FEDERATED INSURANCE SERIES, N-30D, 2000-08-21

FEDERATED INSURANCE SERIES
N-30D, 2000-08-21

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SEMI-ANNUAL REPORT

President's Message

Dear Fellow Shareholder:

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

This report covers the six-month period from January 1, 2000 through June 30, 2000. 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.

At the end of the reporting period, the selected high-quality stocks in the fund's portfolio included 103 holdings that represent major industry groups, and include leaders like Allstate, Anheuser-Busch, AT&T, Boeing, Exxon Mobil, General Motors and Wal-Mart.

For the six-month reporting period, the fund produced a total return of (4.25%) through income totaling $0.189 per share, capital gains totaling $0.573 per share, and a net asset value decrease of $1.63.¹ On June 30, 2000, the fund's net assets reached $458 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,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

1 Past performance is no guarantee 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. The performance information presented does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

Investment Review

The six-month reporting period ended June 30, 2000, provided anemic results from the stock market with the Standard & Poor's 500¹ (S&P 500) returning (0.42%). Despite a few difficult months for growth stocks, value, as defined by the S&P/Barra Value Index,² lagged with a (4.07%) return during the time period versus 2.58% for the S&P/Barra Growth Index.³ Value sectors lagged as investors continue to fear that the Federal Reserve Board's (the "Fed's") cumulative 175 basis points of tightening will result in a "hard landing." Growth's strong relative performance was not driven by Technology, which was up 3.2% in the reporting period, but by Healthcare. The relative safety and stability of the pharmaceuticals, and strong earnings momentum of the healthcare maintenance organizations (HMOs) and hospitals drove the Healthcare sector to a 24.0% return. Following Healthcare were Utilities, up 19.1%, and Energy, up 4.5%. Sectors displaying weakness were Basic Materials, down 24.7%, Consumer Cyclicals, down 18.9%, and Communications Services, down 14.8%.

1 S&P 500 Index is an unmanaged 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. These indexes are unmanaged and investments cannot be made in an index.

2 S&P 500/Barra Value Index is a market capitalization-weighted index of the stocks in the Standard & Poor's 500 Index having the highest book-to-price ratios. The index consists of approximately half of the S&P 500 on a market capitalization basis.

3 S&P 500/Barra Value Index is a market capitalization-weighted index of the all the stocks in the S&P 500 Index that have high price-to-book ratios.

The fund returned (4.25%)⁴ for the reporting period, underperforming both the S&P 500 and the median Lipper Multi-Cap Value Fund which returned (0.47%) and (1.10%), respectively.⁵ Leading sectors for the half included Healthcare, Utilities and Energy (up 5%). Lagging sectors included Basic Materials, Consumer Cyclicals, and Communication Services (down 15%). Aiding performance relative to the S&P 500 for the half was an overweight in Utilities, and favorable security selection in Healthcare (Oxford Health Plans, up 88%, and Abbott Laboratories, up 23%) and Energy (Schlumberger, up 33%). More than offsetting these favorable influences were both an underweight in Technology and unfavorable security performance of our holdings in the sector (Novell, down 77%, Unisys, down 54%, and Motorola, down 41%). Other sectors that dragged down performance were Capital Goods (Honeywell, down 42%) and Finance (Conseco, down 45%).

Our equity market outlook remains the same: U.S. stocks are overvalued, but pockets of reasonable valuation exist within the market. Despite the recent correction in Technology stocks, the valuation differentials between the "haves" and "have nots" remains extremely wide. The S&P Technology sector is still valued at 50 times forward earnings. This is historically unprecedented and remains amazing given the historic difficulty of developing a sustainable and defendable, profitable franchise in such a rapidly evolving and volatile area of the economy. Over one-third of the stocks in the portfolio trade for less than 11 times forward 12-month earnings, a huge discount to the S&P 500 which trades at 25 times forward 12-month earnings. However, the catalyst to unwind these valuation differences remains to be seen, and the specter of rising interest rates and increased inflation keeps a damper on "Old Economy" valuations. Many "New Economy" investors believe that Technology shares will be immune to rising rates, but "Old Economy" companies still generate the majority of capital spending. At some point, investors will recognize the disparities between the market values and franchise values of many overlooked leading companies and will gravitate back toward these names given their compelling risk/reward profile. We believe that the portfolio is well positioned to take advantage of this rotation when it occurs.

