FEDERATED INSURANCE SERIES, N-30D, 1999-08-20

FEDERATED INSURANCE SERIES
N-30D, 1999-08-20

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SEMI-ANNUAL REPORT

President's Message

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report for Federated American Leaders
Fund II.

This report covers the six-month reporting period from January 1, 1999 through
June 30, 1999. 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
financial statements.

At the end of the reporting period, the selected high-quality stocks included 88
holdings that represent major industry groups and include leaders such as
Allstate, Anheuser-Busch, AT&T, Boeing, Eastman Kodak, Exxon, General Motors,
Kmart, and Wal-Mart.

For the six-month reporting period ended June 30, 1999, the fund achieved a
total return of 12.41% 1 through income totaling $0.20 per share, capital gains
totaling $2.04 per share, and a net asset value increase of $0.26. On June 30,
1999, the fund's net assets reached $485.4 million.

Thank you for participating in the long-term growth of American companies
through Federated American Leaders Fund II. As always, we welcome your comments
and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1999

1 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 six-month reporting period ended June 30, 1999 was a strong continuation of
the bull market with the Standard & Poor's 500 Index ("S&P 500") returning
12.39%. 1 The reporting period started as 1998 had finished: strong market
returns during the first quarter were provided by a handful of large
capitalization growth stocks. However, the situation shifted dramatically in
April 1999. Sparked by surprisingly strong first quarter earnings, a revival in
oil prices and signs of a global economic recovery, market leadership rotated to
a broader group of cyclical, commodity and smaller capitalization stocks. After
three years of returns being dominated by a limited list of large capitalization
growth stocks, the perceived revival of global economic activity benefited areas
of the market which had not been the "safe havens" from the global economic
turmoil of the past two years and whose earnings should benefit with a marked
increase in global growth. Due to this dramatic improvement in market breadth,
the second quarter provided the average active equity manager their best
performance relative to the S&P 500 in quite some time.

The fund provided a return of 12.41% 2 for the six-month reporting period,
outperforming both the S&P 500 and the average Lipper3 growth and income fund
which returned 12.39% and 10.93%, respectively. Leading sectors for the
six-month period included Technology, Basic Materials and Energy. Lagging
sectors included Health Care, Consumer Staples and Utilities. Aiding relative
performance for the six-month reporting period was favorable security
performance in the Health Care (United HealthCare and HEALTHSOUTH), Capital
Goods (AlliedSignal and Ingersoll-Rand) and Consumer Cyclicals (Dillards and
News Corp.). Underweight positions in the strong performing Technology and
Communication Services sectors, as well as unfavorable security performance in
the Basic Materials sector (Archer- Daniels-Midland) detracted from relative
performance.

1 The S&P 500 is a capitalization-weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries. This
index is unmanaged, and investments cannot be made in an index.

2 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.

3 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 stock market outlook remains basically unchanged-the market appears
overvalued by all traditional measures, but no visible catalyst is positioned to
change this. Money flows and investor sentiment remain quite strong. Relative to
interest rates, the markets are extremely overvalued- the dividend discount
models maintained by the Federal Reserve Board (the "Fed") and leading market
strategists show that the S&P 500 is now more than 30% overvalued given the
increase in interest rates during 1999. To offset this overvaluation relative to
interest rates, the equity markets are betting on continued earnings strength
and muted inflation. Real interest rates are extremely high as the bond market
believes that inflation is around the corner. However, the equity markets,
fueled by the Fed's late June 1999 neutral stance towards monetary policy,
believe that technology and continued growth in productivity will keep inflation
at bay. The market's April 1999 rotation toward cyclical and small
capitalization stocks is both encouraging and frightening at the same time. On
the plus side, an improvement in market breadth and the revival of some of the
market's worst performing sectors indicates that the global economy is
recovering. In addition, this indicates a new overall market base is building,
onto which future market advances can move from. On the negative side, the April
1999 rotation indicates that low interest rates, which have helped drive the
performance of large growth stocks, are no longer accepted as the norm and that
one of the market's major underpinnings, low inflation, may be in question. We
believe that the valuation disparities between ultra-large growth stocks and the
rest of the market, combined with a strong near-term earnings outlook, can fuel
a continuation of the market's rotation towards a broader array of value and
smaller capitalization stocks.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-96.8%
BASIC MATERIALS-3.6%
412,835 Archer-Daniels-Midland Co. $ 6,373,140
165,600 Corn Products
International, Inc. 5,040,450
127,000 Nucor Corp. 6,024,562
TOTAL 17,438,152
CAPITAL GOODS-12.6%
101,000 AlliedSignal, Inc. 6,363,000
156,400 Boeing Co. 6,910,925
146,400 Crown Cork & Seal Co., Inc. 4,172,400
110,900 Deere & Co. 4,394,412
68,500 Ingersoll-Rand Co. 4,426,812
69,000 Johnson Controls, Inc. 4,782,562
55,476 Koninklijke (Royal)
Philips Electronics NV, ADR 5,596,141
116,200 Parker-Hannifin Corp. 5,316,150
199,500 Tenneco, Inc. 4,763,062
78,641 Tyco International Ltd. 7,451,235
125,900 Waste Management, Inc. 6,767,125
TOTAL 60,943,824
COMMUNICATION SERVICES-
5.8%
94,350 AT&T Corp. 5,265,909
55,200 BellSouth Corp. 2,587,500
121,500 GTE Corp. 9,203,625
85,300 SBC Communications, Inc. 4,947,400
105,200 US West, Inc. 6,180,500
TOTAL 28,184,934
CONSUMER CYCLICALS-10.5%
125,400 Brunswick Corp. 3,495,525
114,800 Cooper Tire & Rubber Co. 2,712,150
52,839 Delphi Automotive Systems
Corp. 980,824
170,600 Dillards, Inc., Class A 5,992,325
75,600 General Motors Corp. 4,989,600
256,800 1 Kmart Corp. 4,221,150
157,800 Liz Claiborne, Inc. 5,759,700
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-
CONTINUED
206,600 News Corp. Ltd., ADR $ 6,520,812
161,600 Sherwin-Williams Co. 4,484,400
314,500 1 Toys 'R' Us, Inc. 6,506,219
106,800 Wal-Mart Stores, Inc. 5,153,100
TOTAL 50,815,805
CONSUMER STAPLES-10.4%
59,800 Anheuser-Busch Cos., Inc. 4,242,062
168,400 Kimberly-Clark Corp. 9,598,800
141,700 1 King World Productions,
Inc. 4,932,931
202,200 Nabisco Group Holdings
Corp. 3,955,537
112,500 Philip Morris Cos., Inc. 4,521,094
67,400 1 R.J. Reynolds Tobacco
Holdings, Inc. 2,123,100
203,200 Sara Lee Corp. 4,610,100
86,500 1 Tricon Global Restaurants,
Inc. 4,681,812
212,400 UST, Inc. 6,212,700
131,800 1 Viacom, Inc., Class A 5,815,675
TOTAL 50,693,811
ENERGY-7.2%
151,400 Ashland, Inc. 6,074,925
140,600 Diamond Offshore Drilling,
Inc. 3,989,525
48,400 Exxon Corp. 3,732,850
41,600 Mobil Corp. 4,118,400
90,900 Royal Dutch Petroleum Co.,
ADR 5,476,725
77,900 Schlumberger Ltd. 4,961,256
104,100 Sunoco, Inc. 3,142,519
110,300 USX - Marathon Group 3,591,644
TOTAL 35,087,844
FINANCIALS-17.6%
415,000 ABB AB, ADR 5,654,375
166,500 Allstate Corp. 5,973,188
83,900 Bank One Corporation 4,997,294
90,700 Bank of America Corp. 6,649,444
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
FINANCIALS-CONTINUED
126,280 Bear Stearns Cos., Inc. $ 5,903,590
89,500 CIGNA Corp. 7,965,500
262,900 CIT Group, Inc., Class A 7,591,238
391,221 Conseco, Inc. 11,907,789
101,400 Lincoln National Corp. 5,304,488
58,100 Loews Corp. 4,597,163
71,700 MBIA, Inc. 4,642,575
82,600 Marsh & McLennan Cos., Inc. 6,236,300
52,300 Republic New York Corp. 3,566,206
130,300 Washington Mutual, Inc. 4,609,363
TOTAL 85,598,513
HEALTH CARE-9.2%
109,600 Abbott Laboratories 4,986,800
77,500 Baxter International, Inc. 4,698,438
67,600 Bristol-Myers Squibb Co. 4,761,575
384,700 1 HEALTHSOUTH, Corp. 5,746,456
70,100 Merck & Co., Inc. 5,187,400
244,200 1 Oxford Health Plans, Inc. 3,800,363
138,000 Pharmacia & Upjohn, Inc. 7,840,125
120,200 United HealthCare Corp. 7,527,525
TOTAL 44,548,682
TECHNOLOGY-13.2%
87,600 1 Computer Sciences Corp. 6,060,825
52,300 Eastman Kodak Co. 3,543,325
124,700 Electronic Data Systems
Corp. 7,053,344
153,900 First Data Corp. 7,531,481
97,000 Galileo International,
Inc. 5,183,438
56,200 International Business
Machines Corp. 7,263,850
28,600 1 Lexmark Intl. Group, Class A 1,889,387
63,500 Motorola, Inc. 6,016,625
153,800 1 Seagate Technology, Inc. 3,941,125
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS-continued
TECHNOLOGY-CONTINUED
168,600 1 Storage Technology Corp. $ 3,835,650
168,600 1 Sun Microsystems, Inc. 11,612,325
TOTAL 63,931,375
TRANSPORTATION-0.7%
123,200 Ryder System, Inc. 3,203,200
UTILITIES-6.0%
157,400 Entergy Corp. 4,918,750
82,200 FPL Group, Inc. 4,490,175
145,700 PG&E Corp. 4,735,250
142,100 PECO Energy Co. 5,950,438
115,300 Public Service Enterprises
Group, Inc. 4,712,888
164,800 Reliant Energy, Inc. 4,552,600
TOTAL 29,360,101
TOTAL COMMON STOCKS
(IDENTIFIED COST
$363,708,544) 469,806,241
REPURCHASE AGREEMENT-3.4%
2
$ 16,740,000 Goldman Sachs Group, LP,
5.25%, dated 6/30/1999,
due 7/1/1999
(at amortized cost) 16,740,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$380,448,544) 3 $ 486,546,241
</TABLE>

1 Non-income producing security.

2 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.

3 The cost of investments for federal tax purposes amounts to $380,448,544. The
net unrealized appreciation of investments on a federal tax basis amounts to
$106,097,697 which is comprised of $119,427,404 appreciation and $13,329,707
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($485,417,449) at June 30, 1999.

The following acronym is used throughout this portfolio:

ADR -American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$380,448,544) $ 486,546,241
Cash 3,134
Income receivable 568,749
Receivable for investments
sold 763,079
TOTAL ASSETS 487,881,203
LIABILITIES:
Payable for investments
purchased $ 2,442,888
Accrued expenses 20,866
TOTAL LIABILITIES 2,463,754
Net assets for 22,124,472
shares outstanding $ 485,417,449
NET ASSETS CONSIST OF:
Paid in capital $ 366,262,112
Net unrealized
appreciation of
investments 106,097,697
Accumulated net realized
gain on investments 10,844,995
Undistributed net
investment income 2,212,645
TOTAL NET ASSETS $ 485,417,449
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$485,417,449 / 22,124,472
shares outstanding $21.94
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $45,617) $ 3,988,236
Interest 171,516
TOTAL INCOME 4,159,752
EXPENSES:
Investment advisory fee $ 1,646,201
Administrative personnel
and services fee 165,498
Custodian fees 13,342
Transfer and dividend
disbursing agent fees and
expenses 25,972
Directors'/Trustees' fees 2,037
Auditing fees 6,185
Legal fees 2,007
Portfolio accounting fees 40,503
Share registration costs 8,873
Printing and postage 19,195
Insurance premiums 1,284
Miscellaneous 3,951
TOTAL EXPENSES 1,935,048
Net investment income 2,224,704
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 11,365,078
Net change in unrealized
appreciation of
investments 38,287,098
Net realized and
unrealized gain on
investments 49,652,176
Change in net assets
resulting from operations $ 51,876,880
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,224,704 $ 3,898,554
Net realized gain on investments and foreign currency transactions ($11,365,078
and $39,177,380, respectively, as computed for federal
tax purposes) 11,365,078 38,726,749
Net change in unrealized
appreciation of
investments 38,287,098 14,436,779
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 51,876,880 57,062,082
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (3,909,272) (1,591,758)
Distributions from net
realized gains on
investments and foreign
currency transactions (39,204,563) (20,469,565)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (43,113,835) (22,061,323)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 63,664,847 115,497,228
Net asset value of shares
issued to shareholders in
payment of
distributions declared 43,113,823 22,060,601
Cost of shares redeemed (48,335,985) (60,142,932)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 58,442,685 77,414,897
Change in net assets 67,205,730 112,415,656
NET ASSETS:
Beginning of period 418,211,719 305,796,063
End of period (including
undistributed net
investment income of
$2,212,645 and $3,897,213,
respectively) $ 485,417,449 $ 418,211,719
</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1994 1
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $21.68 $19.63 $15.26 $12.80 $ 9.74 $10.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.10 0.20 0.19 0.19 0.20 0.19
Net realized and
unrealized gain (loss) on
investments and foreign
currency transactions 2.40 3.20 4.64 2.54 3.06 (0.26)
TOTAL FROM
INVESTMENT OPERATIONS 2.50 3.40 4.83 2.73 3.26 (0.07)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.20) (0.10) (0.10) (0.18) (0.19) (0.19)
Distributions in excess of
net investment income 2 - - - - (0.01) -
Distributions from net
realized gain on
investments and foreign
currency transactions (2.04) (1.25) (0.36) (0.09) - -
TOTAL DISTRIBUTIONS (2.24) (1.35) (0.46) (0.27) (0.20) (0.19)
NET ASSET VALUE, END OF
PERIOD: $21.94 $21.68 $19.63 $15.26 $12.80 $ 9.74
TOTAL RETURN 3 12.41% 17.62% 32.34% 21.58% 33.71% (0.70%)

RATIOS TO AVERAGE NET
ASSETS:
Expenses 4 0.88% 5 0.89% 0.94% 1.07% 2.21% 25.96% 5
Net investment income
(net operating loss) 4 1.01% 5 1.05% 1.09% 1.32% 0.67% (22.84%)5
Expenses (after waivers) 0.88% 5 0.88% 0.85% 0.85% 0.85% 0.54% 5
Net investment income
(after waivers) 1.01% 5 1.06% 1.18% 1.54% 2.03% 2.58% 5
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $485,417 $418,212 $305,796 $142,216 $48,514 $2,400
Portfolio turnover 18% 58% 56% 90% 43%
32%
</TABLE>

1 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.

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

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

4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 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 objective of the Fund is to achieve long-term growth of
capital. The Fund's secondary objective is to provide income.

SIGNIFICANT ACCOUNTING POLICIES

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

INVESTMENT VALUATIONS

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.

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.

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,
1999 1998
<S> <C> <C>
Shares sold 2,939,802 5,676,003
Shares issued to
shareholders in payment of
distributions declared 2,130,130 1,061,627
Shares redeemed (2,238,142) (3,023,452)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 2,831,790 3,714,178
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

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, Inc. 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.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. For the
six months ended June 30, 1999, the Fund did not incur a shareholder services
fee.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary 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.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1999, were as follows:

Purchases $ 86,722,209
Sales $ 79,944,463

YEAR 2000

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

Trustees

JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
WILLIAM J. COPELAND
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
EDWARD L. FLAHERTY, JR., ESQ.
PETER E. MADDEN
JOHN E. MURRAY, JR., J.D., S.J.D.
WESLEY W. POSVAR
MARJORIE P. SMUTS
JOHN S. WALSH

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
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.

[Graphic]
Federated
World-Class Investment Manager

Federated American Leaders Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1999

SEMI-ANNUAL REPORT

[Graphic]
Federated
Federated American Leaders Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916405
G00433-04 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Fellow Shareholder:

I am pleased to present the Semi-Annual Report for Federated Equity Income Fund
II.

This report covers the six-month period from January 1, 1999 through June 30,
1999. It begins with a commentary by the fund's portfolio manager, which is
followed by a complete listing of the fund's holdings and the financial
statements.

Federated Equity Income Fund II is managed to help your money earn income and
grow in value by investing primarily in a diversified portfolio of
dividend-paying stocks. The fund's common stock holdings are typically
diversified across key business and industrial sectors. Many of the holdings at
the end of the reporting period-including AT&T, Bank America, DuPont, Exxon,
Ford, General Electric, General Mills, Merck, Sprint, J.C.
Penney, and Xerox-are household names.

For the six-month reporting period, the fund produced a total return of 10.24%
with income distributions totaling $0.23 per share, and capital gain
distributions totaling $0.18 per share and a $1.01 increase in net asset value.
1 By the end of the reporting period, fund assets reached $68.4 million.

Thank you for choosing Federated Equity Income Fund II as a diversified,
professionally managed way to participate in the income and growth potential of
American companies. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

August 15, 1999

1 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 first quarter of 1999, the U.S. stock market continued its impressive
recovery which began in last year's fourth quarter. The Dow Jones Industrial
Average surpassed the historic 10,000 mark, while the Standard & Poor's 500
Index ("S&P 500") 1 returned an impressive 4.98%. This advance was again
concentrated in a small number of large capitalization growth companies, while
the average stock, as measured by the equal weighted S&P 500, returned only
1.19% during the period.

The stock market in the second quarter was marked by dramatic reversals in
leadership, based on market capitalization, investment style (i.e., value versus
growth), and sector. In the second quarter, small capitalization stocks
outperformed large capitalization stocks by 8.5%, as reported by Ned Davis
Research. There was also a sudden reversal in investment style. Since the fourth
quarter of 1997, growth stocks had provided excess return relative to value
stocks. Ned Davis also reports that in this most recent quarter, large
capitalization value stocks outperformed large capitalization growth stocks by
7.5%. These shifts were accompanied by rapid sector rotation, as technology,
financial and pharmaceutical groups lagged, while the beleaguered basic
materials and industrial cyclical sectors surged.

The broadening in what had been, until recently, a narrow market was due to the
increasing perception that overseas economies were improving, while the United
States economy continued to be robust. This strength caused concern in the bond
market, where the 30-year Treasury bond yield rose from its October 1998 low of
4.7% to over 6.0% by the end of June 1999. This was the largest percentage move
upward in yields during the low-inflation decade of the 1990s.

For six months ended June 30, 1999, the S&P 500 returned 12.38%. The Federated
Equity Income Fund II returned 10.24%, 2 nicely ahead of the 8.98% return of the
average equity income fund, as reported by Lipper Analytical Services, Inc.3

Stock market returns for the balance of the year should depend on positive
earnings growth and a benign interest rate environment. With regard to earnings
prospects, economic improvement in Asia has begun to benefit technology,
chemical and manufacturing companies. The economic expansion in the United
States is now 100 months old, making it the longest peacetime cycle. Still,
inflation is not evident. On the cost side, productivity improvements have
allowed our economy to grow without inflation. Meanwhile, on the revenue side,
intense global competition has made it difficult for companies to raise prices.
This low inflation, coupled with increasing evidence of a slowdown in our
economy's growth, would likely prevent the Federal Reserve Board from further
rate increases. Such an environment would be bullish for stocks.

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

CURRENT STRATEGY

Whether value stocks will retain their leadership as compared to growth stocks,
will depend on improving earnings in the value-oriented sectors. In the case of
the Basic Materials sector, there are good signs in the paper products and
chemicals groups, but still poor conditions for iron and steel, metals mining
and gold companies. Leadership could shift back to growth just as quickly as it
shifted away during this past quarter. The fund attempts to smooth this
volatility by seeking superior equity and convertible securities on a
sector-neutral basis. The fund holds a blend of growth and value securities with
a middle-to-large capitalization bias. We will continue to seek common stocks of
market-leading companies that have a long history of growing dividends. We will
also maintain a healthy component of higher-yielding convertible bonds and
preferred stocks, for their income and for their relatively defensive attributes
in market downturns.

COMMENTS ON SELECTED TRANSACTIONS

In the Basic Materials sector we sold BARRICK GOLD CORP. after the stock
appreciated dramatically during the quarter's surge in most commodity stocks. We
purchased MONSANTO CONVERTIBLE PREFERREDS which yield 6.2%; we believe that the
underlying common stock is undervalued.

In the Consumer Staples sector, we completed the first quarter swap out of FOOD
LION and into ALBERTSONS. Both companies are undervalued supermarket concerns;
however, we believe that Albertsons is a higher-quality company with a number of
positive catalysts. We also sold MCKESSON HBOC CONVERTIBLE PREFERREDS after
management credibility issues arose and the earnings outlook deteriorated
materially. We replaced it with PROCTER AND GAMBLE, a leading global
manufacturer of household products. Procter and Gamble has raised its dividend
every year for the last 27 years, at an average rate of 9.6%. The stock appears
inexpensive, and a major restructuring was recently announced which should boost
earnings.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-79.4%
BASIC MATERIALS-2.3%
11,800 Du Pont (E.I.) de Nemours &
Co. $ 806,088
49,800 USEC, Inc. 740,775
TOTAL 1,546,863
CAPITAL GOODS-5.9%
11,000 Emerson Electric Co. 691,625
10,200 General Electric Co. 1,133,475
19,700 Lockheed Martin Corp. 733,825
12,200 Pitney Bowes, Inc. 783,850
8,300 Textron, Inc. 683,194
TOTAL 4,025,969
COMMUNICATION SERVICES-8.8%
8,700 AT&T Corp. 485,569
13,700 Ameritech Corp. 1,006,950
24,300 GTE Corp. 1,840,725
10,946 1 MCI Worldcom, Inc. 942,040
24,500 Sprint Corp. 1,293,906
8,050 1 Sprint PCS Group 459,856
TOTAL 6,029,046
CONSUMER CYCLICALS-6.1%
13,600 Block (H&R), Inc. 680,000
23,800 Cooper Tire & Rubber Co. 562,275
13,000 Ford Motor Co. 733,688
21,500 New York Times Co., Class A 791,469
15,200 Penney (J.C.) Co., Inc. 738,150
9,400 Whirlpool Corp. 695,600
TOTAL 4,201,182
CONSUMER STAPLES-10.1%
12,700 Albertsons, Inc. 654,844
32,500 Disney (Walt) Co. 1,001,406
14,000 General Mills, Inc. 1,125,250
17,500 Heinz (H.J.) Co. 877,188
12,100 Kimberly-Clark Corp. 689,700
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER STAPLES-CONTINUED
14,200 Nabisco Group Holdings
Corp. $ 277,788
23,200 PepsiCo, Inc. 897,550
13,300 Philip Morris Cos., Inc. 534,494
7,700 Procter & Gamble Co. 687,225
4,733 1 R.J. Reynolds Tobacco
Holdings, Inc. 149,100
TOTAL 6,894,545
ENERGY-5.0%
6,400 BP Amoco PLC, ADR 694,400
10,200 Exxon Corp. 786,675
17,100 Halliburton Co. 773,775
11,500 Mobil Corp. 1,138,500
TOTAL 3,393,350
FINANCIALS-12.3%
17,000 Allstate Corp. 609,875
18,600 Bank One 1,107,862
11,781 Bank America Corp. 863,695
9,200 Chase Manhattan Corp. 796,950
5,100 Chubb Corp. 354,450
24,000 Citigroup, Inc. 1,140,000
14,600 First Union Corp. 686,200
7,800 Lincoln National Corp. 408,037
8,100 Marsh & McLennan Cos., Inc. 611,550
19,600 Mellon Bank Corp. 712,950
8,300 Morgan Stanley, Dean
Witter & Co. 850,750
6,400 Post Properties, Inc. 262,400
TOTAL 8,404,719
HEALTH CARE-11.1%
23,500 Abbott Laboratories 1,069,250
20,800 American Home Products
Corp. 1,196,000
18,100 Baxter International, Inc. 1,097,312
22,200 Bristol-Myers Squibb Co. 1,563,712
7,700 Johnson & Johnson 754,600
15,800 Merck & Co., Inc. 1,169,200
11,200 Warner-Lambert Co. 777,000
TOTAL 7,627,074
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
TECHNOLOGY-15.4%
21,953 1 Apple Computer, Inc. $ 1,016,698
5,600 1 Cisco Systems, Inc. 361,200
22,900 Electronic Data Systems
Corp. 1,295,281
12,700 Intel Corp. 755,650
13,000 International Business
Machines Corp. 1,680,250
12,200 1 Lexmark Intl. Group, Inc.,
Class A 805,962
10,700 Motorola, Inc. 1,013,825
30,700 1 Storage Technology Corp. 698,425
13,700 1 Sun Microsystems, Inc. 943,587
16,000 1 Tellabs, Inc. 1,081,000
23,800 1 Western Digital Corp. 154,700
12,400 Xerox Corp. 732,375
TOTAL 10,538,953
TRANSPORTATION-0.9%
16,000 CNF Transportation, Inc. 614,000
UTILITIES-1.5%
12,963 Enron Corp. 1,059,725
TOTAL COMMON STOCKS
(IDENTIFIED COST
$42,860,616) 54,335,426
CONVERTIBLE PREFERRED
STOCKS-10.1%
BASIC MATERIALS-0.9%
16,000 Monsanto Co., Conv. Pfd.,
$2.60 642,000
CAPITAL GOODS-2.5%
31,000 Crown Cork & Seal, Inc.,
Conv. Pfd., $1.89 831,188
30,300 Ingersoll-Rand Co., DECS,
Series 6.75% 909,000
TOTAL 1,740,188
CONSUMER STAPLES-1.8%
11,800 Ralston Purina Co., SAILS,
$1.08 548,700
8,500 Suiza Foods Corp., Conv.
Pfd., $2.75 318,053
10,300 2 Suiza Foods Corp., Conv.
Pfd., $2.75 385,405
TOTAL 1,252,158
FINANCIALS-3.5%
23,800 Conseco, Inc., Cumulative
PRIDES, Series F, $3.50 956,463
800 Jefferson-Pilot Corp.,
Conv. Pfd., $5.26 98,400
17,100 Lincoln National Corp.,
Cumulative PRIDES, $1.94 464,906
26,000 WBK STRYPES Trust,
STRYPES, $3.13 841,750
TOTAL 2,361,519
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED
STOCKS-continued
UTILITIES-1.4%
17,150 Texas Utilities Co.,
Cumulative PRIDES, $4.63 $ 943,250
TOTAL CONVERTIBLE
PREFERRED STOCKS
(IDENTIFIED COST
$7,242,559) 6,939,115
CONVERTIBLE CORPORATE
BONDS-7.0%
CONSUMER CYCLICALS-1.9%
$ 450,000 Home Depot, Inc., Conv.
Sub. Note, 3.25%,
10/1/2001 1,265,274
TECHNOLOGY-5.1%
80,000 America Online, Inc.,
Conv. Pfd., 4.00%,
11/15/2002 674,144
1,500,000 2 Citrix Systems, Inc.,
Conv. Bond, 7/1/2029 692,445
265,000 EMC Corp. Mass, Conv. Bond,
3.25%, 3/15/2002 1,288,006
300,000 2 LSI Logic Corp., Conv.
Bond, 4.25%, 3/15/2004 491,343
600,000 2 Western Digital Corp.,
Conv. Sub. Deb., 5.307%
accrual, 2/18/2018 104,952
1,500,000 Western Digital Corp.,
Conv. Sub. Deb., 5.307%
accrual, 2/18/2018 262,380
TOTAL 3,513,270
TOTAL CONVERTIBLE
CORPORATE BONDS
(IDENTIFIED COST
$2,837,357) 4,778,544
REPURCHASE AGREEMENT-3.4% 3
2,290,000 Goldman Sachs Group LP, 5.25%, dated 6/30/1999, due 7/1/1999 (at
amortized
cost) 2,290,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$55,230,532) 4 $ 68,343,085

</TABLE>

1 Non-income producing security.

2 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's Board of Trustees. At June 30, 1999, these
securities amounted to $1,674,145 which represents 2.4% of net assets.

