) (0.34)
Distributions from net realized gain on investments (0.26) (0.05) -- --
Total distributions (0.47) (0.46) (0.45) (0.34)
NET ASSET VALUE, END OF PERIOD $12.37 $11.81 $11.03 $ 9.29
TOTAL RETURN(B) 8.98% 11.56% 24.18% 1.12%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.85%* 0.85% 0.85% 0.60%*
Net investment income 3.69%* 3.92% 4.62% 4.77%*
Expense waiver/reimbursement(c) 0.32%* 0.51% 2.24% 54.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $77,394 $63,558 $29,679 $974
Average commission rate paid(d) $0.0357 $0.0402 -- --
Portfolio turnover 25% 63% 62% 73%
</TABLE>

* Computed on an annualized basis.

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

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

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

FEDERATED UTILITY FUND II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated Utility 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 achieve high current income and
moderate capital appreciation.

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS-- Listed corporate bonds, (other fixed income and
asset-backed securities), and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked price
as furnished by an independent pricing service. Listed equity securities are
valued at the last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. With respect to valuation of foreign
securities, trading in foreign cities may be completed at times which vary
from the closing of the New York Stock Exchange. Therefore, foreign securities
are valued at the latest closing price on the exchange on which they are
traded prior to the closing of the New York Stock Exchange. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at the foreign
exchange rate in effect at noon, eastern time, on the day the value of the
foreign security is determined.

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

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

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

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

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.

FOREIGN EXCHANGE CONTRACTS-- The Fund may enter into foreign currency
commitments for the delayed delivery of securities or foreign currency
exchange transactions. Purchased contracts are used to acquire exposure to
foreign currencies; whereas, contracts to sell are used to hedge the Fund's
securities against currency fluctuations. Risks may arise upon entering these
transactions from the potential inability of counterparts to meet the terms of
their commitments and from unanticipated movements in security prices or
foreign exchange rates. The foreign currency transactions are adjusted by the
daily exchange rate of the underlying currency and any gains or losses are
recorded for financial statement purpose as unrealized until the settlement
date.

At June 30, 1997, the Fund had outstanding foreign currency commitments as set
forth below:

<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACTS TO CONTRACTS APPRECIATION
DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
<S> <S> <C> <C> <C> <C>
Contracts Sold:
Hong Kong Dollar July 3, 1997 51,340 $ 6,626 $ 6,627 $(1)
Italian Lira July 2, 1997 37,931,250 22,313 22,318 (5)
Net Unrealized
(Depreciation)
on Foreign
Exchange Contracts (6)
</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.

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

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

SECURITY ACQUISITION DATE ACQUISITION COST
Tosco Corp. 12/10/1996-5/30/1997 $799,994
CalEnergy Co., Inc. 2/28/1997-5/30/1997 329,188
Roche Holdings, Inc. 4/29/1997 709,011
Solectron Corp. 2/15/1996-6/4/1997 753,847

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 MONTH YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
Shares sold 1,201,323 3,296,405
Shares issued to shareholders in
payment of distributions declared 229,915 180,323
Shares redeemed (556,026) (785,968)
Net change resulting from share transactions 875,212 2,690,760
</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.

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 EXPENSE -- Organizational and/or 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/or start-up
administrative expenses during the five-year period following effective date.
For the period ended June 30, 1997, the Fund paid $6,569 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 (and in-kind
contributions), for the period ended June 30, 1997, were as follows:

PURCHASES $24,397,784
SALES $16,732,861

6. CONCENTRATION OF CREDIT RISK

At June 30, 1997, the diversification of countries was as follows:

PERCENTAGE OF
COUNTRY NET ASSETS
Brazil 2.3%
Chile 1.7%
Hong Kong 1.3%
Italy 1.5%
Japan 0.9%
Korea 0.9%
Portugal 2.1%
Switzerland 1.0%
United Kingdom 2.0%

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

Matthew S. Hardin
Assistant Secretary

FEDERATED
UTILITY
FUND II

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1997

FEDERATED INSURANCE SERIES

[Graphic] Federated Investors
Federated Securities Corp., Distributor

Cusip 313916108
G00433-03 (8/97)
[Graphic]

PRESIDENT'S MESSAGE

Dear Shareholder:

I am pleased to present the Semi-Annual Report to shareholders for Federated
Fund for U.S. Government Securities II, a portfolio of Federated Insurance
Series.

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 six-month reporting period, the fund produced a net total return of
3.01%.* The fund paid dividends totaling $0.29 per share. On June 30, 1997, the
fund's total net assets stood at $44.4 million.

Thank you for pursuing income through the diversification and professional
management of Federated Fund for U.S. Government Securities II. Your
comments and suggestions are always welcome.

Sincerely,
[Graphic]
J. Christopher Donahue
President
August 15, 1997

INVESTMENT REVIEW

Federated Fund for U.S. Government Securities II provides shareholders with 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 7.48% and a weighted average
effective duration of 4.0 years.