4 Past performance is no guarantee 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.

5 Lipper figures represent the average total returns reported by all mutual funds designated by Lipper Analytical Services as falling into the respective categories indicated. They do not reflect sales charges.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value

COMMON STOCKS--96.5%

Basic Materials--2.3%

156,500

Corn Products International, Inc.

4,147,250

81,000

Nucor Corp.

2,688,187

79,200

PPG Industries, Inc.

3,509,550

TOTAL

10,344,987

Capital Goods--9.5%

182,000

Boeing Co.

7,609,875

78,700

Honeywell International, Inc.

2,651,206

111,400

Ingersoll-Rand Co.

4,483,850

13,400

Johnson Controls, Inc.

687,587

198,304

Koninklijke (Royal) Philips Electronics NV, ADR

9,419,440

41,100

Minnesota Mining & Manufacturing Co.

3,390,750

59,700

Textron, Inc.

3,242,456

157,682

Tyco International Ltd.

7,470,185

125,500

Viasystems Group, Inc.

2,031,531

125,900

Waste Management, Inc.

2,392,100

TOTAL

43,378,980

Communication Services--7.5%

132,650

AT&T Corp.

4,195,056

21,500

BCE, Inc.

511,969

122,300

GTE Corp.

7,613,175

88,000

MCI Worldcom, Inc.

4,037,000

127,200

SBC Communications, Inc.

5,501,400

45,200

Sprint Corp. (Fon Group)

2,305,200

21,000

Telephone and Data System, Inc.

2,105,250

92,200

U.S. West, Inc.

7,906,150

TOTAL

34,175,200

Shares

Value

COMMON STOCKS--continued

Consumer Cyclicals--10.4%

137,000

Block (H&R), Inc.

4,435,375

125,400

Brunswick Corp.

2,076,937

188,400

Cendant Corp.

2,637,600

114,800

Cooper Tire & Rubber Co.

1,277,150

106,539

Delphi Auto Systems Corp.

1,551,474

94,400

Federated Department Stores, Inc.

3,186,000

112,100

Ford Motor Co.

4,820,300

45,428

General Motors Corp.

2,637,663

15,946

General Motors Corp., Class H

1,399,261

256,800

K Mart Corp.

1,749,450

75,400

Knight-Ridder, Inc.

4,010,337

85,300

Liz Claiborne, Inc.

3,006,825

161,600

Sherwin-Williams Co.

3,423,900

342,600

Toys `R' Us, Inc.

4,989,112

20,300

TRW, Inc.

880,512

14,678

Visteon Corp.

177,966

95,900

Wal-Mart Stores, Inc.

5,526,237

TOTAL

47,786,099

Consumer Staples--11.7%

65,500

Anheuser-Busch Cos., Inc.

4,892,031

88,000

AT&T Corp. - Liberty Media Group, Inc., Class A

2,134,000

178,100

Charter Communications, Inc., Class A

2,927,519

68,300

Kimberly-Clark Corp.

3,918,713

221,200

News Corp., Ltd., ADR

10,507,000

143,300

Philip Morris Cos., Inc.

3,806,406

220,700

Sara Lee Corp.

4,262,269

288,000

UST, Inc.

4,230,000

103,800

Viacom, Inc., Class A

7,097,325

145,478

Viacom, Inc., Class B

9,919,781

TOTAL

53,695,044

Shares

Value

COMMON STOCKS--continued

Energy--8.1%

151,400

Ashland, Inc.

5,308,462

103,500

Diamond Offshore Drilling, Inc.

3,635,437

100,818

Exxon Mobil Corp.

7,914,213

105,500

Royal Dutch Petroleum Co., ADR

6,494,844

92,900

Schlumberger Ltd.