3 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.

4 The cost of investments for federal tax purposes amounts to $55,230,532. The
net unrealized appreciation of investments on a federal tax basis amounts to
$13,112,553 which is comprised of $14,837,845 appreciation and $1,725,292
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($68,401,909) at June 30, 1999.

The following acronyms are used throughout this portfolio:

ADR -American Depositary Receipt
DECS -Dividend Enhanced Convertible Stock
PRIDES -Preferred Redeemable Increased Dividend Equity Securities
SAILS -Stock Appreciation Income Linked Security
STRYPES -Structured Yield Product Exchangeable for Stock

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$55,230,532) $ 68,343,085
Cash 60
Income receivable 80,266
Receivable for investments
sold 50,853
TOTAL ASSETS 68,474,264
LIABILITIES:
Accrued expenses $ 72,355
TOTAL LIABILITIES 72,355
Net assets for 4,511,893
shares outstanding $ 68,401,909
NET ASSETS CONSIST OF:
Paid in capital $ 55,612,746
Net unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 13,112,553
Accumulated net realized
loss on investments and
foreign currency
transactions (783,073)
Undistributed net
investment income 459,683
TOTAL NET ASSETS $ 68,401,909
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$68,401,909 / 4,511,893
shares outstanding $15.16

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $854) $ 657,759
Interest 90,017
TOTAL INCOME 747,776
EXPENSES:
Investment advisory fee $ 227,962
Administrative personnel
and services fee 61,985
Custodian fees 2,419
Transfer and dividend
disbursing agent fees and
expenses 25,915
Directors'/Trustees' fees 3,512
Auditing fees 8,654
Legal fees 3,337
Portfolio accounting fees 32,356
Share registration costs 3,158
Printing and postage 26,668
Insurance premiums 1,889
Miscellaneous 11,020
TOTAL EXPENSES 408,875
WAIVERS:
Waiver of investment
advisory fee (121,836)
Net expenses 287,039
Net investment income 460,737
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized loss on
investments and foreign
currency transactions (733,775)
Net change in unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 6,389,019
Net realized and
unrealized gain (loss) on
investments and foreign
currency 5,655,244
Change in net assets
resulting from operations $ 6,115,981

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(unaudited) ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 460,737 $ 939,160
Net realized gain (loss) on
investments and foreign
currency transactions
(($733,775) and $759,986,
respectively, as computed
for federal tax purposes) (733,775) 785,704
Net change in unrealized
appreciation 6,389,019 5,149,795
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 6,115,981 6,874,659
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (939,841) (211,620)
Distributions from net
realized gains (760,272) (9,563)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (1,700,113) (221,183)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 8,727,503 21,185,637
Net asset value of shares
issued to shareholders in
payment of
distributions declared 1,700,111 221,183
Cost of shares redeemed (3,940,579) (3,436,527)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 6,487,035 17,970,293
Change in net assets 10,902,903 24,623,769
NET ASSETS:
Beginning of period 57,499,006 32,875,237
End of period (including
undistributed net
investment income of
$459,683 and $938,787,
respectively) $ 68,401,909 $ 57,499,006

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR PERIOD
(unaudited) ENDED ENDED
JUNE 30, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.15 $12.31 $10.47
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.10 0.22 0.23
Net realized and unrealized gain on investments 1.32 1.69 1.76
TOTAL FROM INVESTMENT OPERATIONS 1.42 1.91 1.99
LESS DISTRIBUTIONS:
Distributions from net investment income (0.23) (0.07) (0.15)
Distribution from net realized gain (0.18) - -
TOTAL DISTRIBUTIONS (0.41) (0.07) (0.15)
NET ASSET VALUE, END OF PERIOD $15.16 $14.15 $12.31
TOTAL RETURN 2 10.24% 15.57% 19.19%

RATIOS TO AVERAGE NET ASSETS:
Expenses 3 1.35% 4 1.36% 2.29% 4
Net investment income 3 1.12% 4 1.61% 0.97% 4
Expenses (after waivers and reimbursements) 0.95% 4 0.93% 0.85% 4
Net investment income (after waivers
and reimbursements) 1.52% 4 2.04% 2.41% 4
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $68,402 $57,499 $32,875
Portfolio turnover 25% 59% 68%

</TABLE>

1 Reflects operations for the period from January 30, 1997 (date of initial
public investment) to December 31, 1997.

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

3 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 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.

SIGNIFICANT ACCOUNTING POLICIES

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 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

RESTRICTED SECURITIES

Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from registration. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Board of Trustees. The Fund will not incur any registration costs upon such
resales. Restricted securities are valued at amortized cost in accordance with
Rule 2a-7 under the Investment Company Act of 1940.

USE OF ESTIMATES

OTHER

Investment transactions are
accounted for on the
trade date.

SHARES OF BENEFICIAL INTEREST

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

Transactions in shares were as follows:

<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Shares sold 599,947 1,639,612
Shares issued to
shareholders in payment of
distributions declared 119,642 16,731
Shares redeemed (270,939) (264,192)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 448,650 1,392,151

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 or reimburse the Fund for certain operating
expenses. The Adviser can modify or terminate this voluntary waiver at any time
at its sole discretion.

ADMINISTRATIVE FEE

SHAREHOLDER SERVICES FEE

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. ("FSC"), 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 FSC.
For the period ended June 30, 1999, the Fund did not incur a distribution
services fee.

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.

INTERFUND TRANSACTIONS

During the period ended June 30, 1999, the Fund engaged in sale transactions
with funds that have a common investment adviser (or affiliated investment
advisers), common Directors/Trustees, and/or common Officers. These sale
transactions were made at current market value pursuant to Rule 17a-7 under the
Act amounting to $589,438.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1999, were as follows:

Purchases $ 19,625,262
Sales $ 14,630,430

YEAR 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

EDWARD L. FLAHERTY, JR., ESQ.

PETER E. MADDEN

JOHN E. MURRAY, JR., JD, S.J.D.

WESLEY W. POSVAR

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT

Federated Equity Income Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 1999

[Graphic]
Federated
Federated Equity Income Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916801
G01305-01 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated Fund for U.S.
Government Securities II.

The report covers the six-month reporting period from January 1, 1999 through
June 30, 1999. It begins with an investment review by the fund's portfolio
manager, which is followed by a complete listing of the fund's government bond
holdings and the financial statements.

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

During the six-month reporting period, the fund produced a strong income stream
totaling $0.44 per share. The fund also paid capital gains totaling $0.09 per
share. Due to a rising interest rate environment that caused bond prices to
decline, the fund's share price declined from $11.15 at the beginning of the
reporting period to $10.49 at the end of the reporting period. As a result, the
fund's total return was a slightly negative (1.26%). 1 On June 30, 1999, the
fund's net assets reached $120.7 million.

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

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1999

Investment Review

Federated Fund for U.S. Government Securities II, a portfolio of Federated
Insurance Series, invests in U.S. government securities which include agency
mortgage (Federal Home Loan Mortgage Corporation (FHLMC), Federal National
Mortgage Association (FNMA), and Government National Mortgage Association
(GNMA)), U.S. Treasury and agency debenture securities. The "base" portfolio is
a two-thirds/one-third blend of mortgage-backed and Treasury/agency securities,
respectively.

Continued strong economic growth, increasing concern over potential Federal
Reserve Board (the "Fed") action and the declining flight-to- quality bid for
U.S. Treasury securities combined to push yields significantly higher over the
reporting period. Investor risk aversion faded in early 1999 as worldwide
economies and financial markets stabilized. As crisis concerns faded, attention
turned to economic fundamentals, which reflected above-trend economic growth.
Strong growth heightened concern over a potential inflationary surge, fueling
further yield increases. Two-year yields rose 99 basis points during the
reporting period to 5.52%. Similarly, 10-year yields closed the semi-annual
reporting period at 5.79%, an increase of 114 basis points.

The U.S. economy continued to display a phenomenal blend of vigorous growth and
benign inflation. Propelled by vigorous consumer demand, Gross Domestic Product
growth continued at a brisk pace. While the unemployment rate declined to a
30-year low of 4.2%, wage pressures remained moderate. Low import prices, rising
productivity and highly competitive markets continued to hold inflation at bay.
However, the Fed acted to take back a portion of last year's easings, given
improving worldwide economic and financial market performance, along with
concern for potential inflation. The Federal Funds target rate was increased 25
basis points to 5% on June 30, 1999.

Owing to tighter spreads and incremental yield, mortgage-backed securities (MBS)
outperformed Treasuries for the reporting period. MBS spreads tightened
significantly over the first 4-1/2 months of the reporting period, before
reversing course over the final 6 weeks, ending marginally tighter. Conventional
(FNMA/FHLMC) and GNMA current coupon option-adjusted spreads ended the reporting
period 8 and 1 basis points lower, respectively. Premium coupon MBS outperformed
lower coupon securities, due to the fact that current coupon and discount
mortgages experience greater duration extension relative to premium coupons as
rates increase.

The government allocation (Treasury/agency debt) maintained sizable holdings of
agency debentures. The sector offers a significant yield pick-up versus U.S.
Treasury securities, with spreads at the wide end of historical ranges. While
spread movements proved volatile, the incremental income and potential for
spread tightening make the sector attractive from a longer-term perspective.

The MBS and Treasury/agency debt allocation remained neutral at approximately
67% and 33%, respectively. The fund's duration ended the period at 4.44 years,
slightly above the blended benchmark's (67% Lehman Brothers Mortgage-Backed
Securities Index and 33% Lehman Brothers Government Index) 4.30. 1 The fund's
net total return for the six-month reporting period ended June 30, 1999 was
(1.26%)2 versus (0.45%) for the benchmark.

1 The Lehman Brothers Mortgage-Backed Securities Index is composed of all fixed
rate, securitized mortgage pools by GNMA (Government National Mortgage
Association), FNMA (Federal National Mortgage Association), and FHLMC (Federal
Home Loan Mortgage Corporation). The Lehman Brothers Government Index includes
the Treasury and Agency Indexes. The Treasury component includes public
obligations of the U.S. Treasury that have remaining maturities of more than one
year. The Agency component includes both callable and noncallable agency
securities. This includes publicly issued debt of U.S. government agencies,
quasi-federal corporations, and corporate or foreign debt guaranteed by the U.S.
government. These three indexes are unmanaged, and investments cannot be made in
an index.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
INTERMEDIATE-TERM U.S.
GOVERNMENT OBLIGATIONS-14.6%
$ 1,000,000 Federal Farm Credit Bank,
7.35%, 3/24/2005 $ 1,049,810
2,500,000 Federal Home Loan Bank
System, 4.875%, 1/22/2002 2,436,850
1,000,000 Federal Home Loan Bank
System, 5.125%, 2/26/2002 979,870
5,500,000 Federal Home Loan Bank
System, 5.50%, 7/14/2000 -
1/21/2003 5,451,190
1,000,000 Federal Home Loan Bank
System, 5.53%, 1/15/2003 980,070
2,500,000 Federal Home Loan Bank
System, 5.905%, 3/27/2008 2,393,275
750,000 Federal Home Loan Bank
System, 6.185%, 5/6/2008 731,625
1,500,000 Federal Home Loan Bank
System, 6.285%, 6/26/2000 1,509,599
1,000,000 Federal Home Loan Bank
System, 6.83%, 7/17/2001 1,019,550
1,000,000 Federal Home Loan Bank
System, 7.66%, 7/20/2004 1,059,460
TOTAL INTERMEDIATE-TERM
U.S. GOVERNMENT
OBLIGATIONS
(IDENTIFIED COST
$12,331,036) 17,611,299
LONG-TERM U.S. GOVERNMENT
OBLIGATIONS-65.6%
FEDERAL HOME LOAN MORTGAGE
CORPORATION-20.6%
2,329,608 1 7.50%, (30 Year), 7/1/2029 2,355,816
6,136,480 6.00%, 1/1/2014 -
11/1/2028 5,840,870
8,682,403 6.50%, 5/1/2024 - 4/1/2029 8,391,388
7,244,090 7.00%, 8/1/2013 - 5/1/2029 7,204,547
704,437 8.00%, 10/1/2027 -
1/1/2028 723,147
283,747 9.00%, 2/1/2025 - 5/1/2025 301,214
TOTAL 24,816,982
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-20.8%
4,456,000 1 6.50%, (15 Year), 7/1/2014 4,393,349
1,500,000 1 7.00%, (30 Year), 7/1/2029 1,484,070
5,786,192 6.00%, 5/1/2014 - 6/1/2014 5,587,262
7,737,076 6.50%, 12/1/2028 -
4/1/2029 7,468,942
683,182 7.00%, 2/1/2024 676,774
3,971,031 7.50%, 12/1/2027 -
9/1/2028 4,022,992
1,440,963 8.00%, 10/1/2027 -
12/1/2027 1,478,342
TOTAL 25,111,731
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT
OBLIGATIONS-continued
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION-24.2%
$ 4,013,000 1 7.500%, (30 Year),
7/1/2029 $ 4,054,374
1,275,948 6.00%, 9/15/2028 -
4/15/2029 1,193,847
4,966,168 6.50%, 12/15/2023 -
3/15/2029 4,795,293
17,284,196 7.00%, 12/15/2027 -
3/15/2029 17,062,786
1,052,467 8.00%, 9/15/2017 -
10/15/2024 1,086,212
342,247 8.50%, 6/15/2027 358,292
628,851 9.50%, 11/15/2016 680,926
TOTAL 29,231,730
TOTAL LONG-TERM
U.S. GOVERNMENT
OBLIGATIONS
(IDENTIFIED COST
$98,999,979) 79,160,443
U.S. TREASURY OBLIGATIONS-
18.0%
1,100,000 United States Treasury
Bonds, 6.00%, 2/15/2026 1,074,219
2,250,000 United States Treasury
Bonds, 6.125%, 11/15/2027 2,236,289
1,600,000 United States Treasury
Bonds, 8.00%, 11/15/2021 1,931,000
2,200,000 United States Treasury
Bonds, 9.25%, 2/15/2016 2,869,281
990,000 United States Treasury
Bonds, 11.25%, 2/15/2015 1,483,453
1,200,000 United States Treasury
Notes, 5.00%, 4/30/2001 1,189,884
3,600,000 United States Treasury
Notes, 5.375%, 6/30/2003 3,558,938
2,100,000 United States Treasury
Notes, 5.625%, 5/15/2008 2,060,625
2,700,000 United States Treasury
Notes, 5.75%, 11/15/2000 2,711,391
1,500,000 United States Treasury
Notes, 6.25%, 2/28/2002 1,523,672
1,000,000 United States Treasury
Notes, 6.875%, 5/15/2006 1,055,310
TOTAL U.S. TREASURY
OBLIGATIONS (IDENTIFIED
COST $23,117,804) 21,694,062
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
REPURCHASE AGREEMENTS-11.2% 2
$ 4,455,000 3 Goldman Sachs Group, LP,
4.95%, dated 6/18/1999,
due 7/19/1999 $ 4,455,000
2,695,000 Goldman Sachs Group, LP,
5.25%, dated 6/30/1999,
due 7/1/1999 2,695,000
4,013,000 3 J.P. Morgan & Co., Inc.,
4.92%, dated 6/22/1999,
due 7/22/1999 4,013,000
2,330,000 3 Morgan Stanley Group,
Inc., 4.90%, dated
6/14/1999, due 7/14/1999 2,330,000
TOTAL REPURCHASE
AGREEMENTS (AT AMORTIZED
COST) 13,493,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$134,448,819) 4 $ 131,958,804
</TABLE>

1 These securities are subject to dollar roll transactions.

3 Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days.

4 The cost of investments for federal tax purposes amounts to $134,448,819. The
net unrealized appreciation of investments on a federal tax basis amounts to
$2,490,015 which is comprised of $217,434 appreciation and $2,707,449
depreciation at June 30, 1999.

See Notes which are an integral part of the Financial Statements

Note: The categories of investments are shown as a percentage of net assets
($120,683,559) at June 30, 1999.

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase
agreements $ 13,493,000
Investments in securities 118,465,804
Total investments in
securities, at value
(identified and tax cost
$134,448,819) $ 131,958,804
Cash 618
Income receivable 1,072,647
TOTAL ASSETS 133,032,069
LIABILITIES:
Payable for investments
purchased 12,334,869
Accrued expenses 13,641
TOTAL LIABILITIES 12,348,510
Net assets for 11,502,033
shares outstanding $ 120,683,559
NET ASSETS CONSIST OF:
Paid in capital $ 120,299,003
Net unrealized
depreciation of
investments (2,490,015)
Accumulated net realized
loss on investments (212,288)
Undistributed net
investment income 3,086,859
TOTAL NET ASSETS $ 120,683,559
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$120,683,559 / 11,502,033
shares outstanding $10.49

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar
roll expense of $43,909) $ 3,569,778
EXPENSES:
Investment advisory fee $ 351,790
Administrative personnel
and services fee 61,987
Custodian fees 5,618
Transfer and dividend
disbursing agent fees and
expenses 16,413
Directors'/Trustees' fees 1,232
Auditing fees 6,210
Legal fees 1,642
Portfolio accounting fees 22,601
Share registration costs 1,574
Printing and postage 17,907
Insurance premiums 1,009
Miscellaneous 11,528
TOTAL EXPENSES 499,511
Net investment income 3,070,267
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on
investments (210,587)
Net change in unrealized
depreciation of
investments (4,292,216)
Net realized and
unrealized loss on
investments (4,502,803)
Change in net assets
resulting from operations $ (1,432,536)
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 3,070,267 $ 4,680,557
Net realized gain (loss) on
investments ($(210,587)
and $919,638,
respectively, as computed
for federal tax purposes) (210,587) 919,660
Net change in unrealized
appreciation/(depreciation) (4,292,216) 535,278
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS (1,432,536) 6,135,495
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (4,656,024) (1,184,475)
Distributions from net
realized gains (920,857) (52,421)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (5,576,881) (1,236,896)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 32,836,682 92,242,565
Net asset value of shares
issued to shareholders in
payment of
distributions declared 5,576,878 1,236,865
Cost of shares redeemed (22,071,038) (50,126,525)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 16,342,522 43,352,905
Change in net assets 9,333,105 48,251,504
NET ASSETS:
Beginning of period 111,350,454 63,098,950
End of period (including
undistributed net
investment income of
$3,086,859 and $4,672,616,
respectively) $ 120,683,559 $ 111,350,454

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1994 1
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.15 $10.54 $10.09 $10.29 $ 9.99 $ 9.99
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.24 0.44 0.58 0.59 0.54 0.27
Net realized and
unrealized gain (loss)
on investments (0.37) 0.36 0.26 (0.18) 0.30 -
TOTAL FROM
INVESTMENT OPERATIONS (0.13) 0.80 0.84 0.41 0.84 0.27
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.44) (0.18) (0.39) (0.57) (0.54) (0.27)
Distribution from net
realized gain on
investments (0.09) (0.01) - (0.04) - -
TOTAL DISTRIBUTIONS (0.53) (0.19) (0.39) (0.61) (0.54) (0.27)
NET ASSET VALUE, END OF
PERIOD $10.49 $11.15 $10.54 $10.09 $10.29 $ 9.99
TOTAL RETURN 2 (1.26%) 7.66% 8.58% 4.20% 8.77% 2.62%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 0.85% 4 0.93% 1.25% 1.81% 5.61% 33.31% 4
Net investment income 3 5.25% 4 5.36% 5.53% 4.99% 1.19% (28.84%)4
Expense (after waivers) 0.85% 4 0.85% 0.80% 0.80% 0.80% 0.48% 4
Net investment income
(after waivers) 5.25% 4 5.44% 5.98% 6.00% 6.00% 3.99% 4
SUPPLEMENTAL DATA:
Net assets, end of
period (000 omitted) $120,684 $111,350 $63,099 $34,965 $12,264 $1,244
Portfolio turnover 55% 99% 73% 97% 65% 0%
</TABLE>

1 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 24, 1994, net investment income was distributed to the
Fund's adviser.

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

3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 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.

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 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS

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

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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 involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the Fund's
current yield and total return.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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,
1999 1998
<S> <C> <C>
Shares sold 3,027,502 8,487,195
Shares issued to
shareholders in payment of
distributions declared 526,121 117,350
Shares redeemed (2,042,588) (4,597,436)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 1,511,035 4,007,109
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

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

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary, 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.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1999, were as follows:

Purchases $77,455,156
Sales $64,298,127

YEAR 2000

Trustees

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT

Federated Fund for U.S. Government Securities II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1999

[Graphic]
Federated
Federated Fund for U.S. Government Securities II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916207
G00433-01 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated Growth Strategies
Fund II.

Federated Growth Strategies Fund II is managed to help your investment grow over
the long term through a highly diversified portfolio of common stocks issued by
large, quality companies. At the end of the reporting period, the fund's
extensive list of stock holdings included many well-known names such as AT&T,
Best Buy, Bristol-Myers Squibb, General Electric, Home Depot, Merck, Schwab
(Charles), and Wal-Mart.

This diversified portfolio produced a six-month total return of 23.62% 1 through
a significant net asset value increase of $4.23. On June 30, 1999, net assets
reached $81.9 million.

Thank you for putting your money to work in quality American companies through
the diversification and professional management of Federated Growth Strategies
Fund II. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

August 15, 1999

Investment Review

For the stock market, the first quarter of 1999 ended up almost being a replay
of 1998. Stocks staged a narrow rally, lead by growth stocks in general, and
technology stocks in particular. While the credit crisis of 1998 appeared to
have calmed, the global economic environment was not much improved: Latin
America developed a severe recession, Japan showed no signs of recovery and
deflation grew more common around the world. Despite malaise outside of the
U.S., however, domestic consumer demand remained healthy, propelling the U.S.
economy to a strong quarter of growth. The lack of additional credit shocks and
the vigor of the U.S. economy kept the Federal Reserve Board on hold and helped
push the yield on the long bond up.

The second quarter of 1999 provided quite a shakeup in leadership for the equity
markets. The early part of the quarter saw a Consumer Price Index announcement
that was higher than expected. From there, inflation fears reemerged and
investors began to focus on the continued strength in the U.S. economy as well
as signs of economic stabilization and growth worldwide. Leadership within the
equity markets rotated rapidly from large growth stocks to smaller value stocks.
Globally, equity markets generally traded up, with the emerging markets that
were hit hardest in late 1998 rallying the most. Some of those markets gained
back nearly all the performance lost during the Asian crisis.