After the torrid rate of growth in the first quarter of 1997, the pace of
economic activity slowed down to a more tolerable level during the second
quarter. Consumers appeared to have moderated their spending, and the
manufacturing sector had a pull back after the large increase in inventories
during the first quarter. Personal income grew faster than inflation, and the
Treasury market continued its range bound trading pattern.

During this semi-annual reporting period, mortgages turned in a stellar
performance, having benefited from stable Treasury rates and declining implied
volatilities. On a total rate of return basis for the first six months of 1997,
mortgages outperformed Treasuries by 110 basis points. The question at this
juncture is: will the outperformance continue going forward in the mortgage
market? Currently, fund management is cautious on mortgages due to near-term
risks. These risks include a pickup in volatility as well as a breakout from our
current trading range.

Portfolio activity during this reporting period focused on purchases of seasoned
30-year mortgage securities. In addition, the fund did modest extension swaps in
the core position of U.S. Treasuries. This strategy gave the fund, for the
six-month period ended June 30, 1997, a net total return of 3.01%* versus a
blend of the Lehman Government and Mortgage Indices** return of 3.22%

As of June 30, 1997, total net assets were $44.4 million and the average 30-day
net yield as calculated under Securities and Exchange Commission guidelines was
6.22%* based upon the net asset value of $10.10.

* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that
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.

** The indices are a blend of 40% Lipper General U.S. Government Funds and 60%
Lehman Brothers Mortgage-Backed Securities Index. Lipper General U.S.
Government Funds invest at least 65% of assets in U.S. Government and agency
issues. Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services, Inc. as
falling into the respective categories indicated. Lipper figures do not
reflect sales charges. Lehman Brothers Mortgage-Backed Securities Index is
composed of all fixed rate, securitized mortgage pools by the Government
National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"), including GNMA Graduated Payment Mortgages. Indexes are unmanaged
and investments cannot be made in an index.

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
PORTFOLIO OF INVESTMENTS

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS--17.0%
$ 2,500,000 Federal Farm Credit Bank, 6.320%, 10/30/1998 $ 2,515,950
500,000 Federal Farm Credit Bank, 8.650%, 10/1/1999 525,725
900,000 Federal Farm Credit Bank, 9.000%, 3/7/2000 960,138
1,500,000 Federal Home Loan Bank System, 6.285%, 6/26/2000 1,496,625
1,000,000 Federal Home Loan Bank System, 6.830%, 7/17/2001 1,014,350
1,000,000 Federal Home Loan Bank System, 8.600%, 8/25/1999 1,048,710
TOTAL INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $7,528,148) 7,561,498
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--63.8%
9,084,110 Federal Home Loan Mortgage Corp., 6.00% - 9.00%,
9/1/2010 - 7/1/2026 9,068,041
9,917,366 Federal National Mortgage Association, 6.50% - 10.00%,
8/1/2011 - 2/1/2027 9,905,842
9,066,900 Government National Mortgage Association, 6.50% - 11.00%,
9/15/2015 - 7/15/2026 9,312,578
TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $28,129,365) 28,286,461
U.S. TREASURY OBLIGATIONS--17.4%
1,100,000 U.S. Treasury Bonds, 6.000%, 2/15/2026 984,962
900,000 U.S. Treasury Bonds, 9.250%, 2/15/2016 1,126,539
690,000 U.S. Treasury Bonds, 11.250%, 2/15/2015 1,002,715
1,000,000 U.S. Treasury Notes, 6.250%, 2/28/2002 994,660
1,000,000 U.S. Treasury Notes, 6.625%, 3/31/2002 1,009,200
1,500,000 U.S. Treasury Notes, 7.000%, 7/15/2006 1,543,950
1,000,000 U.S. Treasury Notes, 7.250%, 8/15/2004 1,042,530
TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $7,642,237) 7,704,556
</TABLE>
Federated Fund for U.S. Government Securities II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)REPURCHASE AGREEMENT--0.9%
$ 380,000 BT Securities Corporation, 6.00%, dated 6/30/1997, due 7/1/1997
(AT AMORTIZED COST) $ 380,000
TOTAL INVESTMENTS (IDENTIFIED COST $43,679,750)(B) $ 43,932,515
</TABLE>

(a) 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.

(b) The cost of investments for federal tax purposes amounts to $43,679,750. The
net unrealized appreciation of investments on a federal tax basis amounts to
$252,765 which is comprised of $330,133 appreciation and $77,368
depreciation at June 30, 1997.

Note: The categories of investments are shown as a percentage of net assets
($44,369,652) at June 30, 1997.