6,932,662

104,100

Sunoco, Inc.

3,064,444

15,081

Transocean Sedco Forex, Inc.

805,891

110,300

USX-Marathon Group

2,764,394

TOTAL

36,920,347

Financials--16.0%

66,371

ABB AB, ADR

7,969,485

166,500

Allstate Corp.

3,704,625

114,700

Bank of America Corp.

4,932,100

132,594

Bear Stearns Cos., Inc.

5,519,225

61,950

Chase Manhattan Corp.

2,853,572

54,500

CIGNA Corp.

5,095,750

352,500

CIT Group, Inc., Class A

5,728,125

449,921

Conseco, Inc.

4,386,730

73,400

Countrywide Credit Industries, Inc.

2,224,937

139,200

Lincoln National Corp.

5,028,600

88,900

Loews Corp.

5,334,000

53,400

Marsh & McLennan Cos., Inc.

5,576,963

109,000

MBIA, Inc.

5,252,438

119,200

PNC Financial Services Group

5,587,500

136,100

Washington Mutual, Inc.

3,929,888

TOTAL

73,123,938

Health Care--9.8%

137,000

Abbott Laboratories

6,105,063

89,600

Baxter International, Inc.

6,300,000

112,600

Bristol-Myers Squibb Co.

6,558,950

481,800

Healthsouth, Corp.

3,462,938

81,800

Merck & Co., Inc.

6,267,925

166,200

Oxford Health Plans, Inc.

3,957,638

131,597

Pharmacia & Upjohn, Inc.

6,801,920

63,300

United Healthcare Corp.

5,427,975

TOTAL

44,882,409

Shares

Value

COMMON STOCKS--continued

Technology--16.0%

172,500

Compaq Computer Corp.

4,409,531

91,300

Computer Associates International, Inc.

4,673,419

52,300

Computer Sciences Corp.

3,906,156

123,100

Electronic Data Systems Corp.

5,077,875

186,900

First Data Corp.

9,274,913

65,400

International Business Machines Corp.

7,165,388

73,700

Lexmark International Group, Class A

4,956,325

43,300

Lucent Technologies, Inc.

2,565,525

37,400

Micron Technology, Inc.

3,293,538

121,500

Motorola, Inc.

3,531,094

33,763

Nortel Networks Corp.

2,304,325

179,400

Novell, Inc.

1,659,450

97,200

Seagate Technology, Inc.

5,346,000

142,100

Sun Microsystems, Inc.

12,922,219

154,200

Unisys Corp.

2,245,538

TOTAL

73,331,296

Utilities--5.2%

86,600

Coastal Corp.

5,271,775

175,000

Edison International

3,587,500

213,200

Entergy Corp.

5,796,375

101,200

FPL Group, Inc.

5,009,400

39,600

Montana Power Co.

1,398,375

71,500

Williams Cos., Inc.

2,980,656

TOTAL

24,044,081

TOTAL COMMON STOCKS (IDENTIFIED COST $393,008,876)

441,682,381

Shares or
Principal
Amount

Value

PREFERRED STOCKS--2.1%

Consumer Cyclicals--0.2%

42,000

Cendant Corp., Conv. Pfd., $0.94

913,500

Financials--1.0%

67,000

Metropolitan Life Insurance Co., Conv. Pfd., $4.00

4,635,563

Transportation--0.9%

103,000

Union Pacific Capital Trust, Conv. Pfd.

4,302,207

TOTAL PREFERRED STOCKS (IDENTIFIED COST $8,657,961)

9,851,270

REPURCHASE AGREEMENT--1.4%³

6,210,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

6,210,000

TOTAL INVESTMENTS (IDENTIFIED COST $407,876,837)⁴

457,743,651

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, 2000, these securities amounted to $7,969,845 which represents 1.7% 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 $407,876,837. The net unrealized appreciation of investments on a federal tax basis amounts to $49,866,814 which is comprised of $109,867,810 appreciation and $60,000,996 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($457,712,439) at June 30, 2000.