Some of the particulars for the quarter were:

* the Standard & Poor's ("S&P") 500 Index gained almost 12.5%, the S&P 400
MidCap Index returned 6.9% and the S&P 600 SmallCap Index gained more than 5.0%;
1

* the NASDAQ Composite Index (an index of stocks traded over-the-counter and
dominated by large cap technology stocks) gained 22.5%; 2

* the S&P Barra Growth Index (a composite of large-cap growth stocks, with more
health care and consumer non-durables and less tech than the NASDAQ) was up
10.9% while the S&P Barra MidCap Growth Index returned 8.2%; 3 and

* 30-year Treasury bonds traded off, moving the yield up from an early April
1999 low of 5.4% to end the quarter at just under 6.0%.

1 S&P 500 Index, S&P 400 MidCap Index, and S&P 600 SmallCap Index are composite
indexes of common stocks in industry, transportation, and financial and public
utility companies. These indexes are unmanaged, and investments cannot be made
in an index.

2 NASDAQ Composite Index measures all NASDAQ domestic and non-U.S.-based common
stock listed on the NASDAQ Stock Market.

3 S&P Barra Growth Index is a capitalization-weighted index of all the stocks in
the S&P 500 that have price-to-book ratios. S&P Barra MidCap Growth Index is a
market capitalization-weighted index of the stocks in the S&P 400 MidCap Index
having the highest book-to-price ratios. These indexes are unmanaged, and
investments cannot be made in an index.

The Federated Growth Strategies Fund II had a strong first half, generating a
return of 23.62%. 4 The average fund within the Lipper5 Growth Fund universe was
up 7.1% in the second quarter. The fund outperformed the average Lipper growth
fund through relative sector weightings and stock selection. Overweighted
sectors included Technology and Consumer Cyclicals (mainly retail stocks) and
successful underweighting occurred within Health Care (mainly pharmaceuticals),
Consumer Staples, and Finance. Exceptionally strong stocks were primarily in the
Technology sector and included Broadcom, Echostar, Qualcomm and Qlogic.

The fund made relatively modest strategic changes within the portfolio during
the first half. Weightings within Capital Goods were brought from a maximum
relative underweight (50% of the S&P 500 Index's exposure to that sector) to a
more modest underweight, Health Care was reduced from modest overweight to
market weight, and Finance was reduced from market weight to modest underweight.
Within Technology, exposure to Internet stocks were reduced while communications
related stocks were increased. These changes totaled only 3% to 4% of the fund's
assets and were made to decrease the portfolio's sensitivity to a stronger
economy and higher interest rates.

The fund's current strategy is, and has been, to provide shareholders with
diversified exposure to growth equities. Growth stocks tend to do well in
environments where economic growth is decelerating and interest rates are
declining. While the current domestic economy appears strong, we believe that
there are several indications that growth may be poised to slow. These factors
include slowing construction spending, moderating car sales and widespread lack
of pricing power at the consumer level. We believe that these and other
conditions make a good case for slower economic growth over the next several
quarters and should provide a favorable back drop for growth stocks.

4 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.

5 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.

COMMENTS REGARDING SELECTED HOLDINGS OR PURCHASES

SANMINA

SANM provides electronic contract manufacturing services. The company should
continue to benefit from the strong growth in manufacturing outsourcing used by
most electronic component and devices designers.

BEST BUY

BBY is one of the leading retailer of consumer electronics, entertainment
software and appliances. Best Buy is currently enjoying the beginning boom in
digital consumer products, such as DVD players, HDTV sets and other personal
digital devices.

ENSCO

ESV is an international offshore contract drilling company that also provides
marine transportation services in the Gulf of Mexico. The company is poised to
benefit from a ramp-up in capital expenditures expected to come from
international exploration and production oil companies over the next several
years.

RF MICRO DEVICES

RFMD designs, develops and markets proprietary radio frequency integrated
circuits. RFMD's chips are in very high demand among producers of fast- selling,
high-end wireless devices, such as Nokia and Motorola.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-97.3%
BASIC MATERIALS-3.0%
10,200 Ecolab, Inc. $ 444,975
10,200 General Motors Corp.,
Class H 573,750
18,700 1 Smurfit-Stone Container
Corp. 384,519
13,700 Vulcan Materials Co. 661,025
5,700 Weyerhaeuser Co. 391,875
TOTAL 2,456,144
CAPITAL GOODS-6.0%
6,500 General Electric Co. 722,312
11,900 1 Gulfstream Aerospace Corp. 803,994
6,800 Pitney Bowes, Inc. 436,900
7,500 1 Sanmina Corp. 569,062
15,600 Symbol Technologies, Inc. 575,250
15,100 Tyco International Ltd. 1,430,725
5,600 United Technologies Corp. 401,450
TOTAL 4,939,693
COMMUNICATION SERVICES-11.9%
12,700 1 AT&T Canada, Inc. 813,594
6,500 AT&T Corp. 362,781
30,300 1 AT&T Corp. - Liberty Media
Group, Inc., Class A 1,113,525
8,700 Ameritech Corp. 639,450
10,200 1 Cablevision Systems, Class A 714,000
8,550 CenturyTel, Inc. 339,862
18,200 Comcast Corp., Class A 699,562
11,100 Frontier Corp. 654,900
8,600 1 Level 3 Communications,
Inc. 516,537
16,302 1 MCI Worldcom, Inc. 1,402,991
17,000 1 Qwest Communications
International, Inc. 562,063
7,200 1 United International
Holdings, Inc., Class A 486,900
9,200 1 Univision Communications,
Inc., Class A 607,200
16,500 1 WinStar Communications,
Inc. 804,375
TOTAL 9,717,740
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-12.6%
20,200 1 Abercrombie & Fitch Co.,
Class A $ 969,600
16,800 1 BJ's Wholesale Club, Inc. 505,050
7,400 1 Best Buy Co., Inc. 499,500
8,500 Black & Decker Corp. 536,563
8,200 Circuit City Stores, Inc. 762,600
4,200 1 DoubleClick, Inc. 385,350
18,200 1 Gemstar International
Group Ltd. 1,187,550
28,600 1 Gentex Corp. 800,800
14,500 Home Depot, Inc. 934,344
12,400 1 MIPS Technologies, Inc. 594,425
6,200 Omnicom Group, Inc. 496,000
4,800 1 Rambus, Inc. 442,500
13,300 1 Staples, Inc. 411,469
18,000 TJX Co., Inc. 599,625
8,900 1 Tommy Hilfiger Corp. 654,150
10,700 Wal-Mart Stores, Inc. 516,275
TOTAL 10,295,801
CONSUMER STAPLES-4.5%
22,300 1 Brinker International,
Inc. 606,281
23,100 Dial Corp. 859,031
18,500 1 Keebler Foods Co. 561,937
7,000 Quaker Oats Co. 464,625
8,300 1 Safeway, Inc. 410,850
12,600 Pepsi Bottling Group, Inc. 290,588
13,100 1 Valassis Communications,
Inc. 479,787
TOTAL 3,673,099
ENERGY MINERALS-5.7%
25,300 Diamond Offshore Drilling,
Inc. 717,887
37,400 ENSCO International, Inc. 745,662
6,700 Elf Aquitaine SA, ADR 492,869
11,600 Halliburton Co. 524,900
31,300 1 Nabors Industries, Inc. 764,894
11,400 Schlumberger Ltd. 726,037
27,700 Transocean Offshore, Inc. 727,125
TOTAL 4,699,374
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
FINANCE-10.3%
9,600 AFLAC, Inc. $ 459,600
3,900 American International
Group, Inc. 456,544
13,800 Capital One Financial
Corp. 768,487
10,650 Citigroup, Inc. 505,875
8,700 Federal Home Loan Mortgage
Corp. 504,600
21,900 Firstar Corp. 613,200
8,600 1 Knight/Trimark Group, Inc. 518,687
42,630 MBNA Corp. 1,305,544
6,700 Morgan Stanley, Dean
Witter & Co. 686,750
12,075 Old Kent Financial Corp. 505,641
12,850 Providian Financial Corp. 1,201,475
5,000 Schwab (Charles) Corp. 549,375
5,900 Zions Bancorporation 374,650
TOTAL 8,450,428
HEALTH CARE-10.9%
5,200 Allergan, Inc. 577,200
7,700 American Home Products
Corp. 442,750
10,800 1 Biogen, Inc. 694,575
12,100 1 Boston Scientific Corp. 531,644
8,100 Bristol-Myers Squibb Co. 570,544
14,500 1 Centocor, Inc. 676,062
7,600 Guidant Corp. 390,925
7,600 Johnson & Johnson 744,800
8,300 Lilly (Eli) & Co. 594,488
13,900 Merck & Co., Inc. 1,028,600
10,700 Schering Plough Corp. 567,100
12,600 1 Universal Health Services,
Inc., Class B 601,650
11,000 1 VISX, Inc. 871,063
8,934 Warner-Lambert Co. 619,796
TOTAL 8,911,197
TECHNOLOGY-29.9%
5,900 1 Adaptec, Inc. 208,344
6,000 1 America Online, Inc. 663,000
31,400 1 American Tower Systems
Corp. 753,600
8,300 1 Broadcom Corp. 1,199,869
20,000 1 Cisco Systems, Inc. 1,290,000
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
TECHNOLOGY-CONTINUED
14,800 1 Citrix Systems, Inc. $ 836,200
6,400 1 Cree Research, Inc. 492,400
1,100 eBay, Inc. 166,100
32,200 1 EMC Corp. 1,771,000
10,200 1 Echostar Communications
Corp., Class A 1,565,062
8,000 1 Etec Systems, Inc. 266,000
4,800 1 Exodus Communications,
Inc. 575,700
2,100 1 Inktomi Corp. 274,181
15,750 1 International Network
Services 635,906
7,800 1 Lexmark Intl. Group, Class
A 515,287
7,400 Lucent Technologies, Inc. 499,038
40,500 1 Mastech Corp. 754,313
19,300 1 Microsoft Corp. 1,740,619
9,500 1 New Era of Networks, Inc. 417,406
10,000 Nokia Oyj, Class A, ADR 915,625
7,000 1 PMC-Sierra, Inc. 412,563
7,700 1 Qlogic Corp. 1,016,400
7,600 1 Qualcomm, Inc. 1,090,600
13,800 1 RF Micro Devices, Inc. 1,029,825
3,300 1 RealNetworks, Inc. 227,288
22,000 1 Sun Microsystems, Inc. 1,515,250
18,800 1 Tellabs, Inc. 1,270,175
6,500 1 USWeb Corp. 144,219
3,500 1 Uniphase Corp. 581,000
12,600 1 Vitesse Semiconductor
Corp. 849,712
13,900 1 Xilinx, Inc. 795,775
TOTAL 24,472,457
TRANSPORTATION-1.5%
6,600 1 FDX Corp. 358,050
27,500 Southwest Airlines Co. 855,938
TOTAL 1,213,988
UTILITIES-1.0%
11,000 Enron Corp. 899,250
TOTAL COMMON STOCKS
(IDENTIFIED COST
$54,391,555) 79,729,171
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
REPURCHASE AGREEMENT-2.3%
$ 1,840,000 Goldman Sachs Group, Inc.,
5.25%, dated 6/30/1999,
due 7/1/1999 (at amortized
cost) $ 1,840,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$56,231,555) 2 $ 81,569,171

</TABLE>

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $56,231,555. The
net unrealized appreciation of investments on a federal tax basis amounts to
$25,337,616 which is comprised of $26,222,901 appreciation and $885,285
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($81,899,786) at June 30, 1999.

The following acronym is used throughout this portfolio:

ADR -American Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$56,231,555) $ 81,569,171
Cash 3,356
Income receivable 30,842
Receivable for investments
sold 648,549
Prepaid expenses 11,409
TOTAL ASSETS 82,263,327
LIABILITIES:
Payable for investments
purchased $ 353,909
Payable for taxes withheld 122
Accrued expenses 9,510
TOTAL LIABILITIES 363,541
Net assets for 3,698,850
shares outstanding $ 81,899,786
NET ASSETS CONSIST OF:
Paid in capital $ 52,743,136
Net unrealized
appreciation of
investments 25,337,616
Accumulated net realized
gain on investments 3,940,976
Accumulated net operating
loss (121,942)
TOTAL NET ASSETS $ 81,899,786
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$81,899,786 / 3,698,850
shares outstanding $22.14

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $1,236) $ 129,778
Interest 43,859
TOTAL INCOME 173,637
EXPENSES:
Investment advisory fee $ 259,462
Administrative personnel
and services fee 61,987
Custodian fees 3,576
Transfer and dividend
disbursing agent fees and
expenses 8,067
Directors'/Trustees' fees 977
Auditing fees 5,024
Legal fees 1,675
Portfolio accounting fees 22,273
Share registration costs 1,427
Printing and postage 9,855
Insurance premiums 952
Miscellaneous 1,177
TOTAL EXPENSES 376,452
WAIVER:
Waiver of investment
advisory fee (80,873)
Net expenses 295,579
Net operating loss (121,942)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 7,637,459
Net change in unrealized
appreciation of
investments 7,668,014
Net realized and
unrealized gain on
investments 15,305,473
Change in net assets
resulting from operations $ 15,183,531

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (121,942) $ (132,611)
Net realized gain (loss) on
investments ($7,637,459
and $(3,497,705)
respectively, as computed
for federal tax purposes) 7,637,459 (3,589,862)
Net change in unrealized
appreciation of
investments 7,668,014 12,326,113
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 15,183,531 8,603,640
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income - (47,544)
Distributions from net
realized gains on
investments - (3,039,172)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS - (3,086,716)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 7,574,170 11,516,169
Net asset value of shares
issued to shareholders in
payment of distributions
declared - 3,086,711
Cost of shares redeemed (3,604,592) (4,653,483)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 3,969,578 9,949,397
Change in net assets 19,153,109 15,466,321
NET ASSETS:
Beginning of period 62,746,677 47,280,356
End of period $ 81,899,786 $ 62,746,677

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $17.91 $16.14 $12.80 $10.30 $10.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income (net
operating loss) (0.03) (0.04) 2 0.02 2 0.05 0.03
Net realized and
unrealized gain
on investments 4.26 2.83 3.41 2.45 0.27
TOTAL FROM
INVESTMENT OPERATIONS 4.23 2.79 3.43 2.50 0.30
LESS DISTRIBUTIONS:
Distributions from net
investment income - (0.02) (0.02) (0.00) 3 -
Distributions from net
realized gain
on investments - (1.00) (0.07) - -
TOTAL DISTRIBUTIONS - (1.02) (0.09) - -
NET ASSET VALUE, END OF
PERIOD $22.14 $17.91 $16.14 $12.80 $10.30
TOTAL RETURN 4 23.62% 17.44% 27.03% 24.32% 3.00%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 5 1.09% 6 1.17% 1.52% 4.72% 77.80% 6
Net operating loss 5 (0.59%) 6 (0.56%) (0.53%) (3.32%) (75.04%) 6
Expense (after waivers) 0.85% 6 0.86% 0.85% 0.85% 0.85% 6
Net investment income (net
operating loss) (after
waivers) (0.35%) 6 (0.25%) 0.14% 0.55% 1.91% 6
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $81,900 $62,747 $47,280 $16,985 $368
Portfolio turnover 66% 104% 148% 96% 4%

</TABLE>

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

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

3 Per share amount does not round to $(0.01).

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

5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

6 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 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.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

At December 31, 1998, the Fund, for federal tax purposes, had a capital loss
carryforward of $3,497,705, 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 in
2006.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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,
1999 1998
<S> <C> <C>
Shares sold 378,751 697,066
Shares issued to
shareholders in payment of
distributions declared - 178,629
Shares redeemed (183,500) (300,599)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 195,251 575,096

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1999, were as follows:

Purchases $48,227,964
Sales $45,478,835

YEAR 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

EDWARD L. FLAHERTY, JR., ESQ.

PETER E. MADDEN

JOHN E. MURRAY, JR., J.D., S.J.D.

WESLEY W. POSVAR

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT

Federated Growth Strategies Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 1999

[Graphic]
Federated
Federated Growth Strategies Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916702

G00433-08 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated High Income Bond
Fund II.

For the six-month reporting period ended June 30, 1999, the fund's broadly
diversified, carefully researched portfolio focusing on over 300 high-yield,
lower-rated bonds 1 produced a total return of 2.61%.2 Contributing to this
total return was a strong income stream totaling $0.86 per share. The fund also
paid capital gains totaling $0.07 per share. The fund's total return was
impacted by a decline in high-yield bond prices, which in turn caused the fund's
net asset value to decline from $10.92 at the beginning of the reporting period
to $10.27 at the end of the reporting period. On June 30, 1999, the fund's net
assets reached $231.5 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. As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

August 15, 1999

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

Investment Review

High yield bonds delivered excellent relative returns for the six month
reporting period ended June 30, 1999. These returns were driven by continued
strong domestic economic growth coupled with stable to improving foreign
economies. Reflecting the strong domestic economic situation, the yield spread
between the First Boston High Yield Bond Index 1 and a comparable U.S. Treasury
security narrowed 83 basis points during the reporting period. Given the bright
economic outlook, the basic material sectors such as forest products, metals and
mining were standouts while healthcare was a noticeable laggard, as concerns
about government reimbursements in the long term care segment negatively
impacted the sector. In general, credit risk was rewarded as illustrated by the
performance of the Lehman Brothers CCC Index, which returned 8.58%, while the
Lehman Brothers BB and B Indexes returned 0.40% and 2.09%, respectively.1 While
relative returns were attractive, absolute returns were negatively impacted by
rising interest rates in the high-quality fixed income markets. Early in the
reporting period, the rise in interest rates was absorbed by spread tightening.
However, from mid-May through the end of June 1999, high yield bonds fell in
price along with high-quality bonds as rates continued to rise in anticipation
of the Federal Reserve Board (the "Fed") tightening moves to protect against
inflation. For the six-month reporting period ended June 30, 1999, the fund
returned 2.61%.2 The Lehman Brothers High Yield Bond Index1 returned 2.20%,
outperforming the Lehman Brothers Aggregate Bond Index,1 a measure of
high-quality bond performance, which returned (1.37%) for the same period.

1 First Boston High Yield Bond Index is an index that serves as a benchmark to
evaluate the performance of low-quality bonds, which are defined as BBB to CCC
and defaults. Morningstar receives and publishes this figure as a monthly total
return. Lehman Brothers CCC Index, Lehman Brothers BB Index, and Lehman Brothers
B Index are proprietary indexes of CCC, BB, and B rated securities,
respectively. Lehman Brothers High Yield Bond Index is an index which includes
fixed rate, public nonconvertible, non-investment grade issues that are rated
Ba1 or lower by Moody's Investors Service, Inc. Lehman Brothers Aggregate Bond
Index is a total return index measuring both the capital price changes and
income provided by the underlying universe of securities, weighted by market
value outstanding. These indexes are unmanaged, and investments cannot be made
in an index.

The fund outperformed the Lehman High Yield Bond Index while modestly
underperforming the Lipper High Current Yield Fund Average 3 for the reporting
period. Several factors impacted the fund's performance. First, on the positive
side, the fund was overweight in the telecommunications sector, which
outperformed the overall market. Also, within the telecommunications sector, the
fund had no exposure to the satellite segment when disappointments at Iridium, a
satellite phone company, dragged the sector lower. The fund was also underweight
in the healthcare sector which substantially underperformed and had little
exposure to the long term care segment within healthcare, which lead to the
sector's problems. Specific holdings in Fox/Liberty and MetroNet outperformed as
stronger credits took operating control of both companies. Triton PCS,
Telesystem International and Teligent, three aggressive telecommunications
issuers, outperformed as lower quality issues surged. On the negative side, the
main reason for the underperformance of the fund versus the Lipper average was
the fund's underweight positions in the more aggressive CCC and non-rated
sectors. The fund was underweight in the basic material sectors, which
outperformed given the strong economy. Also, positions in Jitney- Jungle, a
southern supermarket chain, Paging Network, the largest U.S. paging company and
Stena Lines, a major European ferry operator, underperformed because of
disappointing financial performance.

For the balance of 1999, we believe high-yield bonds offer attractive relative
returns given strong domestic economic growth and stable to improving
international economies, which should lead to additional spread tightening
between high-yield bonds and U.S. Treasury securities. Absolute returns will be
influenced by the direction of interest rates. The June 30, 1999 hike in the Fed
Funds rate by the Fed signals its concern about strong economic growth leading
to inflationary pressures and its willingness to raise rates to head off
inflation.

From a portfolio perspective, we continue to be overweight in the
telecommunications sector given the powerful secular growth characteristics of
the sector. We remain biased to modestly decreasing interest rate risk and
increasing credit risk given the strong economic conditions, while we also look
to increase exposure to basic materials. This bias will be carefully implemented
given the rising trend in default rates.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>

PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-91.9%
AEROSPACE & DEFENSE-0.5%
$ 750,000 1 Anteon Corp., Sr. Sub.
Note, 12.00%, 5/15/2009 $ 742,500
325,000 1 Condor Systems, Inc., Sr.
Sub. Note, 11.875%,
5/1/2009 316,875
TOTAL 1,059,375
AUTO/TRUCK-0.5% 525,000 1 HDA Parts System, Inc., Sr.
Sub. Note, 12.00%,
8/1/2005 532,875
700,000 1 J.L. French Automotive
Castings, Inc., Sr. Sub.
Note, 11.50%, 6/1/2009 717,500
TOTAL 1,250,375
AUTOMOBILE-2.2%
675,000 Accuride Corp., Sr. Sub.
Note, 9.25%, 2/1/2008 664,875
425,000 Aftermarket Technology
Co., Sr. Sub. Note, 12.00%,
8/1/2004 444,125
350,000 Aftermarket Technology
Co., Sr. Sub. Note, Series
D, 12.00%, 8/1/2004 365,750
1,050,000 Collins & Aikman Products
Co., Sr. Sub. Note, 11.50%,
4/15/2006 1,065,750
1,000,000 1 Lear Corp., Sr. Note,
8.11%, 5/15/2009 971,950
850,000 Lear Corp., Sub. Note,
9.50%, 7/15/2006 877,625
750,000 Oxford Automotive, Inc.,
Sr. Sub. Note, 10.125%,
6/15/2007 761,250
TOTAL 5,151,325
AUTOMOTIVE-0.8%
1,000,000 American Axle &
Manufacturing, Inc.,
Company Guarantee, Sr.
Sub. Note, 9.75%, 3/1/2009 1,007,500
825,000 1 Motor Coach Industries
International, Inc., Sr.
Sub. Note, 11.25%,
5/1/2009 829,125
TOTAL 1,836,625
BANKING-0.8%
2,000,000 GS Escrow Corp., Sr. Note,
7.125%, 8/1/2005 1,940,700
BEVERAGE & TOBACCO-0.4%
600,000 Dimon, Inc., Sr. Note,
8.875%, 6/1/2006 531,000
500,000 1 National Wine & Spirits,
Inc., Sr. Note, 10.125%,
1/15/2009 516,250
TOTAL 1,047,250
BROADCAST RADIO & TV-7.0% 1,150,000 ACME Television, LLC,
Sr.
Disc. Note, 0/10.875%,
9/30/2004 960,250
1,100,000 Big City Radio, Inc.,
Company Guarantee,
0/11.25%, 3/15/2005 783,750
450,000 Capstar Broadcasting
Partners, Inc., Sr. Sub.
Note, 9.25%, 7/1/2007 472,500
650,000 Chancellor Media Corp.,
Company Guarantee, 8.00%,
11/1/2008 637,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
BROADCAST RADIO & TV-
CONTINUED
$ 600,000 Chancellor Media Corp.,
Company Guarantee, 10.50%,
1/15/2007 $ 657,000
2,675,000 Chancellor Media Corp.,
Sr. Sub. Note, 8.125%,
12/15/2007 2,594,750
800,000 Chancellor Media Corp.,
Sr. Sub. Note, 8.75%,
6/15/2007 800,000
250,000 Chancellor Media Corp.,
Sr. Sub. Note, 9.375%,
10/1/2004 255,625
650,000 Cumulus Media, Inc., Sr.
Sub. Note, 10.375%,
7/1/2008 692,250
2,475,000 Fox/Liberty Networks, LLC,
Sr. Disc. Note, 0/9.75%,
8/15/2007 1,942,875
400,000 Fox/Liberty Networks, LLC,
Sr. Note, 8.875%,
8/15/2007 416,000
250,000 Lamar Advertising Co., Sr.
Sub. Note, 8.625%,
9/15/2007 252,500
550,000 Lamar Advertising Co., Sr.
Sub. Note, 9.625%,
12/1/2006 563,750
1,075,000 Outdoor Systems, Inc., Sr.
Sub. Note, 8.875%,
6/15/2007 1,127,406
250,000 Outdoor Systems, Inc., Sr.
Sub. Note, 9.375%,
10/15/2006 267,187
345,000 SFX Broadcasting, Inc.,
Sr. Sub. Note, 10.75%,
5/15/2006 367,425
750,000 Sinclair Broadcast Group,
Inc., Sr. Sub. Note, 8.75%,
12/15/2007 733,125
1,425,000 Sinclair Broadcast Group,
Inc., Sr. Sub. Note, 9.00%,
7/15/2007 1,407,187
575,000 Sinclair Broadcast Group,
Inc., Sr. Sub. Note,
10.00%, 9/30/2005 589,375
150,000 Young Broadcasting, Inc.,
Sr. Sub. Note, 9.00%,
1/15/2006 147,000
475,000 Young Broadcasting, Inc.,
Sr. Sub. Note, 10.125%,
2/15/2005 491,625
TOTAL 16,158,580
BUILDING & DEVELOPMENT-1.5%
250,000 American Architectural
Products Corp., Sr. Note,
11.75%, 12/1/2007 188,750
700,000 American Builders &
Contractors Supply Co.,
Inc., Sr. Sub. Note,
10.625%, 5/15/2007 661,500
500,000 Building Materials Corp.
of America, Sr. Note,
8.00%, Series B,
10/15/2007 468,750
450,000 Building Materials Corp.
of America, Sr. Note,
8.625%, Series B,
12/15/2006 442,125
975,000 Falcon Building Products,
Inc., Sr. Sub. Disc. Note,
0/10.50%, 6/15/2007 663,000
150,000 Falcon Building Products,
Inc., Sr. Sub. Note, 9.50%,
6/15/2007 143,250
725,000 1 Formica Corp., Sr. Sub.
Note, 10.875%, 3/1/2009 703,250
325,000 1 Juno Lighting, Inc., Sr.
Sub. Note, 11.875%,
7/1/2009 330,687
TOTAL 3,601,312
BUSINESS EQUIPMENT &
SERVICES-2.3%
600,000 1 Avis Rent A Car, Inc., Sr.
Sub. Note, 11.00%,
5/1/2009 612,000
1,100,000 Dialog Corp., Sr. Sub.
Note, Series A, 11.00%,
11/15/2007 1,001,000
300,000 Electronic Retailing
Systems International,
Inc., Sr. Disc. Note,
0/13.25%, 2/1/2004 85,500
1,575,000 Fisher Scientific
International, Inc., Sr.
Sub. Note, 9.00%, 2/1/2008 1,504,125
325,000 Fisher Scientific
International, Inc., Sr.
Sub. Note, 9.00%, 2/1/2008 310,375
1,600,000 U.S. Office Products Co.,
Sr. Sub. Note, 9.75%,
6/15/2008 1,016,000
275,000 United Stationers Supply
Co., Sr. Sub. Note, 8.375%,
4/15/2008 262,625
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
BUSINESS EQUIPMENT &
SERVICES-CONTINUED
$ 400,000 United Stationers Supply
Co., Sr. Sub. Note, 12.75%,
5/1/2005 $ 440,000
TOTAL 5,231,625
CABLE TELEVISION-10.5% 4,703 2 Australis Media Ltd., Sr.
Disc. Note, 5/15/2003 47
275,000 2 Australis Media Ltd.,
Unit, 0/14.00%, 5/15/2003 2,750
500,000 CSC Holdings, Inc., Sr.
Note, 7.875%, 12/15/2007 503,760
875,000 CSC Holdings, Inc., Sr.
Sub. Note, 9.25%,
11/1/2005 905,625
650,000 CSC Holdings, Inc., Sr.
Sub. Note, 9.875%,
5/15/2006 695,500
350,000 CSC Holdings, Inc., Sr.
Sub. Deb., 9.875%,
2/15/2013 378,000
1,125,000 1 Charter Communications
Holdings Capital Corp.,
Sr. Disc. Note, 0/9.92%,
4/1/2011 703,125
1,175,000 Diamond Cable
Communications PLC, Sr.
Disc. Note, 0/10.75%,
2/15/2007 922,375
525,000 Diamond Cable
Communications PLC, Sr.
Note, 9.125%, 2/1/2008 535,500
550,000 Diva Systems Corp., Sr.
Disc. Note, 0/12.625%,
3/1/2008 162,250
2,800,000 1 Echostar Communications
Corp., Sr. Note, 9.375%,
2/1/2009 2,849,000
2,325,000 International Cabletel,
Inc., Sr. Defd. Cpn. Note,
Series B, 0/11.50%,
2/1/2006 2,040,187
475,000 International Cabletel,
Inc., Sr. Defd. Cpn. Note,
Series A, 0/12.75%,
4/15/2005 459,562
500,000 Lenfest Communications,
Inc., Sr. Secd. Note,
8.375%, 11/1/2005 523,750
725,000 Lenfest Communications,
Inc., Sr. Sub. Note, 8.25%,
2/15/2008 748,562
2,050,000 NTL, Inc., 0/12.375%, Sr.
Defd. Note, 10/1/2008
Series B 1,414,500
2,275,000 NTL, Inc., Sr. Defd. Note,
0/9.75%, 4/1/2008 1,569,750
500,000 NTL, Inc., Sr. Note,
11.50%, 10/1/2008 553,750
775,000 Pegasus Communications
Corp., Sr. Note, 9.625%,
10/15/2005 771,125
525,000 Pegasus Communications
Corp., Sr. Note, 9.75%,
12/1/2006 517,125
300,000 Pegasus Media, Note,
12.50%, 7/1/2005 333,375
550,000 RCN Corp., Sr. Disc. Note,
0/11.125%, 10/15/2007 371,250
475,000 RCN Corp., Sr. Disc. Note,
0/9.80%, 2/15/2008 301,625
900,000 Rogers Cablesystems Ltd.,
Sr. Secd. 2nd Priority
Note, 10.00%, 3/15/2005 976,500
400,000 Rogers Cablesystems Ltd.,
Sr. Secd. 2nd Priority
Note, 10.00%, 12/1/2007 434,000
400,000 Rogers Cablesystems Ltd.,
Sr. Sub. Gtd. Note, 11.00%,
12/1/2015 462,000
3,125,000 TeleWest PLC, Sr. Disc.
Deb., 0/11.00%, 10/1/2007 2,804,687
400,000 TeleWest PLC, Sr. Note,
11.25%, 11/1/2008 452,000
1,175,000 UIH Australia/Pacific, Sr.
Disc. Note, 0/14.00%,
5/15/2006 834,250
1,475,000 United International
Holdings, Inc., Sr. Secd.
Disc. Note, 0/10.75%,
2/15/2008 988,250
TOTAL 24,214,180
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
CHEMICALS & PLASTICS-4.1%
$ 500,000 Buckeye Cellulose Corp.,
Sr. Sub. Note, 8.50%,
12/15/2005 $ 495,000
900,000 Buckeye Cellulose Corp.,
Sr. Sub. Note, 9.25%,
9/15/2008 932,922
200,000 Foamex LP, Sr. Sub. Note,
13.50%, 8/15/2005 181,000
250,000 1 General Chemical
Industrial Products, Inc.,
Sr. Sub. Note, 10.625%,
5/1/2009 253,125
1,050,000 1 Huntsman Corp., Sr. Sub.
Note, 9.50%, 7/1/2007 1,002,750
800,000 1 Huntsman ICI Chemicals
LLC, Sr. Sub. Note,
10.125%, 7/1/2009 811,000
475,000 ISP Holding, Inc., Sr.
Note, 9.75%, 2/15/2002 480,937
1,300,000 1 Lyondell Chemical Co., Sr.
Sub. Note, 10.875%,
5/1/2009 1,345,500
650,000 Polymer Group, Inc., Sr.
Sub. Note, 8.75%, 3/1/2008 619,125
2,075,000 Polymer Group, Inc., Sr.
Sub. Note, 9.00%, 7/1/2007 1,997,187
875,000 Sterling Chemicals
Holdings, Inc., Sr. Disc.
Note, 0/13.50%, 8/15/2008 258,125
525,000 Sterling Chemicals
Holdings, Inc., Sr. Sub.
Note, 11.75%, 8/15/2006 406,875
750,000 Texas Petrochemicals
Corp., Sr. Sub. Note,
11.125%, 7/1/2006 671,250
TOTAL 9,454,796
CLOTHING & TEXTILES-1.1%
350,000 Collins & Aikman
Floorcoverings, Inc., Sr.
Sub. Note, 10.00%,
1/15/2007 351,750
625,000 Dyersburg Corp., Sr. Sub.
Note, 9.75%, 9/1/2007 259,375
550,000 GFSI, Inc., Sr. Sub. Note,
9.625%, 3/1/2007 464,750
575,000 Glenoit Corp., Sr. Sub.
Note, 11.00%, 4/15/2007 508,875
150,000 Pillowtex Corp., Sr. Sub.
Note, 9.00%, 12/15/2007 151,125
950,000 Pillowtex Corp., Sr. Sub.
Note, 10.00%, 11/15/2006 902,500
TOTAL 2,638,375
CONGLOMERATE-0.5%
1,150,000 Eagle Picher Industries,
Inc., Sr. Sub. Note,
9.375%, 3/1/2008 1,098,250
CONSUMER PRODUCTS-4.5%
1,350,000 Albecca, Inc., Company
Guarantee, 10.75%,
8/15/2008 1,113,750
500,000 American Safety Razor Co.,
Sr. Note, 9.875%, 8/1/2005 507,500
700,000 Amscan Holdings, Inc., Sr.
Sub. Note, 9.875%,
12/15/2007 581,000
1,150,000 Chattem, Inc., Sr. Sub.
Note, 8.875%, 4/1/2008 1,109,750
200,000 Diamond Brands Operating
Corp., Sr. Sub. Note,
10.125%, 4/15/2008 161,000
250,000 Diamond Brands, Inc., Sr.
Disc. Deb., 0/12.875%,
4/15/2009 51,250
750,000 NBTY, Inc., Sr. Sub. Note,
8.625%, 9/15/2007 648,750
1,025,000 Playtex Family Products
Corp., Sr. Sub. Note,
9.00%, 12/15/2003 1,045,500
625,000 Revlon Consumer Products
Corp., Sr. Note, 8.125%,
2/1/2006 615,625
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
CONSUMER PRODUCTS-
CONTINUED
$ 2,425,000 Revlon Consumer Products
Corp., Sr. Sub. Note,
8.625%, 2/1/2008 $ 2,303,750
325,000 Sealy Mattress Co.,
Company Guarantee,
0/10.875%, 12/15/2007 212,875
200,000 Sealy Mattress Co., Sr.
Sub. Note, 9.875%,
12/15/2007 197,000
329,000 1 The Boyds Collection,
Ltd., Sr. Sub. Note, 9.00%,
5/15/2008 325,710
500,000 1 True Temper Sports, Inc.,
Sr. Sub. Note, 10.875%,
12/1/2008 427,500
250,000 1 United Industries Corp.,
Sr. Sub. Note, 9.875%,
4/1/2009 226,875
725,000 1 Volume Services America,
Inc., Sr. Sub. Note,
11.25%, 3/1/2009 801,125
TOTAL 10,328,960
CONTAINER & GLASS
PRODUCTS-1.0%
400,000 Owens-Illinois, Inc., Sr.
Note, 8.10%, 5/15/2007 398,236
250,000 Plastic Containers, Inc.,
Sr. Secd. Note, 10.00%,
12/15/2006 283,262
725,000 1 Russell Stanley Holdings,
Inc., Sr. Sub. Note,
10.875%, 2/15/2009 710,500
1,000,000 Tekni-Plex, Inc., Sr. Sub.
Note, 9.25%, 3/1/2008 975,000
TOTAL 2,366,998
ECOLOGICAL SERVICES &
EQUIPMENT-1.0%
2,000,000 Allied Waste North
America, Inc., Company
Guarantee, 7.625%,
1/1/2006 1,875,000
500,000 Allied Waste North
America, Inc., Company
Guarantee, 7.875%,
1/1/2009 465,000
TOTAL 2,340,000
ELECTRONICS-1.2%
250,000 1 Cherokee International,
LLC, Sr. Sub. Note, 10.50%,
5/1/2009 250,000
300,000 1 Fairchild Semiconductor
Corp., Sr. Sub. Note,
10.375%, 10/1/2007 295,500
1,950,000 Telecommunications
Techniques Co., LLC, Sr.
Sub. Note, 9.75%,
5/15/2008 1,930,500
350,000 Viasystems, Inc., Sr. Sub.
Note, 9.75%, 6/1/2007 308,000
TOTAL 2,784,000
FARMING & AGRICULTURE-0.1%
225,000 1 Royster-Clark, Inc., 1st
Mtg. Note, 10.25%,
4/1/2009 223,875
FOOD & DRUG RETAILERS-0.2%
350,000 Community Distributors,
Inc., Sr. Note, 10.25%,
10/15/2004 309,750
750,000 Jitney-Jungle Stores of
America, Inc., Sr. Sub.
Note, 10.375%, 9/15/2007 266,250
TOTAL 576,000
FOOD PRODUCTS-2.0%
1,050,000 Agrilink Foods, Inc.,
Company Guarantee,
11.875%, 11/1/2008 1,089,375
400,000 Aurora Foods, Inc., Sr.
Sub. Note, 9.875%,
2/15/2007 416,000
500,000 Aurora Foods, Inc., Sr.
Sub. Note, 9.875%,
2/15/2007 520,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
FOOD PRODUCTS-CONTINUED
$ 550,000 Eagle Family Foods, Inc.,
Sr. Sub. Note, 8.75%,
1/15/2008 $ 492,250
1,200,000 International Home Foods,
Inc., Sr. Sub. Note,
10.375%, 11/1/2006 1,272,000
850,000 1 Triarc Consumer Products
Group, LLC, Sr. Sub. Note,
10.25%, 2/15/2009 841,500
TOTAL 4,631,125
FOOD SERVICES-1.7%
700,000 Advantica Restaurant
Group, Sr. Note, 11.25%,
1/15/2008 682,500
225,000 AmeriServe Food
Distribution, Inc., Sr.
Note, 8.875%, 10/15/2006 208,125
1,900,000 AmeriServe Food
Distribution, Inc., Sr.
Sub. Note, 10.125%,
7/15/2007 1,624,500
525,000 Carrols Corp., 9.50%,
12/1/2008 494,812
825,000 Domino's, Inc., Company
Guarantee, 10.375%,
1/15/2009 835,312
TOTAL 3,845,249
FOREST PRODUCTS-0.6%
50,000 Container Corp. of
America, Sr. Note, 11.25%,
5/1/2004 52,687
325,000 1 Packaging Corp. of
America, Sr. Sub. Note,
9.625%, 4/1/2009 331,500
100,000 Stone Container Corp., Sr.
Note, 11.50%, 10/1/2004 105,500
800,000 Stone Container Corp., Sr.
Note, 12.58%, 8/1/2016 868,000
TOTAL 1,357,687
HEALTHCARE-3.9%
750,000 Alliance Imaging, Inc.,
Sr. Sub. Note, 9.625%,
12/15/2005 712,500
900,000 CONMED Corp., Sr. Sub.
Note, 9.00%, 3/15/2008 895,500
700,000 Columbia/HCA Healthcare
Corp., Sr. Note, 6.91%,
6/15/2005 647,717
1,175,000 Dade International, Inc.,
Sr. Sub. Note, 11.125%,
5/1/2006 1,245,500
525,000 Everest Healthcare
Services Corp., Sr. Sub.
Note, 9.75%, 5/1/2008 506,625
525,000 Genesis Health Ventures,
Inc., Sr. Sub. Note, 9.25%,
10/1/2006 417,375
350,000 Genesis Health Ventures,
Inc., Sr. Sub. Note,
9.875%, 1/15/2009 281,750
275,000 Hudson Respiratory Care,
Inc., Sr. Sub. Note,
9.125%, 4/15/2008 229,625
200,000 Tenet Healthcare Corp.,
Sr. Note, 7.625%, 6/1/2008 187,500
1,850,000 Tenet Healthcare Corp.,
Sr. Note, 8.00%, 1/15/2005 1,813,000
1,550,000 Tenet Healthcare Corp.,
Sr. Sub. Note, 8.625%,
1/15/2007 1,526,750
475,000 1 Triad Hospitals Holdings,
Inc., Sr. Sub. Note,
11.00%, 5/15/2009 485,688
TOTAL 8,949,530
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
HOTELS, MOTELS, INNS &
CASINOS-2.0%
$ 350,000 Courtyard by Marriott II
LP, Sr. Note, 10.75%,
2/1/2008 $ 358,750
1,375,000 Florida Panthers Holdings,
Inc., Company Guarantee,
9.875%, 4/15/2009 1,313,125
2,250,000 HMH Properties, Inc., Sr.
Note, Series B, 7.875%,
8/1/2008 2,086,875
900,000 HMH Properties, Inc., Sr.
Note, Series C, 8.45%,
12/1/2008 859,500
TOTAL 4,618,250
INDUSTRIAL PRODUCTS &
EQUIPMENT-4.0%
800,000 Amphenol Corp., Sr. Sub.
Note, 9.875%, 5/15/2007 820,000
400,000 Cabot Safety Acquisition
Corp., Sr. Sub. Note,
12.50%, 7/15/2005 430,000
750,000 Continental Global Group,
Inc., Sr. Note, 11.00%,
4/1/2007 618,750
800,000 Euramax International PLC,
Sr. Sub. Note, 11.25%,
10/1/2006 812,000
250,000 Fairfield Manufacturing
Co., Inc., Sr. Sub. Note,
11.375%, 7/1/2001 255,313
850,000 1 Hexcel Corp., Sr. Sub.
Note, 9.75%, 1/15/2009 837,250
600,000 ISG Resources, Inc., Sr.
Sub. Note, 10.00%,
4/15/2008 618,000
225,000 International Utility
Structures, Inc., Sr. Sub.
Note, 10.75%, 2/1/2008 226,688
375,000 Johnstown America
Industries, Inc., Sr. Sub.
Note, 11.75%, 8/15/2005 397,500
225,000 Johnstown America
Industries, Inc., Sr. Sub.
Note, 11.75%, 8/15/2005 238,500
1,075,000 MMI Products, Inc., Sr.
Sub. Note, 11.25%,
4/15/2007 1,107,250
850,000 Neenah Corp., Sr. Sub.
Note, 11.125%, 5/1/2007 837,250
200,000 1 Neenah Corp., Sr. Sub.
Note, 11.125%, 5/1/2007 197,000
500,000 Unifrax Investment Corp.,
Sr. Note, 10.50%,
11/1/2003 518,750
1,275,000 WESCO Distribution, Inc.,
Sr. Sub. Note, 9.125%,
6/1/2008 1,239,938
TOTAL 9,154,189
LEISURE & ENTERTAINMENT-
3.7%
1,164,000 AMF Group, Inc., Sr. Sub.
Disc. Note, 0/12.25%,
3/15/2006 715,860
500,000 Loews Cineplex
Entertainment Corp., Sr.
Sub. Note, 8.875%,
8/1/2008 480,000
1,500,000 Premier Parks, Inc., Sr.
Disc. Note, 0/10.00%,
4/1/2008 1,003,125
250,000 Premier Parks, Inc., Sr.
Note, 9.25%, 4/1/2006 251,875
1,500,000 Premier Parks, Inc., Sr.
Note, 9.75%, 6/15/2007 1,522,500
850,000 Premier Parks, Inc., Sr.
Note, 12.00%, 8/15/2003 911,489
2,275,000 Regal Cinemas, Inc., Sr.
Sub. Note, 9.50%, 6/1/2008 2,149,875
1,325,000 Six Flags Theme Parks, Sr.
Sub. Disc. Note, 12.25%,
6/15/2005 1,484,000
TOTAL 8,518,724
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
MACHINERY & EQUIPMENT-2.5%
$ 348,000 Alvey Systems, Inc., Sr.
Sub. Note, 11.375%,
1/31/2003 $ 353,220
900,000 Clark Material Handling
Corp., Sr. Note, 10.75%,
11/15/2006 787,500
300,000 Columbus McKinnon Corp.,
Sr. Sub. Note, 8.50%,
4/1/2008 292,500
625,000 1 Fairchild Corp., Sr. Sub.
Note, 10.75%, 4/15/2009 618,750
500,000 National Equipment
Services, Inc., Sr. Sub.
Note, 10.00%, 11/30/2004 510,000
1,125,000 National Equipment
Services, Inc., Sr. Sub.
Note, Series C, 10.00%,
11/30/2004 1,147,500
1,250,000 United Rentals, Inc.,
Company Guarantee, 9.25%,
1/15/2009 1,237,500
850,000 1 United Rentals, Inc., Sr.
Sub. Note, 9.00%, 4/1/2009 839,375
TOTAL 5,786,345
METALS & MINING-0.9% 1,025,000 1 AEI Holding Co., Inc., Sr.
Note, 10.50%, 12/15/2005 1,022,438
1,000,000 1 AEI Resources, Inc., Sr.
Sub. Note, 11.50%,
12/15/2006 987,500
TOTAL 2,009,938
OIL & GAS-3.5% 525,000 Chiles Offshore, LLC, Sr.
Note, 10.00%, 5/1/2008 448,875
1,000,000 Continental Resources,
Inc., Sr. Sub. Note,
10.25%, 8/1/2008 737,500
300,000 DI Industries, Inc., Sr.
Note, 8.875%, 7/1/2007 267,000
1,125,000 2 Dailey Petroleum Services
Corp., Company Guarantee,
9.50%, 2/15/2008 720,000
750,000 Forcenergy, Inc., Sr. Sub.
Note, 8.50%, 2/15/2007 528,750
375,000 Forcenergy, Inc., Sr. Sub.
Note, 9.50%, 11/1/2006 264,375
700,000 Forest Oil Corp., Sr. Sub.
Note, 10.50%, 1/15/2006 728,000
300,000 Nuevo Energy Co., Sr. Sub.
Note, 8.875%, 6/1/2008 292,500
650,000 Pogo Producing Co., Sr.
Sub. Note, Series B,
10.375%, 2/15/2009 679,250
825,000 Pride Petroleum Services,
Inc., Sr. Note, 9.375%,
5/1/2007 820,875
500,000 1 R&B Falcon Corp., Sr. Note,
12.25%, 3/15/2006 515,000
500,000 R&B Falcon Corp., Sr. Note,
Series B, 6.75%, 4/15/2005 417,500
450,000 1 RBF Finance Co., Sr. Secd.
Note, 11.375%, 3/15/2009 470,250
400,000 The Houston Exploration
Co., Sr. Sub. Note, 8.625%,
1/1/2008 390,000
1,200,000 Universal Compression
Holdings, Inc., Sr. Disc.
Note, 0/9.875%, 2/15/2008 759,000
TOTAL 8,038,875
PRINTING & PUBLISHING-0.9%
725,000 Garden State Newspapers,
Inc., Sr. Sub. Note, 8.75%,
10/1/2009 706,875
775,000 Hollinger International
Publishing, Inc., Sr. Sub.
Note, 9.25%, 3/15/2007 798,250
550,000 Ziff-Davis, Inc., Sr. Sub.
Note, 8.50%, 5/1/2008 517,000
TOTAL 2,022,125
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
RETAILERS-0.2%
$ 525,000 Leslie's Poolmart, Inc.,
Sr. Note, 10.375%,
7/15/2004 $ 536,813
SERVICES-1.3%
625,000 Coinmach Corp., Sr. Note,
11.75%, 11/15/2005 687,500
2,000,000 Crown Castle International
Corp., Sr. Disc. Note,
0/10.375%, 5/15/2011 1,182,500
425,000 SITEL Corp., Sr. Sub. Note,
9.25%, 3/15/2006 363,375
675,000 1 URS Corp., Sr. Sub. Note,
12.25%, 5/1/2009 685,125
TOTAL 2,918,500
STEEL-0.8%
600,000 Metals USA, Inc., Sr. Sub.
Note, 8.625%, 2/15/2008 562,500
500,000 National Steel Corp., 1st
Mtg. Bond, 9.875%,
3/1/2009 512,500
450,000 Ryerson Tull, Inc., Note,
8.50%, 7/15/2001 460,580
325,000 Ryerson Tull, Inc., Sr.
Note, 9.125%, 7/15/2006 341,266
TOTAL 1,876,846
SURFACE TRANSPORTATION-
2.2%
650,000 Allied Holdings, Inc., Sr.
Note, 8.625%, 10/1/2007 620,750
700,000 2 AmeriTruck Distribution
Corp., Sr. Sub. Note,
12.25%, 11/15/2005 42,000
1,000,000 Gearbulk Holding Ltd., Sr.
Note, 11.25%, 12/1/2004 1,032,500
550,000 1 Railworks Corp., Sr. Sub.
Note, 11.50%, 4/15/2009 554,125
750,000 Stena AB, Sr. Note, 8.75%,
6/15/2007 688,125
1,500,000 Stena AB, Sr. Note, 10.50%,
12/15/2005 1,507,500
300,000 Stena Lines AB, Sr. Note,
10.625%, 6/1/2008 227,250
725,000 1 The Holt Group, Inc., Sr.
Note, 9.75%, 1/15/2006 482,125
TOTAL 5,154,375
TELECOMMUNICATIONS &
CELLULAR-21.1%
1,000,000 American Cellular Corp.,
Sr. Note, 10.50%,
5/15/2008 1,030,000
500,000 Arch Communications, Inc.,
Sr. Note, Series B, 12.75%,
7/1/2007 430,000
1,850,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/8.94%, 8/15/2008 1,045,250
1,500,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/9.27%, 8/15/2007 960,000
850,000 Call-Net Enterprises,
Inc., Sr. Disc. Note,
0/10.80%, 5/15/2009 471,750
850,000 1 Centennial Cellular Corp.,
Sr. Sub. Note, 10.75%,
12/15/2008 886,125
900,000 1 Dolphin Telecom PLC, Sr.
Disc. Note, 0/14.00%,
5/15/2009 445,500
700,000 E.Spire Communications,
Inc., Sr. Disc. Note,
0/12.75%, 4/1/2006 367,500
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CORPORATE BONDS-continued
TELECOMMUNICATIONS &
CELLULAR-CONTINUED
$ 800,000 Hermes Europe Railtel BV,
Sr. Note, 10.375%,
1/15/2009 $ 812,000
1,375,000 Hermes Europe Railtel BV,
Sr. Note, 11.50%,
8/15/2007 1,447,188
375,000 ICG Holdings, Inc., Sr.
Disc. Note, 0/12.50%,
5/1/2006 292,654
1,450,000 ICG Services, Inc., Sr.
Disc. Note, 0/9.875%,
5/1/2008 797,848
1,000,000 IXC Communications, Inc.,
Sr. Sub. Note, 9.00%,
4/15/2008 961,250
1,625,000 Intermedia Communications,
Inc., Sr. Disc. Note,
0/11.25%, 7/15/2007 1,178,125
1,400,000 Intermedia Communications,
Inc., Sr. Disc. Note,
0/12.50%, 5/15/2006 1,169,000
1,250,000 Intermedia Communications,
Inc., Series B, Sr. Disc.
Note, 0/12.25%, 3/1/2009 715,625
650,000 Intermedia Communications,
Inc., Sr. Note, 8.60%,
6/1/2008 607,750
450,000 Intermedia Communications,
Inc., Sr. Note, 8.875%,
11/1/2007 428,625
3,250,000 Level 3 Communications,
Inc., Sr. Disc. Note,
0/10.50%, 12/1/2008 2,019,063
3,575,000 Level 3 Communications,
Inc., Sr. Note, 9.125%,
5/1/2008 3,543,719
1,900,000 McLeod, Inc., Sr. Disc.
Note, 0/10.50%, 3/1/2007 1,467,750
375,000 McLeod, Inc., Sr. Note,
8.375%, 3/15/2008 355,313
400,000 McLeod, Inc., Sr. Note,
9.25%, 7/15/2007 400,000
375,000 McLeod, Inc., Sr. Note,
9.50%, 11/1/2008 376,875
850,000 MetroNet Communications
Corp., Sr. Disc. Note,
0/10.75%, 11/1/2007 680,000
800,000 MetroNet Communications
Corp., Sr. Note, 12.00%,
8/15/2007 926,000
1,625,000 MetroNet Escrow Corp., Sr.
Disc. Note, 0/9.95%,
6/15/2008 1,210,625
850,000 1 MetroNet Escrow Corp., Sr.
Note, 10.625%, 11/1/2008 962,625
1,550,000 Millicom International
Cellular SA, Sr. Disc.
Note, 0/13.50%, 6/1/2006 1,139,250
350,000 Millicom International
Cellular SA, Sr. Disc. Note
0/14.63%, 6/1/2006 259,000
3,500,000 NEXTEL Communications,
Inc., Sr. Disc. Note,
0/10.65%, 9/15/2007 2,572,500
2,050,000 NEXTEL Communications,
Inc., Sr. Disc. Note,
0/9.95%, 2/15/2008 1,419,625
600,000 NEXTEL International,
Inc., Sr. Disc. Note,
0/12.125%, 4/15/2008 305,250
600,000 1 NEXTEL Partners, Inc., Sr.
Disc. Note, 0/14.00%,
2/1/2009 346,500
950,000 NEXTLINK Communications,
Inc., Sr. Disc. Note,
0/9.45%, 4/15/2008 574,750
2,100,000 NEXTLINK Communications,
Inc., Sr. Disc. Note,
0/12.25%, 6/1/2009 1,239,000
1,000,000 NEXTLINK Communications,
Inc., Sr. Note, 9.00%,
3/15/2008 947,500
1,500,000 Paging Network, Inc., Sr.
Sub. Note, 10.00%,
10/15/2008 1,162,500
800,000 Pathnet, Inc., Unit,
12.25%, 4/15/2008 396,000
900,000 PSINet, Inc., Sr. Note,
10.00%, 2/15/2005 900,000
750,000 PSINet, Inc., Sr. Note,
11.50%, 11/1/2008 791,250
1,375,000 Qwest Communications
International, Inc., Sr.
Disc. Note, 0/9.47%,
10/15/2007 1,069,063
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
CORPORATE BONDS-continued
TELECOMMUNICATIONS &
CELLULAR-CONTINUED
$ 390,000 Qwest Communications
International, Inc., Sr.
Note, 10.875%, 4/1/2007 $ 442,650
500,000 Qwest Communications
International, Inc., Sr.
Note, Series B, 7.50%,
11/1/2008 490,000
1,750,000 Rogers Cantel Mobile,
Inc., Sr. Sub. Note, 8.80%,
10/1/2007 1,754,375
650,000 Telesystem International
Wireless, Inc., Sr. Disc.
Note, 0/10.50%, 11/1/2007 289,250
1,525,000 Telesystem International
Wireless, Inc., Sr. Disc.
Note, 0/13.25%, 6/30/2007 785,375
1,650,000 Teligent AB, Sr. Disc.
Note, 0/11.50%, 3/1/2008 1,014,750
875,000 Teligent AB, Sr. Note,
11.50%, 12/1/2007 879,375
1,000,000 1 Tritel PCS, Inc., Sr. Sub.
Disc. Note, 0/12.75%,
5/15/2009 550,000
1,575,000 Triton PCS, Inc., Sr. Disc.
Note, 0/11.00%, 5/1/2008 1,023,750
500,000 US Xchange, LLC, Sr. Note,
15.00%, 7/1/2008 521,250
350,000 USA Mobile Communications,
Inc., Sr. Note, 9.50%,
2/1/2004 285,250
475,000 Verio, Inc., Sr. Note,
11.25%, 12/1/2008 499,938
850,000 Viatel, Inc., Unit,
0/12.50%, 4/15/2008 548,250
825,000 Viatel, Inc., Unit,
11.25%, 4/15/2008 845,625
TOTAL 49,040,186
UTILITIES-0.4%
1,250,000 Niagara Mohawk Power
Corp., Sr. Disc. Note,
Series H, 0/8.50%,
7/1/2010 939,788
TOTAL CORPORATE BONDS
(IDENTIFIED COST
$223,339,956) 212,701,146
PREFERRED STOCKS-3.5%
BANKING-0.1%
10,000 California Federal
Preferred Capital Corp.,
REIT Perpetual Pfd. Stock,
Series A, $2.28 262,500
BROADCAST RADIO & TV-1.2%
600 Benedek Communications
Corp., Sr. Exchangeable
PIK 459,000
2,403 Capstar Broadcasting
Corp., Cumulative
Exchangeable Pfd. Stock,
Series E, 12.625% 291,923
6,656 Capstar Broadcasting
Partners, Inc., Sr. Pfd.,
$12.00 773,828
515 Cumulus Media, Inc.,
Cumulative Sr. Red. Pfd.
Stk., Series A, $3.44 570,059
7,300 Sinclair Broadcast Group,
Inc., Cumulative Pfd.,
$11.63 770,150
TOTAL 2,864,960
CABLE TELEVISION-0.4%
890 Pegasus Communications
Corp., Cumulative PIK
Pfd., Series A, 12.75% 921,709
FOOD SERVICES-0.1%
4,013 Nebco Evans Holding Co.,
Exchangeable Pfd. Stock 158,501
FOREST PRODUCTS-0.1%
1,750 1 Packaging Corp. of
America, Sr. Exchangeable
PIK 185,063
<CAPTION>
SHARES VALUE
<C> <S> <C>
PREFERRED STOCKS-continued
HEALTHCARE-0.1%
1,961 River Holding Corp., Sr.
Exchangeable PIK $ 137,760
INDUSTRIAL PRODUCTS &
EQUIPMENT-0.1%
150 Fairfield Manufacturing
Co., Inc., Cumulative
Exchangeable Pfd. Stock 154,313
12 1 International Utility
Structures, Inc., Unit 11,550
100 1 International Utility
Structures, Inc., Unit,
$13.00 98,500
TOTAL 264,363
OIL & GAS-0.1%
275 1 R&B Falcon Corp., Unit 280,638
PRINTING & PUBLISHING-1.0%
7,000 Primedia, Inc., Cumulative
Pfd., Series D, $10.00 719,250
2,000 Primedia, Inc.,
Exchangeable Pfd. Stock,
Series H, $2.16 184,000
14,400 Primedia, Inc., Pfd.,
$9.20 1,432,800
TOTAL 2,336,050
TELECOMMUNICATIONS &
CELLULAR-0.3%
589 NEXTEL Communications,
Inc., Cumulative PIK Pfd.,
Series D, 13.00% 639,070
140 NEXTEL Communications,
Inc., Exchangeable Pfd.
Stock, Series E 140,700
TOTAL 779,770
TOTAL PREFERRED STOCKS
(IDENTIFIED COST
$8,288,682) 8,191,314
COMMON STOCKS-0.1%
BUSINESS EQUIPMENT &
SERVICES-0.0%
300 1, 2 Electronic Retailing
Systems International,
Inc., Warrants 1,500
CABLE TELEVISION-0.0%
200 2 Australis Holdings
Property Ltd., Warrants 0
1,650 2 Diva Systems Corp.,
Warrants 19,800
338 2 Pegasus Communications
Corp. 13,330
550 2 Pegasus Communications
Corp., Warrants 33,275
1,175 2 UIH Australia/Pacific,
Warrants 1,322
450 2 Wireless One, Inc.,
Warrants 0
TOTAL 67,727
CHEMICALS & PLASTICS-0.0%
425 2 Sterling Chemicals
Holdings, Inc., Warrants 6,375
METALS & MINING-0.0%
23,013 2 Royal Oak Mines, Inc. 230
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMON STOCKS-continued
PRINTING & PUBLISHING-0.0%
50 2 Affiliated Newspaper
Investments, Inc. $ 7,500
STEEL-0.0%
100 1, 2 Bar Technologies, Inc.,
Warrants 2,000
TELECOMMUNICATIONS &
CELLULAR-0.1%
800 1, 2 MetroNet Communications
Corp., Warrants 60,000
800 1, 2 Pathnet, Inc., Warrants 8,100
TOTAL 68,100
TOTAL COMMON STOCKS
(IDENTIFIED COST $49,823) 153,432
REPURCHASE AGREEMENT-4.7% 3
$ 10,955,000 Goldman Sachs Group, LP,
5.25%, dated 6/30/1999,
due 7/1/1999 (at amortized
cost) 10,955,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$242,633,461) 4 $ 232,000,892