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
STATEMENT OF ASSETS AND LIABILITIES

JUNE 30, 1997 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $43,679,750) $ 43,932,515
Income receivable 512,955
Prepaid expenses 46,872
Total assets 44,492,342
LIABILITIES:
Payable to Bank $ 97,160
Accrued expenses 25,530
Total liabilities 122,690
NET ASSETS for 4,392,706 shares outstanding $ 44,369,652
NET ASSETS CONSIST OF:
Paid in capital $ 44,139,538
Net unrealized appreciation of investments 252,765
Accumulated net realized loss on investments (152,223)
Undistributed net investment income 129,572
Total Net Assets $ 44,369,652
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$44,369,652 / 4,392,706 shares outstanding $10.10
</TABLE>

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)

<TABLE>
<C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 1,353,450
EXPENSES:
Investment advisory fee $ 116,987
Administrative personnel and services fee 61,985
Custodian fees 10,057
Transfer and dividend disbursing agent fees and expenses 8,692
Directors'/Trustees' fees 1,259
Auditing fees 4,501
Legal fees 1,736
Portfolio accounting fees 23,418
Share registration costs 1,741
Printing and postage 17,124
Insurance premiums 1,784
Miscellaneous 8,879
Total expenses 258,163
Waivers and reimbursements--
Waiver of investment advisory fee $ (101,223)
Reimbursement of other operating expenses by the adviser (98)
Total waivers and reimbursements (101,321)
Net expenses 156,842
Net investment income 1,196,608
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (22,328)
Net change in unrealized appreciation of investments 54,621
Net realized and unrealized gain on investments 32,293
Change in net assets resulting from operations $ 1,228,901
</TABLE>

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,196,608 $ 1,410,381
Net realized gain (loss) on investments ($22,328 net loss
and $129,895 net loss, respectively, as computed for
federal tax purposes) (22,328) (129,895)
Net change in unrealized appreciation/depreciation 54,621 21,469
Change in net assets resulting from operations 1,228,901 1,301,955
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,136,086) (1,344,598)
Distributions from net realized gains -- (68,239)
Change in net assets resulting from distributions to
shareholders (1,136,086) (1,412,837)
SHARE TRANSACTIONS--
Proceeds from sale of shares 17,726,106 36,293,161
Net asset value of shares issued to shareholders in payment
of distributions declared 1,136,008 1,406,120
Cost of shares redeemed (9,549,824) (14,888,081)
Change in net assets resulting from share transactions 9,312,290 22,811,200
Change in net assets 9,405,105 22,700,318
NET ASSETS:
Beginning of period 34,964,547 12,264,229
End of period (including undistributed net investment
income of $129,572 and $69,050, respectively) $ 44,369,652 $ 34,964,547
</TABLE>

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

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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JUNE 30, YEAR ENDED DECEMBER 31,
1997 1996 1995 1994(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.09 $10.29 $ 9.99 $ 9.99
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.30 0.59 0.54 0.27
Net realized and unrealized gain (loss) on investments -- (0.18) 0.30 --
Total from investment operations 0.30 0.41 0.84 0.27
LESS DISTRIBUTIONS
Distributions from net investment income (0.29) (0.57) (0.54) (0.27)
Distributions from net realized gain on investments -- (0.04) -- --
Total distributions (0.29) (0.61) (0.54) (0.27)
NET ASSET VALUE, END OF PERIOD $10.10 $10.09 $10.29 $ 9.99
TOTAL RETURN(B) 3.01% 4.20% 8.77% 2.62%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80%* 0.80% 0.80% 0.48%*
Net investment income 6.14%* 6.00% 6.00% 3.99%*
Expense waiver/reimbursement(c) 0.52%* 1.01% 4.81% 32.83%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $44,370 $34,965 $12,264 $1,244
Portfolio turnover 35% 97% 65% 0%
</TABLE>

* Computed on an annualized basis.

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

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

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

FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II
NOTES TO FINANCIAL STATEMENTS

JUNE 30, 1997 (UNAUDITED)

1. ORGANIZATION

Federated Insurance Series (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of eight portfolios. The financial
statements included herein are only those of Federated 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.

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.

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

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

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

At December 31, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $129,895, 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:

EXPIRATION YEAR EXPIRATION AMOUNT
2004 $129,895

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.

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 DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
Shares sold 1,763,505 3,618,961
Shares issued to shareholders in
payment of distributions declared 113,302 140,342
Shares redeemed (950,413) (1,484,884)
Net change resulting from share transactions 926,394 2,274,419
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

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 $51,572 were borne
initially by Adviser. The Fund has agreed to reimburse Adviser for the
organizational expenses during the five-year period following effective date.
For the period ended June 30, 1997, the Fund paid $13,753 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, 1997, were as follows:

PURCHASES $23,300,473
SALES $13,684,506

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

Matthew S. Hardin
Assistant Secretary

FEDERATED
FUND FOR U.S.
GOVERNMENT
SECURITIES II

SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1997
FEDERATED INSURANCE SERIES

[Graphic] Federated Investors
Federated Securities Corp., Distributor

Cusip 313916207
G00433-01 (8/97)
[Graphic]