The following acronyms are used throughout this portfolio:

ADR	--American Depositary Receipt
MBIA	--Municipal Bond Insurance Association

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $407,876,837)

457,743,651

Cash

870

Income receivable

604,541

Receivable for investments sold

442,357

TOTAL ASSETS

458,791,419

Liabilities:

Payable for investments purchased

1,045,045

Accrued expenses

33,935

TOTAL LIABILITIES

1,078,980

Net assets for 23,849,643 shares outstanding

457,712,439

Net Assets Consist of:

Paid in capital

400,520,495

Net unrealized appreciation of investments

49,866,814

Accumulated net realized gain on investments

2,817,338

Undistributed net investment income

4,507,792

TOTAL NET ASSETS

457,712,439

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$457,712,439 ÷ 23,849,643 shares outstanding

$19.19

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends (net of foreign taxes withheld of $47,290)

6,016,514

Interest

485,250

TOTAL INCOME

6,501,764

Expenses:

Investment adviser fee

1,712,489

Administrative personnel and services fee

171,940

Custodian fees

19,431

Transfer and dividend disbursing agent fees and expenses

14,247

Directors'/Trustees' fees

2,584

Auditing fees

9,807

Legal fees

4,902

Portfolio accounting fees

44,232

Share registration costs

9,574

Printing and postage

14,263

Miscellaneous

1,819

TOTAL EXPENSES

2,005,288

Expense Reduction:

Fees paid indirectly from directed broker arrangements

(3,559

)

Net expenses

2,001,729

Net investment income

4,500,035

Realized and Unrealized Gain (Loss) on Investments:

Net realized gain on investments

3,202,527

Net change in unrealized appreciation of investments

(27,948,642

)

Net realized and unrealized loss on investments

(24,746,115

)

Change in net assets resulting from operations

(20,246,080

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

4,500,035

4,330,731

Net realized gain on investments and foreign currency transactions ($3,202,527 and $13,064,865, respectively, as computed for federal tax purposes)

3,202,527

13,177,434

Net change in unrealized appreciation on investments

(27,948,642

)

10,004,857

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(20,246,080

)

27,513,022

Distributions to Shareholders:

Distributions from net investment income

(4,310,915

)

(3,909,272

)

Distributions from net realized gains on investments

(13,042,541

)

(39,204,562

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(17,353,456

)

(43,113,834

)

Share Transactions:

Proceeds from sale of shares

39,767,291

139,737,593

Net asset value of shares issued to shareholders in payment of distributions declared

17,353,452

43,113,823

Cost of shares redeemed

(39,234,810

)

(108,036,281

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

17,885,933

74,815,135

Change in net assets

(19,713,603

)

59,214,323

Net Assets:

Beginning of period

477,426,042

418,211,719

End of period (including undistributed net investment income of $4,507,792 and $4,318,672, respectively)

457,712,439

477,426,042

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value,
Beginning of Period

$20.82

$21.68

$19.63

$15.26

$12.80

$ 9.74

Income From
Investment Operations:

Net investment income

0.19

0.20

0.19

0.20

Net realized and unrealized gain (loss) on investments

(1.06

)

1.19

3.20

4.64

2.54

3.06

TOTAL FROM INVESTMENT OPERATIONS

(0.87

)

1.38

3.40

4.83

2.73

3.26

Less Distributions:

Distributions from net investment income

(0.19

)

(0.20

)

(0.10

)

(0.10

)

(0.18

)

(0.19

)

Distributions in excess of net investment income¹

(0.01

)

Distributions from net realized gain on investments

(0.57

)

(2.04

)

(1.25

)

(0.36

)

(0.09

)

TOTAL DISTRIBUTIONS

(0.76

)

(2.24

)

(1.35

)

(0.46

)

(0.27

)

(0.20

)

Net Asset Value,
End of Period

$19.19

$20.82

$21.68

$19.63

$15.26

$12.80

Total Return²

(4.25

6.67

17.62

32.34

21.58

33.71

Ratios to Average Net Assets:

Expense

0.88

%³

0.88

0.85

Net investment income

1.97

%³

0.95

1.06

1.18

1.54

2.03

Expenses waiver/reimbursement⁴

0.01

0.09

0.22

1.36

Supplemental Data:

Net assets, end of period (000 omitted)

$457,712

$477,426

$418,212

$305,796

$142,216

$48,514

Portfolio turnover

1 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.