</TABLE>

1 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's Board of Trustees. At June 30, 1999, these
securities amounted to $29,204,324 which represents 12.6% of net assets.

2 Non-income producing security.

4 The cost of investments for federal tax purposes amounts to $242,633,461. The
net unrealized depreciation of investments on a federal tax basis amounts to
$10,632,569 which is comprised of $3,046,775 appreciation and $13,679,344
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($231,515,811) at June 30, 1999.

The following acronyms are used throughout this portfolio:

GTD -Guaranty
PIK -Payment in Kind
REIT -Real Estate Investment Trust

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$242,633,461) $ 232,000,892
Cash 3,854
Income receivable 4,114,182
Other assets 4,818
TOTAL ASSETS 236,123,746
LIABILITIES:
Payable for investments
purchased $ 4,597,397
Income distribution
payable 10,538
TOTAL LIABILITIES 4,607,935
Net assets for 22,537,529
shares outstanding $ 231,515,811
NET ASSETS CONSIST OF:
Paid in capital $ 233,283,702
Net unrealized
depreciation of
investments (10,632,569)
Accumulated net realized
loss on investments (638,932)
Undistributed net
investment income 9,503,610
TOTAL NET ASSETS $ 231,515,811
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$231,515,811 / 22,537,529
shares outstanding $10.27

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 478,944
Interest 10,150,356
TOTAL INCOME 10,629,300
EXPENSES:
Investment advisory fee $ 664,620
Administrative personnel
and services fee 77,558
Custodian fees 7,188
Transfer and dividend
disbursing agent fees and
expenses 44,733
Directors'/Trustees' fees 1,478
Auditing fees 6,639
Legal fees 3,049
Portfolio accounting fees 34,616
Share registration costs 10,960
Printing and postage 19,378
Insurance premiums 1,194
Miscellaneous 3,404
TOTAL EXPENSES 874,817
Net investment income 9,754,483
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on
investments (521,627)
Net change in unrealized
depreciation of
investments (3,585,334)
Net realized and
unrealized loss on
investments (4,106,961)
Change in net assets
resulting from operations $ 5,647,522

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 9,754,483 $ 16,803,523
Net realized gain (loss) on
investments ($(521,627)
and $1,457,218,
respectively, as computed
for federal tax purposes) (521,627) 1,535,155
Net change in unrealized
depreciation (3,585,334) (13,361,235)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 5,647,522 4,977,443
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (17,122,309) (4,060,123)
Distributions from net
realized gains (1,467,973) (1,101,291)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (18,590,282) (5,161,414)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 103,478,193 140,016,075
Net asset value of shares
issued to shareholders in
payment of
distributions declared 18,581,140 5,161,412
Cost of shares redeemed (89,890,998) (88,866,908)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 32,168,335 56,310,579
Change in net assets 19,225,575 56,126,608
NET ASSETS:
Beginning of period 212,290,236 156,163,628
End of period (including
undistributed net
investment income of
$9,503,610 and
$16,871,436, respectively) $ 231,515,811 $ 212,290,236

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1994 1
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.92 $10.95 $10.24 $ 9.79 $ 8.87 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.42 0.87 0.88 0.88 0.85 0.75
Net realized and
unrealized gain (loss) on
investments (0.14) (0.57) 0.48 0.45 0.89 (1.12)
TOTAL FROM INVESTMENT
OPERATIONS 0.28 0.30 1.36 1.33 1.74 (0.37)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.86) (0.26) (0.61) (0.88) (0.82) (0.75)
Distributions in excess of
net investment income 2 - - - - - (0.01)
Distributions from net
realized gain on
investments (0.07) (0.07) (0.04) - - -
TOTAL DISTRIBUTIONS (0.93) (0.33) (0.65) (0.88) (0.82) (0.76)
NET ASSET VALUE, END OF
PERIOD $10.27 $10.92 $10.95 $10.24 $ 9.79 $ 8.87
TOTAL RETURN 3 2.61% 2.70% 13.83% 14.31% 20.38% (3.73%)

RATIOS TO AVERAGE NET
ASSETS:
Expenses 4 0.79% 5 0.78% 0.89% 1.39% 4.20% 10.42% 5
Net investment income 4 8.81% 5 9.01% 8.61% 8.64% 5.87% (0.90)% 5
Expenses (after waivers/
reimbursements) 0.79% 5 0.78% 0.80% 0.80% 0.80% 0.41% 5
Net investment income
(after
waivers/reimbursements) 8.81% 5 9.01% 8.70% 9.23% 9.27% 9.11% 5
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $231,516 $212,290 $156,164 $66,043 $20,165 $1,457
Portfolio turnover 11% 27% 52% 51% 48% 18%

</TABLE>

1 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.

2 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.

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

4 During the period, certain fees were voluntarily waived or reimbursed. If such
waivers or reimbursements had not occurred, the ratios would have been as
indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 portfolios. The financial
statements included herein are only those of Federated High Income Bond 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 is to seek high current income.

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

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

RESTRICTED SECURITIES

Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Board of Trustees. The Fund will not incur any registration costs upon such
resales. Restricted securities are valued at amortized cost in accordance with
Rule 2a-7 under the Investment Company Act of 1940.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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,
1999 1998
<S> <C> <C>
Shares sold 9,716,305 12,858,666
Shares issued to
shareholders in payment of
distributions declared 1,803,983 469,646
Shares redeemed (8,425,858) (8,146,880)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 3,094,430 5,181,432

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 voluntary choose
to waive any portion of its fee. The Adviser can modify of terminate this
voluntary waiver at any time at its sole discretion.

ADMINISTRATIVE FEE

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

PORTFOLIO ACCOUNTING FEES

FServ maintains the Trust's accounting records for which it receives a fee. The
fee in based on the level of the Trust's average daily net assets for the
period, plus out of pocket expenses.

ORGANIZATIONAL EXPENSES

Organizational expenses and/or start-up administrative service expenses of
$47,820 were borne initially by the Adviser. The Fund has reimbursed the Adviser
for these expenses. These expenses have been deferred and were completely
amortized over the five-year period following the Fund's effective date.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1999, were as follows:

Purchases $ 46,690,759
Sales $ 24,217,360

YEAR 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

EDWARD L. FLAHERTY, JR., ESQ.

PETER E. MADDEN

JOHN E. MURRAY, JR., J.D., S.J.D.

WESLEY W. POSVAR

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

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

[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT

Federated High Income Bond Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 1999

[Graphic]
Federated
Federated High Income Bond Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916306
G00433-02 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated International
Equity Fund II.

The report covers the six-month period from January 1, 1999 through June 30,
1999. 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. 1 At the end of the
reporting period, the fund's $55-million portfolio was invested in 25 countries
across more than 150 stocks. The fund's largest positions were in Japan, which
represented 27.8% of the portfolio, and the United Kingdom, which represented
13.9% of the portfolio.

During the six-month reporting period, the fund produced a total return of
6.55%. 2 Contributing to the total return were distributions from capital gains
totaling $0.45 per share and a net asset value increase of $0.54.

Thank you for joining the growing number of shareholders who are participating
in the opportunities of international stocks through the diversification and
professional management of Federated International Equity Fund II.

As always, we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

August 15, 1999

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

2 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

We finally began to see investors focus again on emerging markets and Japan
after a notable period of underperformance. This turnaround was attributable to
investor optimism that the "Asian Crisis" is finally over. This rally, however,
came at the expense of the markets in western Europe. Concerns over economic
slowdown, a weak euro currency, and fund outflows were factors.

The year-to-date performance ended June 30, 1999 for the fund stood at 6.55%. 1
This return was greater than the 3.24% return of the Morgan Stanley Capital
International Europe, Australia, and Far East Index2 for
the same reporting period.

The fund's outperformance was mainly due to our investment discipline, which is
driven by security selection. We believe that careful security selection offers
the best potential for superior long-term investment returns. We are looking for
well positioned companies with strong bottom line growth, which are trading at
reasonable valuations. To this end, the fund was well positioned when the
Japanese equity market began to rally. Moreover, positions in the
telecommunications and media sectors in western Europe continued to pay
dividends.

Finally, some of our top holdings include the following.

Our position in SOFTBANK, a leading Japanese based software and media company,
holds great potential given the likely turnaround in the Japanese economy.

In addition, NORTEL NETWORKS CORP., a leading provider of global high-capacity
data networks for telephone and the internet, has done exceptionally well. The
company is well positioned to take advantage of the growth in telephone,
internet protocol, and wireline and wireless networking worldwide.

1 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.