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

3 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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 Valuation

Listed equity securities are valued at the last sale price reported on 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. Securities for which no quotations are readily available (including restricted securities) are valued at their fair value as determined in good faith using methods approved by the Board of Trustees ("Trustees").

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.

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

Investment Income, Expenses and Distributions

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 provision for federal tax is 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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

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 the Board of Trustees. The Fund will not incur any registration costs upon such resales. The Fund's restricted securities are valued at the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined by the fund's pricing committee.

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 a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

2,025,252

6,640,732

Shares issued to shareholders in payment of distributions declared

883,561

2,130,129

Shares redeemed

(1,990,181)

(5,132,532)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

918,632

3,638,329

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment Adviser fee equal to 0.75% of the Fund's average daily net assets.

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 a scale that ranges from 0.15% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

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, 2000, 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.

Expense Reduction

The Trust directs certain portfolio trades to a broker, that in turn, pays a portion of the Fund's operating expenses. For the six months ended June 30, 2000, the Fund's expenses were reduced by $3,559 under these arrangements.

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, 2000, were as follows:

Purchases	$	119,839,469

Sales	$	110,912,337

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Variable investment options 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 investment options involves investment risk, including the possible loss of principal.

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

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated American Leaders Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

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

This report covers the six-month period from January 1, 2000 through June 30, 2000. It begins with a commentary by the fund's portfolio managers, which is followed by a complete listing of the fund's growth stock holdings and financial statements.

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 like Alcoa, America Online, AT&T, Apple Computer, Home Depot, Morgan Stanley, Dean Witter, Pfizer and Wal-Mart.

This diversified portfolio produced a six-month total return of (2.41%) through capital gain distribution of $2.306 and a net asset value decrease of $2.67.¹ On June 30, 2000, net assets reached $150 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,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

1 Past performance is no guarantee 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. The performance information presented does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

Investment Review

The Federated Growth Strategies Fund II total return was (2.41%) for the six-month reporting period.¹ The average fund within the Lipper Multi-Cap Growth Fund universe was up 5.8%.² The Federated Growth Strategies Fund II lagged its peers as it tends to have a portfolio of faster-growing growth stocks than the average fund in its Lipper peer universe. Stocks within Technology, Consumer Staples (mainly media and cable/satellite-to-the-home) and Communication Services were the hardest hit and were the primary reason for the fund's relative underperformance. Consumer staples were particularly difficult as our sector exposure traded off while the sector in general was up for the six-month reporting period.

The fund made very modest strategic changes within the portfolio during the reporting period. The changes in sector weightings were generally driven by the relative performance of the sectors (Technology and Consumer Staples became smaller; Health Care, larger). We do not foresee any major changes in the near future as the opportunities to find attractive growth stocks still appear strongly biased toward the sectors of Technology, Communication Services and Health Care.³ This should be especially true as the economy cools, weighing on the growth potential of the more cyclically sensitive sectors. The median market capitalization of the fund moved down modestly to $14 billion.

The six-month reporting period ended with the faster, higher-risk growth stocks being sold off in favor of almost anything else. The market's apprehension became manifest in March and was fueled by a variety of events, the most important of which was continued Federal Reserve Board tightening (and the prospects for more through the summer). April and May were particularly challenging for faster growth stocks as inflation fears gained strength and investors fled higher price to earnings stocks in every sector. The beginning of June saw the start of a string of economic indicators that pointed to signs that the economy may be starting to cool off. The most prominent indicator was the Nonfarm Payrolls, which showed that tight labor markets may be starting to slacken. With these signs, technology and other faster-growth stocks began to rally off their lows as we moved through June.