2 The Morgan Stanley Capital International Europe, Australia, and Far East Index
is a market capitalization-weighted foreign securities index widely used to
measure the performance of the European, Australian, New Zealand, and Far
Eastern stock markets. This index is unmanaged, and investments cannot be made
in an index.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-97.5%
AUSTRALIA-1.9%
BANKING-0.5%
38,000 Australia & New Zealand Banking Group Ltd., Melbourne $ 279,057
BROADCASTING & PUBLISHING-0.5%
44,697 Publishing and Broadcasting Ltd. 294,583
TELECOMMUNICATIONS-0.9%
217,041 1 Cable & Wireless Optus Ltd. 493,554
TOTAL AUSTRALIA 1,067,194
BELGIUM-1.1%
TELECOMMUNICATIONS-1.1%
7,650 1 Global TeleSystems Group, Inc. 619,650
196 Telinfo SA 2
TOTAL 619,652
BRAZIL-1.4%
TELECOMMUNICATIONS-1.4%
16,700 Tele Norte Leste Participacoes SA, ADR 309,994
18,550 Telesp Celular Participacoes SA, ADR 496,213
TOTAL 806,207
CANADA-7.5%
BEVERAGE & TOBACCO-0.4%
13,000 Molson Co. Ltd., Class A 235,722
ELECTRICAL & ELECTRONICS-1.4%
6,750 Nortel Networks Corp. 577,589
9,800 1 Research in Motion Ltd. 196,666
TOTAL 774,255
ELECTRONIC COMPONENTS, INSTRUMENTS-1.0%
13,300 1 Celestica, Inc. 576,056
FOREST PRODUCTS & PAPER-1.0%
74,000 1 International Forest Products Ltd., Class A 281,426
42,200 Nexfor, Inc. 260,795
TOTAL 542,221
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
CANADA-continued
HEALTH & PERSONAL CARE-1.1%
12,728 1 TLC The Laser Center, Inc. $ 605,990
LEISURE & TOURISM-0.6%
7,500 1 Four Seasons Hotels, Inc. 327,504
TELECOMMUNICATIONS-2.0%
12,600 Teleglobe, Inc. 372,652
42,000 1 Telesystem International Wireless, Inc. 762,988
TOTAL 1,135,640
TOTAL CANADA 4,197,388
DENMARK-0.4%
BUSINESS & PUBLIC SERVICES-0.4%
2,500 1 Falck A/S 199,315
FINLAND-1.1%
AUTOMOBILE-0.4%
6,650 Nokian Renkaat 205,655
BANKING-0.4%
47,000 Merita Ltd., Class A 266,959
LEISURE & TOURISM-0.3%
20,000 1 Rapala Normark Corp. 141,226
TOTAL FINLAND 613,840
FRANCE-11.8%
AEROSPACE & MILITARY TECHNOLOGY-1.0%
15,500 Thompson CSF 538,465
BANKING-0.9%
3,946 Dexia France 527,992
BEVERAGE & TOBACCO-1.0%
3,900 Pernod-Ricard 261,321
16,000 Remy Cointreau SA 310,245
TOTAL 571,566
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
FRANCE-continued
BROADCASTING & PUBLISHING-1.6%
2,519 M6 Metropole Television $ 529,470
1,500 Societe Television Francaise 1 349,458
TOTAL 878,928
BUSINESS & PUBLIC SERVICES-2.4%
337,300 1 Eurotunnel SA 497,219
10,500 Vivendi 850,220
TOTAL 1,347,439
CONSTRUCTION & HOUSING-1.6%
3,397 Bouygues 897,511
3,397 Bouygues, Rights 9,035
TOTAL 906,546
DATA PROCESSING & REPRODUCTION-0.4%
24,750 Bull SA 212,783
ELECTRICAL & ELECTRONICS-1.1%
2,150 Alcatel 302,529
1,100 Labinal 291,195
TOTAL 593,724
HEALTH & PERSONAL CARE-0.6%
1,080 Essilor International 337,447
LEISURE & TOURISM-1.2%
2,600 Club Mediterranee 275,794
3,900 1 Infogrames Entertainment 251,270
1,990 Societe du Louvre 145,546
TOTAL 672,610
TOTAL FRANCE 6,587,500
GERMANY-7.0%
BROADCASTING & PUBLISHING-0.5%
4,192 1 Kinowelt Medien AG 304,653
BUSINESS & PUBLIC SERVICES-0.5%
1,210 Intershop Communications AG 291,251
CHEMICALS-0.5%
6,300 Bayer AG 262,372
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
GERMANY-continued
ELECTRICAL & ELECTRONICS-1.0%
6,900 Siemens AG $ 532,042
ELECTRONIC COMPONENTS, INSTRUMENTS-0.5%
5,328 SER Systeme AG 305,925
FINANCIAL SERVICES-0.4%
3,030 1 Consors Discount Broker AG 230,981
MULTI-INDUSTRY-1.6%
5,829 Mannesmann AG 870,078
TELECOMMUNICATIONS-1.8%
7,770 MobilCom AG 695,243
8,450 1 Telegate AG 287,453
TOTAL 982,696
WHOLESALE & INTERNATIONAL TRADE-0.2%
500 1 Medion AG 141,742
TOTAL GERMANY 3,921,740
GREECE-2.0%
BANKING-1.1%
4,890 Commercial Bank of Greece 349,252
8,400 Piraeus Bank SA 242,374
TOTAL 591,626
BROADCASTING & PUBLISHING-0.5%
10,200 Lambrakis Media Group 258,250
TELECOMMUNICATIONS-0.4%
13,460 Tiletypos SA 239,001
TOTAL GREECE 1,088,877
HONG KONG-2.2%
INSURANCE-0.1%
80,000 Pacific Century Insurance 64,754
MULTI-INDUSTRY-0.7%
266,000 Wheelock & Co. Ltd. 365,130
REAL ESTATE-0.1%
168,000 Midland Realty Holdings 24,252
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
HONG KONG-continued
TELECOMMUNICATIONS-1.3%
209,500 Smartone Telecommunications $ 745,263
TOTAL HONG KONG 1,199,399
INDONESIA-1.0%
BUILDING MATERIALS & COMPONENTS-0.6%
151,000 Semen Gresik 327,076
TELECOMMUNICATIONS-0.4%
126,000 Indosat 240,173
TOTAL INDONESIA 567,249
IRELAND-1.0%
HEALTH & PERSONAL CARE-0.9%
25,900 1 ICON PLC, ADR 508,287
TRANSPORTATION - AIRLINES-0.1%
1,000 1 Ryanair Holdings PLC, ADR 53,000
TOTAL IRELAND 561,287
ITALY-2.1%
AUTOMOBILE-0.5%
11,700 Pininfarina SPA 261,723
BROADCASTING & PUBLISHING-1.3%
87,825 Class Editori SPA 701,642
HEALTH & PERSONAL CARE-0.3%
11,600 Luxottica Group SPA, ADR 180,525
TOTAL ITALY 1,143,890
JAPAN-27.8%
APPLIANCES & HOUSEHOLD DURABLES-5.1%
9,800 Aiwa Co. Ltd. 324,047
11,000 Matsushita Kotobuk Electric 310,986
103,000 Sanyo Electric Co. 418,914
25,000 Sharp Corp. 295,528
13,600 Sony Corp. 1,467,141
TOTAL 2,816,616
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
JAPAN-continued
BROADCASTING & PUBLISHING-0.5%
6,000 Nippon Broadcasting System $ 297,594
BUILDING MATERIALS & COMPONENTS-0.9%
41,000 Inax Corp. 250,467
34,000 Sumitomo Forestry 264,760
TOTAL 515,227
BUSINESS & PUBLIC SERVICES-1.3%
10,400 Asatsu, Inc. 275,110
22,100 Capcom Co. Ltd. 468,600
TOTAL 743,710
DATA PROCESSING & REPRODUCTION-0.6%
16,000 Fujitsu Ltd. 322,063
ELECTRICAL & ELECTRONICS-1.3%
31,000 Hitachi Ltd. 290,857
35,000 NEC Corp. 435,439
TOTAL 726,296
ELECTRONIC COMPONENTS, INSTRUMENTS-6.6%
6,500 Advantest 714,640
2,000 Keyence Corp. 350,169
20,000 Nikon Corp. 327,354
22,000 Olympus Optical Co. 325,353
5,000 Rohm Co. 783,252
16,300 Square Company Ltd. 587,484
17,000 Taiyo Yuden Co. 279,094
4,300 Union Tool 319,914
TOTAL 3,687,260
FINANCIAL SERVICES-1.7%
8,100 Mycal Card, Inc. 368,273
49,000 Nikko Securities Co. Ltd. 316,351
112,000 Wako Securities Co. Ltd. 248,128
TOTAL 932,752
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
JAPAN-continued
FOOD & HOUSEHOLD PRODUCTS-0.9%
11,000 Kao Corp. $ 309,168
14,000 Tenma 183,087
TOTAL 492,255
HEALTH & PERSONAL CARE-1.0%
11,000 Kyorin Pharmaceutical Co. 273,704
6,000 Takeda Chemical Industries 278,251
TOTAL 551,955
INDUSTRIAL COMPONENTS-0.9%
72,000 Furukawa Electric 330,330
26,000 Nippon Conlux Co. Ltd. 139,919
TOTAL 470,249
LEISURE & TOURISM-1.2%
7,900 Enix Corp. 344,813
12,500 Namco 335,827
TOTAL 680,640
MACHINERY & ENGINEERING-1.8%
23,000 Ebara Corp. 273,597
18,000 Fujitec Co. 170,670
26,600 Shinkawa 576,110
TOTAL 1,020,377
MERCHANDISING-1.9%
6,100 Paris Miki, Inc. 332,810
12,500 Shimachu Co. 276,928
5,300 Shimamura Co. Ltd. 449,078
TOTAL 1,058,816
RECREATION, OTHER CONSUMER GOODS-0.5%
37,000 Casio Computer Co. 281,392
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
JAPAN-continued
WHOLESALE & INTERNATIONAL TRADE-1.6%
9,000 Paltek Corp. $ 354,137
2,600 Softbank Corp. 526,792
TOTAL 880,929
TOTAL JAPAN 15,478,131
LUXEMBOURG-1.0%
BROADCASTING & PUBLISHING-1.0%
3,737 1 Societe Europeenne des Satellites 542,209
MEXICO-0.6%
BROADCASTING & PUBLISHING-0.6%
7,000 Grupo Televisa SA, GDR 313,688
NETHERLANDS-5.0%
BUSINESS & PUBLIC SERVICES-0.9%
21,000 TNT Post Group NV 501,148
ELECTRONIC COMPONENTS, INSTRUMENTS-0.5%
5,100 1 ASM Lithography Holding NV, ADR 302,813
FINANCIAL SERVICES-1.0%
9,850 ING Groep NV 533,078
FOOD & HOUSEHOLD PRODUCTS-0.7%
7,400 Benckiser NV 394,764
TELECOMMUNICATIONS-1.9%
6,963 1 Equant NV, ADR 655,392
7,367 1 United Pan-Europe Communications NV, ADR 407,027
TOTAL 1,062,419
TOTAL NETHERLANDS 2,794,222
NORWAY-0.1%
BROADCASTING & PUBLISHING-0.1%
4,531 Schibsted ASA 50,884
POLAND-0.8%
MULTI-INDUSTRY-0.8%
30,100 Elektrim Spolka Akcyina SA 425,455
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
SINGAPORE-1.9%
BEVERAGE & TOBACCO-0.5%
62,000 Fraser and Neave Ltd. $ 275,029
BROADCASTING & PUBLISHING-0.6%
19,000 Singapore Press Holdings Ltd. 323,737
ELECTRONIC COMPONENTS, INSTRUMENTS-0.5%
180,000 Clipsal Industries Ltd. 279,000
FINANCIAL SERVICES-0.3%
214,300 Kim Eng Holdings Ltd. 200,198
TOTAL SINGAPORE 1,077,964
SWEDEN-1.8%
DATA PROCESSING & REPRODUCTION-1.0%
26,102 1 Modern Times Group MTB AB, Class B 567,301
HEALTH & PERSONAL CARE-0.1%
4,300 Gambro AB, Class B 43,309
TELECOMMUNICATIONS-0.7%
148,591 1 Societe Europeenne de Communication SA, Class B, ADR 411,343
TOTAL SWEDEN 1,021,953
SWITZERLAND-1.5%
BUSINESS & PUBLIC SERVICES-1.0%
995 Publicitas Holding SA 543,856
INSURANCE-0.4%
365 Zurich Allied AG 207,485
RECREATION, OTHER CONSUMER GOODS-0.1%
620 The Swatch Group AG 88,509
TOTAL SWITZERLAND 839,850
THAILAND-1.3%
BROADCASTING & PUBLISHING-0.5%
44,000 BEC World Public Company Ltd. 272,054
ELECTRONIC COMPONENTS, INSTRUMENTS-0.4%
69,600 Hana Microelectronics Co. Ltd. 207,620
TRANSPORTATION - AIRLINES-0.4%
130,600 Thai Airways International Ltd. 246,148
TOTAL THAILAND 725,822
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
UNITED KINGDOM-13.9%
BANKING-1.0%
8,750 Barclays PLC $ 254,466
15,000 National Westminster Bank PLC, London 318,008
TOTAL 572,474
BEVERAGE & TOBACCO-0.5%
26,500 Allied Domecq PLC 254,801
BUSINESS & PUBLIC SERVICES-3.1%
7,000 1 Eidos PLC 231,157
31,600 1 Future Networks PLC 209,200
15,250 Logica PLC 160,404
38,100 Reuters Group PLC 501,160
1,200 Sage Group PLC 42,653
45,000 Securicor PLC 396,151
21,490 Sema Group PLC 206,798
TOTAL 1,747,523
ELECTRONIC COMPONENTS, INSTRUMENTS-1.0%
10,600 1 ARM Holdings PLC, ADR 369,675
17,173 1 Baltimore Technologies PLC 196,250
TOTAL 565,925
HEALTH & PERSONAL CARE-1.5%
43,500 Shire Pharmaceuticals Group PLC 362,719
38,599 Smithkline Beecham Corp. 501,944
TOTAL 864,663
INSURANCE-1.4%
51,700 Prudential Corp. PLC 761,951
MERCHANDISING-1.5%
181,600 Electronics Boutique PLC 266,210
56,500 Sainsbury (J) PLC 356,233
22,400 Smith, W.H. Group PLC 215,202
TOTAL 837,645
TELECOMMUNICATIONS-3.9%
19,200 British Telecommunication PLC 321,404
71,410 1 Cable & Wireless Communications PLC 686,616
13,888 1 COLT Telecom Group PLC 290,712
<CAPTION>
VALUE IN
SHARES U.S. DOLLARS
<C> <S> <C>
COMMON STOCKS-continued
UNITED KINGDOM-continued
20,639 1 Energis PLC, ADR $ 493,189
79,800 1 TeleWest Communications PLC 357,543
TOTAL 2,149,464
TOTAL UNITED KINGDOM 7,754,446
UNITED STATES-1.3%
BROADCASTING & PUBLISHING-0.5%
2,995 1 NTL, Inc. 258,132
ELECTRONIC COMPONENTS, INSTRUMENTS-0.8%
2,840 1 Uniphase Corp. 471,440
TOTAL UNITED STATES 729,572
TOTAL COMMON STOCKS (IDENTIFIED COST $47,884,209) 54,327,734
PREFERRED STOCKS-1.9%
AUSTRALIA-1.0%
LEISURE & TOURISM-1.0%
367,600 Village Roadshow Ltd. 549,184
BRAZIL-0.4%
METALS - STEEL-0.4%
62,400 Usinas Siderurgicas de Minas Gerais SA, Preference 210,056
GERMANY-0.5%
HEALTH & PERSONAL CARE-0.5%
430 Wella AG, Vorzugsaktien 312,500
TOTAL PREFERRED STOCKS (IDENTIFIED COST $1,048,314) 1,071,740
TOTAL INVESTMENTS (IDENTIFIED COST $48,932,523) 2 $ 55,399,474

</TABLE>

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $48,932,523. The
net unrealized appreciation of investments on a federal tax basis amounts to
$6,466,951 which is comprised of $7,898,318 appreciation and $1,431,367
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($55,711,633) at June 30, 1999.

The following acronyms are used throughout this portfolio:

ADR -American Depositary Receipt
AG -Aktiengsellschaft
GDR -Global Depositary Receipt
SA -Support Agreement
SPA -Standby Purchase Agreement

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$48,932,523) $ 55,399,474
Cash denominated in
foreign currencies 218,833
Income receivable 119,558
Receivable for investments
sold 2,322,707
Deferred organizational
costs 3,391
TOTAL ASSETS 58,063,963
LIABILITIES:
Payable for investments
purchased $ 2,300,332
Payable for taxes withheld 8,034
Accrued expenses 43,964
TOTAL LIABILITIES 2,352,330
Net assets for 3,497,632
shares outstanding $ 55,711,633
NET ASSETS CONSIST OF:
Paid in capital $ 41,573,858
Net unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency 6,469,551
Accumulated net realized
gain on investments and
foreign currency
transactions 7,695,871
Accumulated net investment
loss (27,647)
TOTAL NET ASSETS $ 55,711,633
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$55,711,633 / 3,497,632
shares outstanding $15.93

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $55,053) $ 395,404
Interest 19,352
TOTAL INCOME 414,756
EXPENSES:
Investment advisory fee $ 270,737
Administrative personnel
and services fee 61,986
Custodian fees 51,557
Transfer and dividend
disbursing agent fees and
expenses 14,223
Directors'/Trustees' fees 1,137
Auditing fees 6,774
Legal fees 1,295
Portfolio accounting fees 29,215
Share registration costs 427
Printing and postage 14,737
Insurance premiums 754
Miscellaneous 3,967
TOTAL EXPENSES 456,809
WAIVER:
Waiver of investment
advisory fee (117,195)
Net expenses 339,614
Net investment income 75,142
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN CURRENCY:
Net realized gain on
investments and foreign
currency transactions 7,737,017
Net change in unrealized
appreciation
(depreciation) of
investments and
translation of assets and
liabilities in foreign
currency (4,401,058)
Net realized and
unrealized gain (loss) on
investments and
foreign currency 3,335,959
Change in net assets
resulting from operations $ 3,411,101

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 75,142 $ 88,913
Net realized gain on investments and foreign currency transactions ($7,737,017
and $1,540,107, respectively, as computed for federal
tax purposes) 7,737,017 1,278,750
Net change in unrealized
appreciation/depreciation
of investments
and translation of assets
and liabilities in foreign
currency (4,401,058) 7,701,983
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 3,411,101 9,069,646
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
realized gains on
investments and foreign
currency transactions (1,537,970) (52,079)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 4,317,976 12,872,900
Net asset value of shares
issued to shareholders in
payment of
distributions declared 1,537,968 52,079
Cost of shares redeemed (4,325,800) (6,209,145)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 1,530,144 6,715,834
Change in net assets 3,403,275 15,733,401
NET ASSETS:
Beginning of period 52,308,358 36,574,957
End of period $ 55,711,633 $ 52,308,358

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.39 $12.27 $11.16 $10.35 $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.02 0.03 2 0.07 0.11 2 0.07
Net realized and
unrealized gain on
investments and foreign
currency transactions 0.97 3.11 1.05 0.75 0.28
TOTAL FROM INVESTMENT
OPERATIONS 0.99 3.14 1.12 0.86 0.35
LESS DISTRIBUTIONS:
Distributions from net
investment income - - (0.01) (0.05) -
Distributions from net
realized gain on
investments and foreign
currency transactions (0.45) (0.02) - - -
TOTAL DISTRIBUTIONS (0.45) (0.02) (0.01) (0.05) -
NET ASSET VALUE, END OF
PERIOD $15.93 $15.39 $12.27 $11.16 $10.35
TOTAL RETURN 3 6.55% 25.57% 10.08% 8.32% 3.50%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 4 1.68% 5 1.72% 2.21% 4.30% 12.64% 5
Net investment income 4 (0.15%) 5 (0.28%) (0.22%) (2.16%) (9.79%) 5
Expenses (after waivers) 1.25% 5 1.25% 1.23% 1.25% 1.22% 5
Net investment income
(after waivers) 0.28% 5 0.19% 0.76% 0.89% 1.63% 5
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $55,712 $52,308 $36,575 $17,752 $4,760
Portfolio turnover 174% 247% 179% 103% 34%

</TABLE>

1 Reflects operations for the period from May 8, 1995 (date of initial public
investment) to December 31, 1995.

2 Per share information is based on average shares outstanding.

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

4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

5 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 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.

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 60 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

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

However, federal taxes may be imposed on the Fund upon the disposition of
certain investment 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.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

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, 1999, the Fund had no outstanding foreign currency commitments.

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.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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,
1999 1998
<S> <C> <C>
Shares sold 272,082 852,526
Shares issued to
shareholders in payment of
distributions declared 99,868 3,497
Shares redeemed (272,207) (438,984)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 99,743 417,039

</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Global Investment Management 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. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.

ADMINISTRATIVE FEE

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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

PORTFOLIO ACCOUNTING FEES

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

ORGANIZATIONAL EXPENSES

Organizational expenses of $15,465 were borne initially by the Adviser. The Fund
reimbursed the Adviser for these expenses. These expenses have been deferred and
are being amortized over the five-year period following the Fund's effective
date. For the period ended June 30, 1999, the Fund amortized $2,208 of
organizational expenses.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1999, were as follows:

Purchases $ 92,925,228
Sales $ 92,178,494

RISKS OF FOREIGN INVESTING

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.

YEAR 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

EDWARD L. FLAHERTY, JR., ESQ.

PETER E. MADDEN

JOHN E. MURRAY, JR., J.D., S.J.D.

WESLEY W. POSVAR

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT

Federated International Equity Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 1999

[Graphic]
Federated
Federated International Equity Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916603
G00433-06 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the Semi-Annual Report to Shareholders for Federated
Prime Money Fund II.

This high-quality money market mutual fund keeps your ready cash pursuing daily
income while keeping your principal stable 1 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 (63.7%), variable rate
notes (12.9%), loan participation notes (9.2%), short-term notes (5.4%),
repurchase agreements (5.3%), municipal bonds (1.3%), and certificates of
deposit (2.3%).

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, 1999, net assets reached $132.8 million.

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

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1999

1 An investment in money market funds are neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the fund.

Investment Review

Federated Prime Money Fund II invests in a portfolio of high quality fixed
income securities maturing in 397 days 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 instruments and repurchase
agreements.

During the first half of 1999, we started to see the Federal Reserve Board
unwind the 75 basis points of easing that occurred at the end of 1998. The
combination of strong domestic growth, tight labor markets and rising labor
costs led to a 25 basis point increase in the Federal Funds rate on June 30,
1999. Continued reports of strong U.S. growth as well as signs of economic
acceleration outside of the U.S. could put continued pressure on bond yields.

Market interest rates should continue to trade up throughout the second half of
1999. The 30-day commercial paper rate began 1999 at 4.90% and traded as low as
4.78% on April 30, 1999. Thirty-day commercial paper ended the period at 5.14%
on June 30, 1999. Ninety-day commercial paper rates were 4.85% on January 1, and
ended at a 5.18% on June 30, 1999.

The target average maturity range for Federated Prime Money Market Fund II
remained in the 45-55 day target range for the entire reporting period. 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, 1999, the net assets of the
fund increased from $103.1 to $132.8 million while the 7- day net yield
decreased from 4.53% to 4.38%. 1 The effective average maturity of the fund on
June 30, 1999, was 49 days.

1 Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings. Performance information does not reflect
the charges or expenses of a variable annuity or variable life insurance
contract.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES-5.4%
FINANCE-AUTOMOTIVE-0.2%
$ 196,647 Honda Auto Receivables
1999-1 Owner Trust, Class
A-1, 4.974%, 2/15/2000 $ 196,647
FINANCE-COMMERCIAL-3.4%
4,500,000 Beta Finance, Inc., 5.010%
- 5.200%, 11/25/2000 -
5/4/2000 4,499,921
FINANCE-EQUIPMENT-1.4%
88,025 Copelco Capital Funding
Trust 1998-A, Class A-1,
5.680%, 8/15/1999 88,025
908,972 Green Tree Lease Finance
LLC 1998-1, Class A1,
5.201%, 1/20/2000 908,972
836,871 Navistar Financial 1999-A
Owner Trust, Class A-1,
5.002%, 6/15/2000 836,871
TOTAL 1,833,868
INSURANCE-0.4%
589,992 Americredit Automobile
Receivables Trust 1999-A,
Class A1, (Insured by FSA),
4.980%, 3/12/2000 589,992
TOTAL SHORT-TERM NOTES 7,120,428
CERTIFICATES OF DEPOSIT-
2.3%
BANKING-2.3%
1,000,000 Canadian Imperial Bank of
Commerce, 5.030%,
1/27/2000 999,832
1,000,000 Commerzbank AG, Frankfurt,
5.250%, 3/9/2000 999,884
1,000,000 UBS AG, 4.939%, 1/13/2000 1,000,407
TOTAL CERTIFICATES OF
DEPOSIT 3,000,123
COMMERCIAL PAPER-63.7%
BANKING-16.4%
5,000,000 Abbey National N.A. Corp.,
(Guaranteed by Abbey
National Bank PLC,
London), 5.139%,
11/26/1999 4,898,250
6,000,000 Fountain Square Commercial
Funding Corp., (Fifth
Third Bank, Cincinnati
Support Agreement), 5.091%
- 5.169%, 7/14/1999 -
9/20/1999 5,979,371
5,000,000 PNC Funding Corp.,
(Guaranteed by PNC Bank
Corp.), 5.010%, 8/4/1999 4,976,531
4,000,000 Three Rivers Funding
Corp., 5.030%, 7/12/1999 3,993,877
2,000,000 Wood Street Funding Corp.,
4.997%, 8/25/1999 1,984,906
TOTAL 21,832,935
BROKERAGE-1.5%
2,000,000 Salomon Smith Barney
Holdings, Inc., 4.879%,
7/13/1999 1,996,787
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMERCIAL PAPER-continued
CHEMICALS-1.9%
$ 1,270,000 IMC Global, Inc., 5.115%,
8/17/1999 $ 1,261,627
1,200,000 Rohm & Haas Co., 4.976%,
7/1/1999 1,200,000
TOTAL 2,461,627
CONTAINER/PACKAGING-1.0%
1,300,000 Crown Cork & Seal Co.,
Inc., 5.181% - 5.317%,
8/3/1999 1,293,836
FINANCE-AUTOMOTIVE-4.8%
5,000,000 Daimler Chrysler North
America Holding Corp.,
4.901%, 8/13/1999 4,971,094
1,500,000 General Motors Acceptance
Corp., 5.507% - 5.542%,
1/26/2000 - 1/31/2000 1,452,666
TOTAL 6,423,760
FINANCE-COMMERCIAL-27.4%
5,000,000 Asset Securitization
Cooperative Corp., 4.913%,
7/15/1999 4,990,511
2,000,000 Beta Finance, Inc.,
4.903%, 8/3/1999 1,991,228
5,000,000 Corporate Asset Funding
Co., Inc. (CAFCO), 4.967%,
8/2/1999 4,978,089
500,000 GE Capital International
Funding, Inc., (Guaranteed
by General Electric
Capital Corp.), 5.463%,
1/24/2000 484,791
3,000,000 General Electric Capital
Services, 4.952%,
7/26/1999 2,989,750
6,000,000 Greenwich Funding Corp.,
4.928% - 5.119%, 7/8/1999 -
2/1/2000 5,963,694
5,000,000 PREFCO-Preferred
Receivables Funding Co.,
4.971%, 8/2/1999 4,978,089
5,000,000 Receivables Capital Corp.,
4.891% - 5.019%, 7/7/1999 -
8/6/1999 4,983,440
5,000,000 Sheffield Receivables
Corp., 4.950%, 7/7/1999 4,995,892
TOTAL 36,355,484
FINANCE-EQUIPMENT-0.7%
1,000,000 Comdisco, Inc., 5.165%,
7/26/1999 996,438
FINANCE-RETAIL-9.0%
6,000,000 Diageo Capital PLC,
(Guaranteed by Diageo
PLC), 4.901%, 8/20/1999 5,959,833
6,000,000 New Center Asset Trust,
A1/P1 Series, 4.908%,
8/9/1999 5,968,605
TOTAL 11,928,438
RETAIL-1.0%
1,320,000 Safeway, Inc., 5.041%,
7/16/1999 1,317,261
TOTAL COMMERCIAL PAPER 84,606,566
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LOAN PARTICIPATION-9.2%
BROKERAGE-3.8%
$ 5,000,000 Goldman Sachs Group, Inc.,
5.023%, 8/2/1999 $ 5,000,000
ELECTRICAL EQUIPMENT-0.4%
600,000 Mt. Vernon Phenol Plant
Partnership, (Guaranteed
by General Electric Co.),
5.050%, 5/17/2000 600,000
FINANCE-AUTOMOTIVE-3.8%
5,000,000 General Motors Acceptance
Corp., Mortgage of PA,
(Guaranteed by General
Motors Acceptance Corp.),
4.983%, 7/1/1999 5,000,000
INSURANCE-1.2%
1,600,000 Marsh & McLennan Co., Inc.,
4.960%, 7/23/1999 1,600,000
TOTAL LOAN PARTICIPATION 12,200,000
MUNICIPALS-1.3%
MUNICIPAL-1.3%
1,800,000 Bergen County, NJ
Improvement Authority,
Bergen Regional Medical
Center
Project (Series 1999-A),
(Guaranteed by Bergen
County, NJ Improvement
Authority), 5.330%,
3/16/2000 1,800,000
NOTES - VARIABLE-12.9% 2
BANKING-6.6%
135,000 Alabama State IDA,
(Wellborn Cabinet, Inc.),
Tax Revenue Bonds,
(Amsouth
Bank N.A., Birmingham
LOC), 5.210%, 7/1/1999 135,000
800,000 1 Bankers Trust Corp.,
5.070%, 7/1/1999 800,000
6,000 Capital One Funding Corp.,
Series 1995-A, (Bank One,
Indiana, N.A. LOC),
5.180%, 7/1/1999 6,000
170,000 Denver Urban Renewal
Authority, (Series 1992-
B), (Paribas, Paris LOC),
5.230%, 7/1/1999 170,000
345,000 Edgefield County, SC,
Series 1997 (Bondex Inc.
Project), (HSBC Bank USA
LOC), 5.218%, 7/1/1999 345,000
180,000 Franklin County, OH,
Edison Welding, Series
1995, (Huntington National
Bank, Columbus, OH LOC),
5.180%, 7/1/1999 180,000
400,000 La-Man Corp., (SouthTrust
Bank of Alabama,
Birmingham LOC), 5.310%,
7/2/1999 400,000
1,419,049 1 Liquid Asset Backed
Securities Trust, Series
1997-1, (Westdeutsche
Landesbank Girozentrale
Swap Agreement), 4.988%,
7/15/1999 1,419,049
550,000 Lynn Haven, FL, Taxable Revenue Bond (Series 1998- B), (Bank
One, Ohio, N.A.
LOC), 5.380%, 7/1/1999 550,000
555,000 Madison, WI Community
Development Authority,
Series 1997-B Hamilton
Point Apts., (Bank One,
Wisconsin, N.A. LOC),
5.280%, 7/1/1999 555,000
880,000 Maryland Economic
Development Corp.,
(Allfirst LOC), 5.190%,
7/2/1999 880,000
198,000 Maryland State IDFA, Human
Genome, Series 1994,
(Allfirst LOC), 5.110%,
7/5/1999 198,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
NOTES - VARIABLE-continued
2
BANKING-CONTINUED
$ 230,000 Mississippi Business
Finance Corp., Metalloy
Project, (Comerica Bank,
Detroit, MI LOC), 4.950%,
7/1/1999 $ 230,000
265,773 1 Rabobank Optional
Redemption Trust, Series
1997-101, 5.000%,
7/20/1999 265,773
350,000 Roby Company Ltd.
Partnership, (Huntington
National Bank, Columbus,
OH LOC), 5.180%, 7/1/1999 350,000
1,000,000 Societe Generale, Paris,
4.993%, 8/11/1999 999,926
1,200,000 Trap Rock Industries,
Inc., Series 1997, (First
Union National Bank,
Charlotte, NC LOC),
5.300%, 7/7/1999 1,200,000
112,000 Vista Funding Corp.,
Series 1994-A, (Fifth
Third Bank of Northwestern
OH LOC), 5.180%, 7/1/1999 112,000
TOTAL 8,795,748
INSURANCE-6.3%
1,000,000 Allstate Life Insurance
Co., 5.040%, 7/1/1999 1,000,000
1,000,000 First Allmerica Financial
Life Insurance Co.,
5.080%, 8/3/1999 1,000,000
1,000,000 GE Life and Annuity
Assurance Co., 5.110%,
9/1/1999 1,000,000
2,000,000 General American Life
Insurance Co., 5.240%,
7/21/1999 2,000,000
1,000,000 Jackson National Life
Insurance Co., 5.108%,
8/1/1999 1,000,000
1,000,000 Jackson National Life
Insurance Co., 5.120%,
7/22/1999 1,000,000
405,288 1 Liquid Asset Backed
Securities Trust, Series
1997-3 Senior Notes,
(Guaranteed
by AMBAC), 4.970%,
9/28/1999 405,288
1,000,000 Travelers Insurance
Company, 5.090%, 7/1/1999 1,000,000
TOTAL 8,405,288
TOTAL NOTES - VARIABLE 17,201,036
REPURCHASE AGREEMENTS-5.3%
3
1,600,000 ABN AMRO, Inc., 5.125%,
dated 6/30/1999, due
7/1/1999 1,600,000
2,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 4.800%, dated
6/30/1999,
due 7/1/1999 2,000,000
3,497,000 Bank of America, Inc.,
5.220%, dated 6/30/1999,
due 7/1/1999 3,497,000
TOTAL REPURCHASE
AGREEMENTS 7,097,000
TOTAL INVESTMENTS (AT
AMORTIZED COST) 4 $ 133,025,153
</TABLE>

2 Floating rate note with current rate and next reset date shown.

3 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.