2 Lipper figures represent the average of the total returns reported by all of the funds designated by Lipper Analytical Services, Inc. as falling into the category indicated. Lipper returns do not take sales charges into account.

3 Funds that have a higher concentration of investments in a specific industry or sector, such as technology, may be subject to a higher degree of market risk than funds whose investments are more diversified.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value

COMMON STOCKS--98.4%

Basic Materials--1.1%

37,200

Alcoa, Inc.

1,078,800

22,900

Westvaco Corp.

568,206

TOTAL

1,647,006

Capital Goods--4.9%

27,400

Flextronics International Ltd.

1,882,038

16,125

Molex, Inc.

776,016

23,900

Sanmina Corp.

2,043,450

19,600

Sealed Air Corp.

1,026,550

33,900

Tyco International Ltd.

1,606,012

TOTAL

7,334,066

Communication Services--8.3%

20,600

Adelphia Business Solutions, Inc.

477,663

21,800

ITXC Corp.

771,856

18,500

Level 3 Communications, Inc.

1,628,000

83,600

McLeodUSA, Inc., Class A

1,729,475

27,200

NEXTEL Communications, Inc., Class A

1,664,300

29,400

NEXTLINK Communications, Inc.

1,115,363

8,700

NTL, Inc.

520,912

22,900

Sprint Corp. (Fon Group)

1,167,900

13,000

Sprint Corp. (PCS Group)

773,500

9,700

VoiceStream Wireless Corp.

1,128,080

44,900

WinStar Communications, Inc.

1,520,987

TOTAL

12,498,036

Consumer Cyclicals--5.9%

22,000

BJ's Wholesale Club, Inc.

726,000

27,100

Circuit City Stores, Inc.

899,381

43,300

Gemstar International Group Ltd.

2,660,920

23,550

Home Depot, Inc.

1,176,028

28,200

MIPS Technologies, Inc.

1,198,500

11,200

Omnicom Group, Inc.

997,500

11,200

Wal-Mart Stores, Inc.

645,400

16,200

Xcelera.com, Inc.

550,800

TOTAL

8,854,529

Shares

Value

COMMON STOCKS--continued

Consumer Staples--7.4%

81,400

AT&T Corp. - Liberty Media Group, Inc., Class A

1,973,950

38,200

EchoStar Communications Corp., Class A

1,264,778

36,700

News Corp., Ltd., ADR

1,743,250

12,400

Patterson Dental Co.

632,400

58,700

Philip Morris Cos., Inc.

1,559,219

25,500

UnitedGlobalCom, Inc., Class A

1,192,125

9,900

Univision Communications, Inc., Class A

1,024,650

17,600

Westwood One, Inc.

600,600

27,500

XM Satellite Radio Holdings, Inc., Class A

1,029,531

TOTAL

11,020,503

Energy--7.1%

29,000

Diamond Offshore Drilling, Inc.

1,018,625

36,800

ENSCO International, Inc.

1,317,900

46,500

Global Marine, Inc.

1,310,719

60,800

Grant Prideco, Inc.

1,520,000

14,700

Murphy Oil Corp.

873,731

30,700

Nabors Industries, Inc.

1,275,969

26,700

Noble Drilling Corp.

1,099,706

50,500

R&B Falcon Corp.

1,189,906

27,500

Weatherford International, Inc.

1,094,844

TOTAL

10,701,400

Financials--6.2%

24,900

American Express Co.

1,297,913

32,700

Citigroup, Inc.

1,970,175

19,700

Knight Trading Group, Inc.

587,306

17,000

Lehman Brothers Holdings, Inc.

1,607,562

9,500

Merrill Lynch & Co., Inc.

1,092,500

18,500

Morgan Stanley, Dean Witter & Co.

1,540,125

13,450

Providian Financial Corp.

1,210,500

TOTAL

9,306,081

Health Care--11.8%

4,900

Affymetrix, Inc.

809,113

12,200

American Home Products Corp.

716,750

11,500

Biogen, Inc.