4 Also represents cost for federal tax purposes.

Note: The categories of investments are shown as a percentage of net assets
($132,845,262) at June 30, 1999.

The following acronyms are used throughout this portfolio:

AG -Aktiengesellschaft
AMBAC -American Municipal Bond Assurance Corporation FSA -Financial Security
Assurance IDA -Industrial Development Authority IDFA -Industrial Development
Finance Authority LLC -Limited Liability Corporation LOC -Letter of Credit PLC
- -Public Limited Company

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at amortized
cost and value $ 133,025,153
Income receivable 345,420
TOTAL ASSETS 133,370,573
LIABILITIES:
Income distribution
payable $ 471,406
Payable to Bank 21,897
Accrued expenses 32,008
TOTAL LIABILITIES 525,311
Net assets for 132,845,262
shares outstanding $ 132,845,262
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$132,845,262 / 132,845,262
shares outstanding $1.00
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 3,070,442
EXPENSES:
Investment advisory fee $ 302,812
Administrative personnel
and services fee 62,149
Custodian fees 5,546
Transfer and dividend
disbursing agent fees and
expenses 10,114
Directors'/Trustees' fees 1,069
Auditing fees 6,421
Legal fees 3,841
Portfolio accounting fees 19,112
Share registration costs 7,947
Printing and postage 4,288
Insurance premiums 3,683
Miscellaneous 40,088
TOTAL EXPENSES 467,070
Net investment income $ 2,603,372
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,603,372 $ 4,010,679
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (2,603,372) (4,010,679)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 158,445,758 316,636,277
Net asset value of shares
issued to shareholders in
payment of
distributions declared 2,129,557 4,013,066
Cost of shares redeemed (130,826,635) (277,212,104)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 29,748,680 43,437,239
Change in net assets 29,748,680 43,437,239
NET ASSETS:
Beginning of period 103,096,582 59,659,343
End of period $ 132,845,262 $ 103,096,582
</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1994 1
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.05 0.05 0.05 0.01
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.05) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
TOTAL RETURN 2 2.15% 4.92% 4.93% 4.75% 5.20% 0.50%

RATIOS TO AVERAGE NET ASSETS:
Expenses 3 0.77% 4 0.81% 1.00% 1.37% 3.49% 72.64% 4
Net investment income 3 4.30% 4 4.79% 4.64% 4.11% 2.43% (67.58%)4
Expenses (after waivers) 0.77% 4 0.80% 0.80% 0.80% 0.80% 0.80% 4
Net investment income
(after waivers) 4.30% 4 4.80% 4.84% 4.68% 5.12% 4.26% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $132,845 $103,097 $59,659 $45,655 $17,838 $552
</TABLE>

1 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.

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

3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 portfolios. The financial
statements included herein are only those of Federated Prime Money Fund II (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to provide current income
consistent with stability of principal and liquidity.

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.

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

RESTRICTED SECURITIES

Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. 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.
Restricted securities are valued at amortized cost in accordance with Rule 2a-7
under the Investment Company Act of 1940.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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, 1999, capital paid-in aggregated $132,845,262.

Transactions in shares were as follows:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
Shares sold 158,445,758 316,636,277
Shares issued to
shareholders in payment of
distributions declared 2,129,557 4,013,066
Shares redeemed (130,826,635) (277,212,104)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 29,748,680 43,437,239
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company 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

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

YEAR 2000

Trustees

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager

Federated Prime Money Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1999

SEMI-ANNUAL REPORT

[Graphic]
Federated
Federated Prime Money Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916504
G00433-05 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the first Semi-Annual Report for Federated Small Cap
Strategies Fund II. This report covers the period from May 28, 1999, the date of
inception, through June 30, 1999. 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 financial statements.

Federated Small Cap Strategies Fund II is managed to offer shareholders
significant opportunities for long-term growth through a highly diversified
portfolio of small capitalization stocks. 1 These stocks, issued by small cap
companies, offer the potential for high returns over time in exchange for a
higher level of risk as compared to stocks issued by large, well-established
companies. To help reduce risk and seek opportunities in this dynamic market,
the fund's portfolio is carefully selected and broadly diversified. At the end
of the reporting period, its holdings included more than 150 stocks spread
across 11 industry sectors.

For its initial period of operation, the fund produced a total return of
6.70% through an increase in net asset value. 2

Thank you for participating in the long-term growth of up-and-coming small cap
companies through Federated Small Cap Strategies Fund II. As always, we welcome
your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1999

1 Small cap stocks have historically experienced greater volatility than
average.

2 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 or expenses of a
variable annuity or variable life insurance contract.

Investment Review

Federated Small Cap Strategies Fund II has a limited performance history because
the fund was launched only one month ago on May 28, 1999. The fund typically
targets smaller companies that fall within the market capitalization range of
the Standard & Poor's 600 Small Cap Index 1 ("S&P 600") ($24 million to $3.8
billion as of reporting period end). Federated Investment Management Company,
the fund's adviser, uses a combination of quantitative models and fundamental
analysis in the process of selecting stocks for the fund. The management style
can best be described as a blend of value and growth, also known as a core
style. The objective is to provide capital appreciation by investing in
companies that offer growth prospects or in companies whose stock is
undervalued.

Since the fund's inception date of May 28, 1999, the overall equity market was
strong. The S&P 600 was up 6.5% and the Russell 2000 Small Cap Index 2 was up
5.9%. The fund was up 6.7% during the second quarter, outperforming the small
cap indices.

Even with the recent strong performance of small cap stocks, especially small
cap growth stocks, the market remains very attractive for long term investors.
Two powerful longer term drivers of performance are (1) valuation levels of
small company stocks are extremely attractive versus larger capitalization
stocks, and (2) earnings growth in the small capitalization market is expected
to outpace larger capitalization stocks over the next 3-5 years. Our analysis of
the smaller capitalization market reveals numerous opportunities to find
companies with rapidly growing revenues and earnings at attractive prices.
Companies in the small cap sector still appear very reasonably priced relative
to large cap companies.

We currently have overweights in the Basic Materials and Consumer Staples
sectors and underweights in Health Care and Utilities. In our two largest
sectors, Technology and Consumer Cyclicals, we are slightly underweight. Our
objective is to remain fully invested in the best 3% of small companies we can
find across a universe of over 5000 small companies in the U.S. We are
maintaining our cash position below 3%, so that effectively, the fund is fully
invested. Under low inflation and moderate economic growth conditions, we expect
small capitalization stocks to do very well.

Characteristics of this fund which make it an ideal investment vehicle for this
market are: (1) sector discipline-we stay invested in all 11 economic sectors at
all times, with appropriate overweights and underweights (one half to two times
sector bands), and (2) small cap discipline-we have kept the median
capitalization of the fund below $1.0 billion, truly a small cap fund. Although
small cap equities may be more volatile than their larger cap counterparts,
history has shown them to be an excellent long term investment. Based on monthly
historical data from 1946 to 1998, given a 15- year holding period, small caps
outperformed large caps 79% of the time.

1 The Standard & Poor's 600 Small Cap Index is an unmanaged capitalization-
weighted index of stocks representing all major industries in the small cap
range of the U.S. stock market. Investment cannot be made in an index.

2 The Russell 2000 Index is a broadly diversified, non-managed index consisting
of approximately 2,000 small capitalization common stocks that can be used to
compare the total returns of funds whose portfolios are invested primarily in
small capitalization common stocks. Investment cannot be made in an index.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-98.0%
BASIC MATERIALS-5.8%
500 AK Steel Holding Corp. $ 11,250
500 1 ATMI, Inc. 14,875
700 Cambrex Corp. 18,375
400 Corn Products International, Inc. 12,174
1,000 1 Daisytek International Corp. 16,312
500 Lone Star Industries, Inc. 18,780
1,400 RPM, Inc. 19,862
TOTAL 111,628
CAPITAL GOODS-13.0%
700 AMETEK, Inc. 16,100
400 1 Allied Waste Industries, Inc. 7,900
600 Applied Power, Inc., Class A 16,388
300 Aptargroup, Inc. 9,000
300 Ballard Power Systems, Inc. 9,600
500 C&D Technologies, Inc. 15,313
400 Carlisle Cos., Inc. 19,250
600 1 Ducommun, Inc. 7,163
200 1 Dycom Industries, Inc. 11,200
100 1 Electro Scientific Industries, Inc. 4,178
1,000 Furon Co. 19,000
300 1 HADCO Corp. 11,925
400 Harman International Industries, Inc. 17,600
800 1 Newpark Resources, Inc. 7,100
400 1 Rayovac Corp. 9,075
400 1 SPS Technologies, Inc. 15,000
100 1 Sanmina Corp. 7,588
900 Spartech Corp. 28,461
500 1 Zebra Technologies Corp., Class A 19,219
TOTAL 251,060
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
COMMUNICATION-1.0%
200 1 Century Communications Corp., Class A $ 9,200
100 Clarent Corp. 1,500
200 1 Entercom Communication Corp. 8,550
TOTAL 19,250
CONSUMER CYCLICALS-19.0%
200 1 Action Performance Cos., Inc. 6,600
500 1 Acxiom Corp. 12,469
300 1 American Eagle Outfitters, Inc. 13,650
200 1 Black Box Corp. 10,025
800 Casey's General Stores, Inc. 12,000
100 1 Catalina Marketing Corp. 9,200
500 1 DeVRY, Inc. 11,188
300 1 Dura Automotive Systems, Inc. 9,975
400 1 Gentex Corp. 11,200
900 1 Helen of Troy Ltd. 16,144
300 Hughes Supply, Inc. 8,906
700 1 ITT Educational Services, Inc. 18,244
300 1 Linens 'N Things, Inc. 13,125
300 1 O'Reilly Automotive, Inc. 15,113
450 1 Pacific Sunwear of California 10,969
1,200 Pier 1 Imports, Inc. 13,500
600 1 ProBusiness Services, Inc. 21,525
400 1 Rent-A-Center, Inc. 9,600
300 Ryland Group, Inc. 8,906
500 Service Corp. International 9,625
1,100 1 Stamps.com, Inc. 19,250
700 1 Stanley Furniture Co., Inc. 15,750
500 Strayer Education, Inc. 15,344
500 1 Sylvan Learning Systems, Inc. 13,594
200 1 Timberland Co., Class A 13,613
400 1 Toll Brothers, Inc. 8,575
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
CONSUMER CYCLICALS-CONTINUED
500 Unifirst Corp. $ 9,185
900 Wolverine World Wide, Inc. 12,600
400 1 Zale Corp. 16,000
TOTAL 365,875
CONSUMER STAPLES-10.2%
1,000 1 Building One Services Corp. 13,875
200 1 Consolidated Graphics, Inc. 10,000
300 Earthgrains Co. 7,744
600 1 Interim Services, Inc. 12,375
300 1 J&J Snack Foods Corp. 7,200
500 1 Metamor Worldwide, Inc. 12,031
400 1 Mondavi Robert Corp., Class A 14,550
300 1 Patterson Dental Co. 10,425
1,100 Richfood Holdings, Inc. 19,388
600 Ruby Tuesday, Inc. 11,400
500 Ruddick Corp. 10,000
700 1 Smithfield Foods, Inc. 23,406
750 1 Tetra Tech, Inc. 12,375
200 1 Valassis Communications, Inc. 7,325
100 1 Whole Foods Market, Inc. 4,806
700 World Color Press 19,250
TOTAL 196,150
ENERGY MINERALS-3.6%
400 Cross Timbers Oil Co. 5,950
300 Devon Energy Corp. 10,725
400 1 Newfield Exploration Co. 11,375
600 1 Pride International, Inc. 6,338
600 Santa Fe International Corp. 13,800
500 1 Stolt Comex Seaway, SA 5,438
500 1 Tuboscope, Inc. 6,844
800 Vintage Petroleum, Inc. 8,600
TOTAL 69,070
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
FINANCE-16.3%
600 1 Affiliated Managers Group $ 18,113
300 1 Annuity & Life Re Ltd. 6,731
500 Chittenden Corp. 15,625
200 City National Corp. 7,488
800 Community First Bankshares, Inc. 19,100
500 1 Delphi Financial Group, Inc., Class A 17,938
600 Enhance Financial Services Group, Inc. 11,850
1,200 1 FirstFed Financial Corp. 23,100
800 Fremont General Corp. 15,100
200 Gallagher (Arthur J.) & Co. 9,900
900 HCC Insurance Holdings, Inc. 20,419
300 HealthCare Financial Partners, Inc. 10,275
300 Heller Financial, Inc. 8,344
600 Horace Mann Educators Corp. 16,313
200 Investment Technology Group, Inc. 6,475
400 Jefferies Group, Inc. 12,000
500 MGI Properties, Inc. 14,125
500 Mutual Risk Management Ltd. 16,688
900 North Fork Bancorp, Inc. 19,181
900 Republic Bancorp, Inc. 13,669
100 SEI Investments Co. 8,825
200 St. Paul Bancorp, Inc. 5,100
500 Sterling Bancorp 9,500
300 Texas Regional Bancshares, Inc., Class A 8,153
TOTAL 314,012
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
HEALTH CARE-6.5%
700 1 Cephalon, Inc. $ 12,163
200 1 Express Scripts, Inc., Class A 12,038
400 1 HCR Manor Care, Inc. 9,675
800 Hooper Holmes, Inc. 16,300
400 1 Mede America Corp. 15,100
600 1 Medicis Pharmaceutical Corp., Class A 15,225
100 1 Medimmune, Inc. 6,775
700 1 Sybron International Corp. 19,292
400 1 Universal Health Services, Inc., Class B 19,100
TOTAL 125,668
TECHNOLOGY-15.5%
400 1 AVT Corp. 15,150
1,100 1 Apex PC Solutions, Inc. 22,550
400 1 CSG Systems International, Inc. 10,475
900 1 Cable Design Technologies, Class A 13,894
500 1 Ciber, Inc. 9,563
300 1 CommScope, Inc. 9,225
400 1 Complete Business Solutions, Inc. 7,175
200 1 Comverse Technology, Inc. 15,100
800 1 Cybex Computer Products Corp. 22,300
600 1 DSP Group, Inc. 21,600
300 1 Digital River, Inc. 9,975
300 1 Etec Systems, Inc. 9,975
400 FactSet Research Systems 22,650
600 1 Kulicke & Soffa Industries 16,088
300 1 Macromedia, Inc. 10,575
700 1 Mastech Corp. 13,038
300 1 Micrel, Inc. 22,200
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
TECHNOLOGY-CONTINUED
300 1 Orbotech Ltd. $ 15,638
100 1 Phone.com, Inc. 5,600
500 1 SS&C Technologies, Inc. 3,813
100 1 Software.com, Inc. 2,319
200 1 Transaction Systems Architects, Inc., Class A 7,800
200 1 Vitesse Semiconductor Corp. 13,488
TOTAL 300,191
TRANSPORTATION-3.1%
300 Airborne Freight Corp. 8,306
500 1 America West Holdings Corp., Class B 9,438
200 CNF Transportation, Inc. 7,675
500 1 Consolidated Freightways Corp. 6,422
200 Expeditors International Washington, Inc. 5,450
300 USFreightways Corp. 13,892
400 Werner Enterprises, Inc. 8,300
TOTAL 59,483
UTILITIES-4.0%
200 Central Hudson Gas & Electric Corp. 8,400
300 Commonwealth Energy System 12,600
300 New Jersey Resources Corp. 11,231
300 Piedmont Natural Gas, Inc. 9,338
200 Sierra Pacific Resources 7,275
200 Southwest Gas Corp. 5,725
400 United Water Resources, Inc. 9,075
500 WICOR, Inc. 13,969
TOTAL 77,613
TOTAL COMMON STOCKS 1,890,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,781,010) 2 $ 1,890,000
</TABLE>

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $1,781,010. The
net unrealized appreciation/depreciation of investments on a federal tax basis
amounts to $108,990 which is comprised of $157,969 appreciation and $48,979
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($1,928,767) at June 30, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$1,781,010) $ 1,890,000
Cash 47,767
Income receivable 769
Receivable for investments
sold 4,642
TOTAL ASSETS 1,943,178
LIABILITIES:
Payable for investments
purchased $ 12,715
Accrued expenses 1,696
TOTAL LIABILITIES 14,411
Net assets for 180,814
shares outstanding $ 1,928,767
NET ASSETS CONSIST OF:
Paid in capital $ 1,808,404
Net unrealized
appreciation of
investments 108,990
Accumulated net realized
gain on investments 11,770
Net investment loss (397)
TOTAL NET ASSETS $ 1,928,767
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$1,928,767 / 180,814
shares outstanding $10.67
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED JUNE 30, 1999 (UNAUDITED) 1

<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,144
Interest 58
TOTAL INCOME 1,202
EXPENSES:
Investment advisory fee $ 1,158
Administrative personnel
and services fee 11,644
Custodian fees 176
Transfer and dividend
disbursing agent fees and
expenses 1,170
Directors'/Trustees' fees 234
Auditing fees 1,591
Legal fees 468
Portfolio accounting fees 4,208
Share registration costs 1,264
Printing and postage 1,014
Insurance premiums 390
Miscellaneous 234
TOTAL EXPENSES 23,551
WAIVERS AND
REIMBURSEMENTS:
Waiver of investment
advisory fee $ (1,158)
Reimbursement of other
operating expenses (20,794)
TOTAL WAIVERS AND
REIMBURSEMENTS (21,952)
Net expenses 1,599
Net operating loss (397)
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on
investments 11,770
Net change in unrealized
appreciation of
investments 108,990
Net realized and
unrealized gain on
investments 120,760
Change in net assets
resulting from operations $ 120,363
</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to June 30, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
PERIOD
ENDED
(unaudited)
JUNE 30,
1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net operating loss $ (397)
Net realized gain on
investments ($11,770 as
computed for federal tax
purposes) 11,770
Net change in unrealized
appreciation 108,990
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 120,363
SHARE TRANSACTIONS:
Proceeds from sale of
shares 1,808,404
Change in net assets 1,928,767
NET ASSETS:
Beginning of period -
End of period $ 1,928,767
</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to June 30, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
PERIOD
ENDED
(unaudited)
JUNE 30,
1999 1
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income -
Net realized and
unrealized gain on
investments 0.67
TOTAL FROM INVESTMENT
OPERATIONS 0.67
NET ASSET VALUE, END OF
PERIOD $10.67
TOTAL RETURN 2 6.70%

RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 15.24% 4
Net investment income 3 (14.47%)4
Expense (after waivers and
reimbursements) 1.03% 4
Net investment income
(after waivers and
reimbursements) (0.26%)4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $1,929
Portfolio turnover 2%
</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to June 30, 1999.

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

3 During the period, certain fees were voluntarily waived and reimbursed. If
such voluntary waivers and reimbursements had not occurred, the ratios would
have been as indicated.

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 portfolios. The financial
statements included herein are only those of Federated Small Cap 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 Fund became effective on May 28, 1999 and its investment objective is
to provide capital appreciation.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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,
1999 1
<S> <C>
Shares sold 180,814
Shares issued to
shareholders in payment of
distributions declared -
Shares redeemed -
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 180,814
</TABLE>

1 Reflects operations for the period from May 28, 1999 (date of initial public
investment) to June 30, 1999.

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 voluntary choose
to waive any portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can modify or terminate this voluntary waiver or
reimbursement at any time at its sole discretion.

ADMINISTRATIVE FEE

DISTRIBUTION SERVICES FEE

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. For the
period ended June 30, 1999, the Fund shares did not incur a shareholder services
fee.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

INTERFUND TRANSACTIONS

During the period ended June 30, 1999, the Fund engaged in purchase transactions
with funds that have a common investment adviser (or affiliated investment
advisers), common Directors/Trustees, and/or common Officers. These purchases
were made at current market value pursuant to Rule 17a-7 under the Act amounting
to $1,434,278.

GENERAL

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

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1999, were as follows:

Purchases $ 1,798,386
Sales $ 29,242

YEAR 2000

Trustees

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager

Federated Small Cap Strategies Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1999

SEMI-ANNUAL REPORT

[Graphic]
Federated
Federated Small Cap Strategies Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916876
G02584-01 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the Semi-Annual Report for Federated Utility Fund II.

Federated Utility Fund II helps shareholders participate in the income and
growth opportunities of a market that provides critical, ongoing services
to the U.S. and other nations. 1

For the six-month reporting period ended June 30, 1999, the fund produced a
total return of 2.97%. 2 Contributing to the total return was dividend income
totaling $0.37 per share. The fund also paid capital gains totaling $0.74 per
share. On June 30, 1999, the fund's net assets totaled $182.7 million.

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

Sincerely,

[Graphic]

J. Christopher Donahue
President
August 15, 1999

1 Utility securities are interest rate sensitive and a rise in interest rates
can cause their value to fall.

Investment Review

Utilities had mixed results in the first half of 1999. The Standard & Poor's
("S&P") Communications Index 1 of telecom stocks returned 17.0%, while the S&P
Utility Index1 returned only 1.2%. The S&P Utility Index was constrained by
electric utilities; the S&P Electric Index1 returned (6.0%). Natural gas stocks,
the other component of the S&P Utility Index, returned 24.4% on the S&P Natural
Gas Index.1 This index result was skewed by Enron, the dominant company in the
gas index, which returned 44.3% in the first six months. For the six-month
period ended June 30, 1999, the fund returned 2.97%2 compared to 7.02% for the
median domestic utility fund, according to Lipper Analytical Services, Inc.3

Telecommunications stocks continued to benefit from surging demand and falling
costs. In addition, pending mergers received a boost from the FCC, which
tentatively approved the merger between SBC Communications and Ameritech. Among
local phone companies, Bell Atlantic, which is seeking to merge with GTE, had a
six-month return of 22.6%. US West, conversely, returned (7.4%). Long distance
stocks were weak in the second quarter due to soft pricing for voice traffic.
For the six-month period, Sprint returned 26.6%, while AT&T trailed with a
respectable 11.4%. Nippon Telegraph and Telephone, Japan's largest phone
company, was our top foreign performer with a return of 68.1%.

Natural gas stocks benefited from rising gas prices going into summer and from
continued merger activity. In addition to Enron's strong performance, WICOR, a
Wisconsin gas utility, returned 30.5% on a takeover bid from the State's largest
electric company. K N Energy, however, terminated its merger agreement with
Sempra Energy and had an earnings shortfall. Its common shares returned (43.5%).
Natural gas stocks continue to seem attractive, as gas demand is growing while
gas production is falling. Furthermore, there is a scarcity value as gas
companies continue to be acquired, usually by (larger) electric companies.