741,750

Shares

Value

COMMON STOCKS--continued

Health Care--continued

15,100

Chiron Corp.

717,250

11,900

Forest Laboratories, Inc., Class A

1,201,900

9,400

Genentech, Inc.

1,616,800

8,900

Human Genome Sciences, Inc.

1,187,038

17,100

Lilly (Eli) & Co.

1,707,863

14,000

Maxim Pharmaceuticals, Inc.

719,250

14,400

Medimmune, Inc.

1,065,600

8,500

Millennium Pharmaceuticals, Inc.

950,937

22,800

Novoste Corp.

1,390,800

20,100

PE Corp.-PE Biosystems Group

1,324,087

47,368

Pfizer, Inc.

2,273,664

25,800

Pharmacia Corp.

1,333,537

TOTAL

17,756,339

Technology--41.8%

45,600

ACTV, Inc.

681,150

15,300

ASM Lithography Holding NV

675,113

10,800

Alteon Websystems, Inc.

1,080,675

31,000

America Online, Inc.

1,635,250

32,800

American Tower Systems Corp.

1,367,350

12,200

Apple Computer, Inc.

638,975

15,800

Applied Materials, Inc.

1,431,875

6,000

Ariba, Inc.

588,281

8,000

Broadcom Corp.

1,751,500

23,800

Broadvision, Inc.

1,209,338

4,900

Brocade Communications Systems, Inc.

899,073

9,400

CIENA Corp.

1,566,863

21,200

Cisco Systems, Inc.

1,347,525

6,600

Commerce One, Inc.

299,578

9,800

Copper Mountain Networks, Inc.

863,625

6,600

Corning, Inc.

1,781,175

10,200

Cree Research, Inc.

1,361,700

15,300

Cymer, Inc.

730,575

35,200

EMC Corp., Mass

2,708,200

24,200

Exodus Communications, Inc.

1,114,713

15,900

F5 Networks, Inc.

867,544

Shares

Value

COMMON STOCKS--continued

Technology--continued

5,900

Foundry Networks, Inc.

651,950

95,200

Genuity, Inc., Class A

871,675

15,200

iGATE Capital Corp.

209,000

10,000

Inktomi Corp.

1,182,500

13,650

Interlink Electronics, Inc.

571,594

11,900

Internap Network Services Corp.

494,036

11,500

JDS Uniphase Corp.

1,378,563

10,200

Juniper Networks, Inc.

1,484,738

13,500

Micron Technology, Inc.

1,188,844

41,600

Nokia Oyj, Class A, ADR

2,077,400

21,900

Novellus Systems, Inc.

1,238,719

37,600

Oracle Corp.

3,160,750

13,900

PMC-Sierra, Inc.

2,469,856

7,000

Phone.com, Inc.

455,875

16,900

Portal Software, Inc.

1,079,487

17,300

QLogic Corp.

1,142,881

10,400

Qualcomm, Inc.

624,000

21,500

RF Micro Devices, Inc.

1,883,937

22,800

RealNetworks, Inc.

1,152,825

63,500

SCG Holding Corp.

1,389,062

8,000

Siebel Systems, Inc.

1,308,500

21,100

Sun Microsystems, Inc.

1,918,781

11,000

Sycamore Networks, Inc.

1,214,125

47,600

Telefonaktiebolaget LM Ericsson, Class B, ADR

952,000

7,800

Verisign, Inc.

1,376,700

10,900

Veritas Software Corp.

1,231,870

37,400

Vitesse Semiconductor Corp.

2,751,237

28,000

Xilinx, Inc.

2,311,750

3,200

Yahoo, Inc.

396,400

TOTAL

62,769,133

Transportation--0.5%

15,400

Expeditors International Washington, Inc.

731,500

Shares or
Principal
Amount

Value

COMMON STOCKS--continued

Utilities--3.4%

15,300

Calpine Corp.

1,005,975

12,700

Duke Energy Corp.

715,963

20,286

Dynegy, Inc.

1,385,787

30,500

Enron Corp.