Electric utilities recovered from a poor first quarter, as the S&P Electric
Index returned 7.6% in the second quarter after falling (12.6%) in the first
quarter. Continued merger activity and progress on industry restructuring helped
the stocks. Potomac Electric Power returned 15.5% on better prospects for its
telecom venture. Illinova returned 11.7% after it agreed to merge with Dynegy, a
power and gas marketer. Duke Energy, however, returned (13.4%) on reduced
earnings forecasts. Electric stocks continue to be undervalued, and strong cash
flows and industry restructuring provide opportunities for enhanced returns to
shareholders.

Among non-utilities, the Morgan Stanley REIT Index 1 rose 4.6%. Equity
Residential Properties Trust returned 15.5% to lead our REITs. The sector is
still undervalued with a price-to-earnings ratio of 10 and a dividend yield of
7.0%. REITs look particularly attractive relative to electric utility stocks. We
continue to favor apartment and office/industrial REITs.

1 The S&P Communications Index is an index that holds 25 of the largest
telecommunications stocks, including the regional bells, long distance companies
and cellular concerns. The S&P Utility Index is an index of common stocks from
forty different utilities. The S&P Electric Index and the S&P Natural Gas Index
are market cap-weighted indexes of common stocks in natural gas and utilities.
The Morgan Stanley REIT Index is an index that tracks the market performance of
U.S. Real Estate Investment Trusts known as REITs. These indexes are unmanaged,
and investments cannot be made in an index.

Our major strategy change this year has been to increase our telecommunications
holdings to benefit from the strong demand for telecom services.
Telecommunications services stocks now comprise 34% of the fund, up from 19% at
year end. Electric utilities are 32%, down from nearly 48%.

We continue to emphasize companies that have strong cash flow and the management
skill to deploy that cash into attractive returns for shareholders. In an
extremely overvalued market for leading growth companies, utilities offer an
appealing combination of value and growth. Electric and gas stocks are
undervalued based on earnings, dividends, and asset values. Telecommunications
stocks offer fine growth prospects at generally reasonable valuations. In
addition, utilities offer relative safety due to the essential nature of their
services.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-88.7%
BASIC MATERIALS-1.5%
170,200 USEC, Inc. $ 2,531,725
14,500 Worthington Industries,
Inc. 238,344
TOTAL 2,770,069
COMMUNICATION SERVICES-32.0%
92,850 AT&T Corp. 5,182,191
37,800 ALLTEL Corp. 2,702,700
49,100 Ameritech Corp. 3,608,850
64,200 Bell Atlantic Corp. 4,197,075
87,400 BellSouth Corp. 4,096,875
21,900 Cable & Wireless PLC, ADR 867,788
81,700 CenturyTel, Inc. 3,247,575
51,200 Cincinnati Bell, Inc. 1,276,800
16,200 Frontier Corp. 955,800
75,500 GTE Corp. 5,719,125
1,681 1 Intermedia Communications,
Inc. 50,430
39,150 1 MCI WorldCom, Inc. 3,369,347
25,900 Nippon Telegraph &
Telephone Corp., ADR 1,621,988
30,500 1 Pacific Gateway Exchange,
Inc. 888,313
20,300 Portugal Telecom SA, ADR 836,106
53,972 SBC Communications, Inc. 3,130,376
84,900 Sprint Corp. 4,483,781
55,000 Swisscom AG, ADR 2,110,625
53,300 Tele Danmark A/S 1,372,475
59,300 Telecom Corp. of New
Zealand Ltd., ADR 2,071,794
6,100 1 Telefonica SA, ADR 897,463
96,200 US West, Inc. 5,651,750
TOTAL 58,339,227
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
ENERGY-0.0%
4,500 Pennzoil-Quaker State Co. $ 67,500
FINANCIALS-8.9%
82,800 AMB Property Corp. 1,945,800
19,000 Apartment Investment &
Management Co., Class A 812,250
38,800 Archstone Communities
Trust 851,175
35,000 Avalonbay Communities,
Inc. 1,295,000
31,500 Camden Property Trust 874,125
14,700 CenterPoint Properties
Corp. 538,388
26,500 Duke Realty Investments,
Inc. 597,906
20,800 Equity Office Properties
Trust 533,000
14,600 Equity Residential
Properties Trust 657,913
33,300 First Industrial Realty
Trust, Inc. 913,669
50,000 Gables Residential Trust 1,206,250
33,000 Health Care Property
Investors, Inc. 952,875
37,500 Liberty Property Trust 932,813
16,400 Post Properties, Inc. 672,400
30,000 Prentiss Properties Trust 705,000
139,400 ProLogis Trust 2,822,850
TOTAL 16,311,414
UTILITIES-46.3%
49,400 AGL Resources, Inc. 910,813
13,900 Atmos Energy Corp. 347,500
89,600 BEC Energy 3,696,000
42,200 CMS Energy Corp. 1,767,125
23,000 Central Hudson Gas &
Electric Corp. 966,000
31,100 Columbia Energy Group 1,949,581
83,700 DQE, Inc. 3,358,463
40,000 Duke Energy Corp. 2,175,000
132,900 Edison International 3,555,075
141,200 El Paso Energy Corp. 4,968,475
19,300 Energen Corp. 359,463
103,800 Energy East Corp. 2,698,800
34,492 Enron Corp. 2,819,721
75,100 Entergy Corp. 2,346,875
32,200 FPL Group, Inc. 1,758,925
<CAPTION>
SHARES VALUE
<C> <S> <C>
COMMON STOCKS-continued
UTILITIES-CONTINUED
58,700 FirstEnergy Corp. $ 1,819,700
57,500 Florida Progress Corp. 2,375,469
68,000 Illinova Corp. 1,853,000
80,100 K N Energy, Inc. 1,071,338
161,200 KeySpan Corp. 4,251,650
156,600 MCN Energy Group, Inc. 3,249,450
58,000 NICOR, Inc. 2,207,625
39,000 National Fuel Gas Co. 1,891,500
51,000 New Jersey Resources Corp. 1,909,313
121,200 NiSource, Inc. 3,128,475
90,100 OGE Energy Corp. 2,139,875
65,000 PG&E Corp. 2,112,500
30,000 Peoples Energy Corp. 1,130,625
65,100 Pinnacle West Capital
Corp. 2,620,275
60,700 Potomac Electric Power Co. 1,786,856
21,390 PowerGen PLC, ADR 917,096
67,800 Public Service Co. of New
Mexico 1,347,525
43,400 Public Service Enterprises
Group, Inc. 1,773,975
70,500 Puget Sound Energy, Inc. 1,692,000
82,300 Questar Corp. 1,573,988
95,800 Rochester Gas & Electric
Corp. 2,544,688
109,000 SCANA Corp. 2,547,875
31,000 Sempra Energy 701,375
47,100 TECO Energy, Inc. 1,071,525
24,000 Unicom Corp. 925,500
39,450 UtiliCorp United, Inc. 959,128
31,600 WICOR, Inc. 882,825
14,400 Washington Gas Light Co. 374,400
TOTAL 84,537,367
TOTAL COMMON STOCKS
(IDENTIFIED COST
$142,146,611) 162,025,577
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
PREFERRED STOCKS-4.6%
BASIC MATERIALS-0.7%
63,100 Merrill Lynch & Co., Inc.,
STRYPES (IMC Global) $ 1,289,606
COMMUNICATION SERVICES-
1.5%
7,200 ICG Communications, Inc.,
Conv. Pfd. 378,900
20,500 IXC Communications, Inc.,
Cumulative Conv. Pfd.,
$3.38 791,505
16,200 2 Qwest Communications
International, Inc., Conv.
Pfd., Series 144A, $0.60 918,589
800 2 WinStar Communications,
Inc., Conv. Pfd., $1.81 790,000
TOTAL 2,878,994
UTILITIES-2.4% 85,700 K N Energy, Inc., Conv.
Pfd., $3.55 2,217,488
38,200 Texas Utilities Co.,
Cumulative PRIDES, $4.63 2,101,000
TOTAL 4,318,488
TOTAL PREFERRED STOCKS
(IDENTIFIED COST
$9,876,356) 8,487,088
CORPORATE BOND-0.6%
COMMUNICATION SERVICES-
0.6%
$ 850,000 2 ITC DeltaCom, Inc., Conv.
Bond, 4.50%, 5/15/2006
(identified cost $865,670) 1,045,500
REPURCHASE AGREEMENT-6.2%
3
11,250,000 Goldman Sachs Group, LP,
5.25%, dated 6/30/1999,
due 7/1/1999 (at amortized
cost) 11,250,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$164,138,637) 4 $ 182,808,165
</TABLE>

1 Non-income producing security.

4 The cost of investments for federal tax purposes amounts to $164,138,637. The
net unrealized appreciation of investments on a federal tax basis amounts to
$18,669,528 which is comprised of $23,453,538 appreciation and $4,784,010
depreciation at June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($182,651,804) at June 30, 1999.

The following acronyms are used throughout this portfolio:

ADR -American Depositary Receipt
PRIDES -Preferred Redeemable Increased Dividend Equity Securities
STRYPES -Structured Yield Products

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities
JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$164,138,637) $ 182,808,165
Cash 44,538
Income receivable 540,819
Receivable for investments
sold 1,135,851
TOTAL ASSETS 184,529,373
LIABILITIES:
Payable for investments
purchased $ 1,858,376
Payable for taxes withheld 1,278
Accrued expenses 17,915
TOTAL LIABILITIES 1,877,569
Net assets for 12,571,238
shares outstanding $ 182,651,804
NET ASSETS CONSIST OF:
Paid in capital $ 155,652,548
Net unrealized
appreciation of
investments 18,669,528
Accumulated net realized
gain on investments and
foreign currency
transactions 5,526,009
Undistributed net
investment income 2,803,719
TOTAL NET ASSETS $ 182,651,804
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$182,651,804 / 12,571,238
shares outstanding $14.53

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations
SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)

<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign
taxes withheld of $10,984) $ 3,359,051
Interest 220,806
TOTAL INCOME 3,579,857
EXPENSES:
Investment advisory fee $ 614,662
Administrative personnel
and services fee 65,208
Custodian fees 7,744
Transfer and dividend
disbursing agent fees and
expenses 24,830
Directors'/Trustees' fees 1,224
Auditing fees 6,185
Legal fees 1,344
Portfolio accounting fees 24,132
Share registration costs 3,563
Printing and postage 20,584
Insurance premiums 1,080
Miscellaneous 3,143
TOTAL EXPENSES 773,699
Net investment income 2,806,158
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain on
investments and foreign
currency transactions 5,768,792
Net change in unrealized
appreciation of
investments (3,286,287)
Net realized and
unrealized gain on
investments and foreign
currency transactions 2,482,505
Change in net assets
resulting from operations $ 5,288,663

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JUNE 30, DECEMBER 31,
1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,806,158 $ 4,025,310
Net realized gain on investments and foreign currency transactions ($5,768,792
and $7,999,119, respectively, as computed for federal
tax purposes) 5,768,792 7,834,265
Net change in unrealized
appreciation of
investments and
translation of assets and
liabilities in foreign
currency (3,286,287) 5,882,380
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 5,288,663 17,741,955
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (4,042,798) (1,023,584)
Distributions from net
realized gains on
investments and foreign
currency transactions (8,007,412) (6,251,285)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (12,050,210) (7,274,869)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 32,585,611 71,820,125
Net asset value of shares
issued to shareholders in
payment of
distributions declared 12,092,114 7,274,865
Cost of shares redeemed (17,302,196) (31,986,413)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 27,375,529 47,108,577
Change in net assets 20,613,982 57,575,663
NET ASSETS:
Beginning of period 162,037,822 104,462,159
End of period (including
undistributed net
investment income of
$2,803,719 and $4,040,359,
respectively) $ 182,651,804 $ 162,037,822

</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JUNE 30, YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995 1994 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $15.27 $14.29 $11.81 $11.03 $ 9.29 $ 9.48
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.21 0.37 0.40 0.42 0.45 0.34
Net realized and
unrealized gain (loss) on
investments and foreign
currency transactions 0.16 1.55 2.62 0.82 1.74 (0.19)
TOTAL FROM
INVESTMENT OPERATIONS 0.37 1.92 3.02 1.24 2.19 0.15
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.37) (0.13) (0.28) (0.41) (0.45) (0.34)
Distributions from net
realized gain on
investments and foreign
currency transactions (0.74) (0.81) (0.26) (0.05) - -
TOTAL DISTRIBUTIONS (1.11) (0.94) (0.54) (0.46) (0.45) (0.34)
NET ASSET VALUE, END OF
PERIOD $14.53 $15.27 $14.29 $11.81 $11.03 $ 9.29
TOTAL RETURN 2 2.97% 13.95% 26.63% 11.56% 24.18% 1.12%

RATIOS TO AVERAGE
NET ASSETS:
Expenses 3 0.94% 4 1.00% 1.12% 1.36% 3.09% 55.43% 4
Net investment income (net
operating loss) 3 3.43% 4 3.13% 3.14% 3.41% 2.38% (50.06%)4
Expenses (after waivers) 0.94% 4 0.93% 0.85% 0.85% 0.85% 0.60% 4
Net investment income
(after waivers) 3.43% 4 3.20% 3.41% 3.92% 4.62% 4.77% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $182,652 $162,038 $104,462 $63,558 $29,679 $974
Portfolio turnover 47% 84% 95% 63% 62% 73%

</TABLE>

1 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 (start of
business) to April 13, 1994, net investment income was distributed to the Fund's
adviser.

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

3 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 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.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

Listed foreign and domestic corporate bonds, other fixed income and asset-
backed securities, and unlisted securities and private placement securities are
generally valued at the mean of the latest bid and asked price as furnished by
an independent pricing service. Listed foreign and domestic equity securities
are valued at the last sale price reported on a national securities exchange.
Short-term securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining maturities of 60
days or less at the time of purchase may be valued at amortized cost, which
approximates fair market value. Investments in other open-end regulated
investment companies are valued at net asset value.

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

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.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

FOREIGN EXCHANGE CONTRACTS

The Fund may enter into foreign currency commitments for the delayed delivery of
securities or foreign currency exchange transactions. The Fund may enter into
foreign currency contract transactions to protect assets against adverse changes
in foreign currency exchange rates or exchange control regulations. 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
counterparties 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 purposes as
unrealized until the settlement date. At June 30, 1999, the Fund had no
outstanding foreign currency commitments.

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 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.

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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,
1999 1998
<S> <C> <C>
Shares sold 2,269,127 5,060,316
Shares issued to
shareholders in payment of
distributions declared 895,049 513,037
Shares redeemed (1,206,086) (2,272,128)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 1,958,090 3,301,225
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

ADMINISTRATIVE FEE

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the six
months ended June 30, 1999, were as follows:

Purchases $88,916,394
Sales $73,233,841

RISKS OF FOREIGN INVESTING

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

At June 30, 1999, the diversification of non-U.S. countries was as
follows:

PERCENTAGE OF
COUNTRY NET ASSETS
Denmark 0.8%
Japan 0.9%
New Zealand 1.1%
Portugal 0.5%
Spain 0.5%
Switzerland 1.2%
United Kingdom 1.0%

YEAR 2000

Trustees

Officers

JOHN F. DONAHUE
Chairman

J. CHRISTOPHER DONAHUE
President

EDWARD C. GONZALES
Executive Vice President

JOHN W. MCGONIGLE
Executive Vice President and Secretary

RICHARD B. FISHER
Vice President

RICHARD J. THOMAS
Treasurer

C. GRANT ANDERSON
Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT

Federated Utility Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 1999

[Graphic]
Federated
Federated
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916108
G00433-03 (8/99)

[Graphic]

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

I am pleased to present the first Semi-Annual Report for Federated Quality Bond
Fund II. This new mutual fund is managed to offer shareholders current income
through a diversified portfolio of investment grade, fixed income securities,
such as U.S. Treasury and U.S. government agency securities, as well as
corporate bonds.

This report covers the period of the fund's initial operation from April 28,
1999 through June 30, 1999. It begins with a commentary by the fund's portfolio
manager, which is followed by a complete listing of the fund's portfolio
holdings and financial statements.

Thank you for participating in the classic income opportunities of
investment-grade, fixed income securities through the diversification and
professional management of this fund.

We look forward to keeping you up-to-date on the progress of your investment,
and we welcome your comments and suggestions.

Sincerely,

[Graphic]

J. Christopher Donahue

President

August 15, 1999

Investment Review

Federated Quality Bond Fund II invests primarily in high quality corporate debt
securities rated in one of the four highest categories by a nationally
recognized statistical rating organization. The fund may also invest in other
high quality government and asset backed securities. The fund duration is
managed within a range of three to seven years.

This is the fund's initial period of operations with a reporting time frame from
April 28, 1999 through June 30, 1999. During this brief reporting period, the
high quality bond markets experienced a significant rise in interest rates, due
to a combination of stronger economic activity and the well-publicized intention
of the Federal Reserve Board ("the Fed") to tighten monetary policy. At its June
1999 meeting, the Fed increased the Fed funds target by 25 basis points. For the
entire reporting period, the 10 year part of the yield curve experienced the
largest rate increase, with the 10 year treasury rising in yield by 53 basis
points.

Relative to fixed income sector performance, nearly all "spread" products
(corporates, mortgages, asset backed securities) underperformed comparable
maturity treasuries. Yield spreads widened significantly in both May and June.
The fund initially held a fairly large treasury position as the spread markets
continued to weaken. Late in the reporting period, the fund increased its
corporate weighting up to approximately 73% of total assets. Fund duration is
being maintained at a neutral target within its range.

Portfolio of Investments

JUNE 30, 1999 (UNAUDITED)

<TABLE>

PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS-72.9%
AUTOMOBILE-4.4%
$ 160,000 Hertz Corp., Sr. Note,
7.00%, 1/15/2028 $ 148,606
ECOLOGICAL SERVICES &
EQUIPMENT-7.5%
250,000 USA Waste Services, Inc.,
Sr. Note, 7.125%,
10/1/2007 251,553
EDUCATION-3.1%
100,000 Columbia University, MTN,
8.62%, 2/21/2001 104,263
FINANCIAL INTERMEDIARIES-
17.8%
100,000 1 FMR Corp., Deb., 7.57%
6/15/2029 99,970
250,000 Lehman Brothers Holdings,
Inc., MTN, 7.00%,
5/15/2003 248,660
250,000 Marsh & McLennan Cos.,
Inc., Sr. Note, 7.125%,
6/15/2009 252,290
TOTAL 600,920
INSURANCE-6.2%
200,000 1 Union Central Life
Insurance Co., Note,
8.20%, 11/1/2026 207,420
MACHINERY & EQUIPMENT-7.3%
250,000 Continental Airlines,
Inc., Pass Thru Cert.,
Series 1999-2 Class C1,
7.73%, 3/15/2011 247,625
METALS & MINING-12.1%
146,000 Barrick Gold Finance,
Inc., Company Guarantee,
7.50%, 5/1/2007 148,638
250,000 Noranda, Inc., Deb.,
8.625%, 7/15/2002 257,630
TOTAL 406,268
RETAILERS-7.2%
200,000 Sears, Roebuck & Co., MTN,
10.00%, 2/3/2012 241,414
TELECOMMUNICATIONS &
CELLULAR-7.3%
250,000 1 Telecom de Puerto Rico, Sr.
Note, 6.65%, 5/15/2006 246,414
TOTAL CORPORATE BONDS
(IDENTIFIED COST
$2,479,320) 2,454,483
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY OBLIGATION-
10.7%
UNITED STATES TREASURY
NOTE-10.7%
$ 350,000 United States Treasury
Note, 6.50%, 8/15/2005
(identified cost $373,328) $ 361,613
REPURCHASE AGREEMENT-14.4% 2
485,000 Goldman Sachs Group, LP, 5.25%, dated 6/30/1999, due 7/1/1999 (at
amortized
cost) 485,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$3,337,648) 3 $ 3,301,096

</TABLE>

3 The cost of investments for federal tax purposes amounts to $3,337,648. The
net unrealized depreciation of investments on a federal tax basis amounts to
$36,552 which is comprised of $11,177 appreciation and $47,729 depreciation at
June 30, 1999.

Note: The categories of investments are shown as a percentage of net assets
($3,370,109) at June 30, 1999.

The following acronym is used throughout this portfolio:

MTN -Medium Term Note

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 1999 (UNAUDITED)

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$3,337,648) $ 3,301,096
Cash 3,649
Income receivable 45,842
Other assets 38,536
TOTAL ASSETS 3,389,123
LIABILITIES:
Accrued expenses $ 19,014
TOTAL LIABILITIES 19,014
Net assets for 343,261
shares outstanding $ 3,370,109
NET ASSETS CONSIST OF:
Paid in capital $ 3,423,368
Net unrealized
depreciation of
investments (36,552)
Accumulated net realized
loss on investments (46,227)
Undistributed net
investment income 29,520
TOTAL NET ASSETS $ 3,370,109
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$3,370,109 / 343,261
shares outstanding $9.82

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED JUNE 30, 1999 (UNAUDITED) 1

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 31,989
EXPENSES:
Investment advisory fee $ 3,139
Administrative personnel
and services fee 19,178
Custodian fees 525
Transfer and dividend
disbursing agent fees and
expenses 3,500
Directors'/Trustees' fees 350
Auditing fees 2,380
Legal fees 700
Portfolio accounting fees 6,455
Shareholder services fee 1,042
Share registration costs 4,318
Printing and postage 2,334
Insurance premiums 584
Miscellaneous 632
TOTAL EXPENSES 45,137
WAIVERS AND
REIMBURSEMENTS:
Waiver of investment
advisory fee $ (3,139)
Waiver of shareholder
services fee (1,042)
Reimbursement of other
operating expenses (38,487)
TOTAL WAIVERS AND
REIMBURSEMENTS (42,668)
Net expenses 2,469
Net investment income 29,520
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on
investments (46,227)
Net change in unrealized
depreciation of
investments (36,552)
Net realized and
unrealized loss on
investments (82,779)
Change in net assets
resulting from operations $ (53,259)

</TABLE>

1 For the period from April 28, 1999 (date of initial public investment) to June
30, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

PERIOD
ENDED
(unaudited)
JUNE 30,
1999 1
<S> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 29,520
Net realized loss on
investments ($46,227 as
computed for federal tax
purposes) (46,227)
Net change in unrealized
depreciation (36,552)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS (53,259)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 3,447,041
Cost of shares redeemed (23,673)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 3,423,368
Change in net assets 3,370,109
NET ASSETS:
Beginning of period -
End of period (including
undistributed net
investment income of
$29,520) $ 3,370,109

</TABLE>

1 For the period from April 28, 1999 (date of initial public investment) to June
30, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

PERIOD
ENDED
(unaudited)
JUNE 30,
1999 1
<S> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.09
Net realized and
unrealized gain (loss) on
investments (0.27)
TOTAL FROM INVESTMENT
OPERATIONS (0.18)
LESS DISTRIBUTIONS:
Distributions from net
investment income -
NET ASSET VALUE, END OF
PERIOD $9.82
TOTAL RETURN 2 (1.80%)

RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 8.66% 4
Net investment income 3 (2.55%) 4
Expenses (after
waivers/reimbursements) 0.50% 4
Net investment income
(after
waivers/reimbursements) 5.61% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $3,370
Portfolio turnover 95%

</TABLE>

1 Reflects operations for the period from April 28, 1999 (date of initial public
investment) to June 30,1999.

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

3 During the period, certain fees were voluntarily waived or reimbursed. If such
voluntary waivers or reimbursements had not occurred, the ratios would have been
as indicated.

4 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 1999 (UNAUDITED)

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 11 portfolios. The financial
statements included herein are only those of Federated Quality 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 Fund became effective on April 28, 1999, and its investment objective
is to provide current income.

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

U.S. government securities, listed corporate bonds, other fixed income and
asset-backed 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 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

RESTRICTED SECURITIES

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

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>

PERIOD
ENDED
JUNE 30,
1999 1
<S> <C>
Shares sold 345,671
Shares redeemed (2,410)
NET CHANGE RESULTING FROM SHARE TRANSACTIONS 343,261

</TABLE>

1 For the period from April 28, 1999 (date of initial public investment) to June
30, 1999.

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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 a portion of its fee or reimburse the Fund for certain operating
expenses. The Adviser can modify or terminate this voluntary waiver or
reimbursement at any time at its sole discretion.

ADMINISTRATIVE FEE

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. ("FSC"), 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 FSC.
The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund shares for the period. The fee paid to FSSC is used to
finance certain services for shareholders and to maintain shareholder accounts.
FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or
terminate this voluntary waiver at any time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended June 30, 1999, were as follows:

<TABLE>

<S> <C>
Purchases $ 5,391,339
Sales $ 2,489,953

</TABLE>

YEAR 2000

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

EDWARD L. FLAHERTY, JR., ESQ.

PETER E. MADDEN

JOHN E. MURRAY, JR., J.D., S.J.D.

WESLEY W. POSVAR

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

J. CHRISTOPHER DONAHUE

President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD B. FISHER

Vice President

RICHARD J. THOMAS

Treasurer

C. GRANT ANDERSON

Assistant Secretary

[Graphic]
Federated
World-Class Investment Manager

Federated Quality Bond Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 1999

SEMI-ANNUAL REPORT

[Graphic]
Federated
Federated Quality Bond Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor

Cusip 313916884

G02590-01 (8/99)

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