1,967,250

TOTAL

5,074,975

TOTAL COMMON STOCKS (IDENTIFIED COST $101,583,336)

147,693,568

REPURCHASE AGREEMENT--1.5%

2,250,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000

2,250,000

TOTAL INVESTMENTS (IDENTIFIED COST $103,833,336)²

149,943,568

1 Non-income producing security.

2 The cost of investments for federal tax purposes amounts to $103,833,336. The net unrealized appreciation of investments on a federal tax basis amounts to $46,110,232 which is comprised of $52,537,648 appreciation and $6,427,416 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($150,060,001) at June 30, 2000.

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, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $103,833,336)

149,943,568

Cash

630

Income receivable

43,256

Receivable for investments sold

1,187,031

TOTAL ASSETS

151,174,485

Liabilities:

Payable for investments purchased

1,104,068

Accrued expenses

10,416

TOTAL LIABILITIES

1,114,484

Net assets for 5,319,811 shares outstanding

150,060,001

Net Assets Consist of:

Paid in capital

99,621,773

Net unrealized appreciation of investments

46,110,232

Accumulated net realized gain on investments

4,636,459

Net operating loss

(308,463

)

TOTAL NET ASSETS

150,060,001

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$150,060,001 ÷ 5,319,811 shares outstanding

$28.21

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends (net of foreign taxes withheld of $3,863)

203,117

Interest

101,848

TOTAL INCOME

304,965

Expenses:

Investment adviser fee

538,477

Administrative personnel and services fee

62,158

Custodian fees

7,692

Transfer and dividend disbursing agent fees and expenses

21,459

Directors'/Trustees' fees

999

Auditing fees

6,430

Legal fees

3,297

Portfolio accounting fees

22,225

Share registration costs

5,400

Printing and postage

14,739

Miscellaneous

2,803

TOTAL EXPENSES

685,679

Waiver and Expense Reduction:

Waiver of investment adviser fee

(71,120

)

Fees paid indirectly from directed broker arrangements

(1,131

)

TOTAL WAIVER AND EXPENSE REDUCTION

(72,251

)

Net expenses

613,428

Net operating loss

(308,463

)

Realized and Unrealized Gain (Loss) on Investments:

Net realized gain on investments

4,838,941

Net change in unrealized appreciation of investments

(8,993,567

)

Net realized and unrealized loss on investments

(4,154,626

)

Change in net assets resulting from operations

(4,463,089

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net operating loss

(308,463

)

(311,592

)

Net realized gain on investments ($4,838,941 and $14,421,532, respectively, as computed for federal tax purposes)

4,838,941

14,437,134

Net change in unrealized appreciation on investments

(8,993,567

)

37,434,197

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(4,463,089

)

51,559,739

Distributions to Shareholders:

Distributions from net realized gains

(10,631,541

)

Share Transactions:

Proceeds from sale of shares

32,121,591

26,190,499

Net asset value of shares issued to shareholders in payment of distributions declared

10,631,529

Cost of shares redeemed

(10,161,797

)

(7,933,607

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

32,591,323

18,256,892

Change in net assets

17,496,693

69,816,631

Net Assets:

Beginning of period

132,563,308

62,746,677

End of period

150,060,001

132,563,308

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value, Beginning of Period

$30.88

$17.91

$16.14

$12.80

$10.30

$10.00

Income From Investment Operations:

Net investment income (net operating loss)

(0.06

)

(0.07

)

(0.04

)²

0.02

0.05

0.03

Net realized and unrealized gain (loss) on investments

(0.30

)

13.04

2.83

3.41

2.45

0.27

TOTAL FROM INVESTMENT OPERATIONS

(0.36

)

12.97

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

(2.31

)

(1.00

)

(0.07

)

TOTAL DISTRIBUTIONS

(2.31

)

(1.02

)

(0.09

)

Net Asset Value, End of Period

$28.21

$30.88

$17.91

$16.14

$12.80

$10.30

Total Return⁴

(2.41

72.42

17.44

27.03

24.32

3.00

Ratios to Average Net Assets:

Expenses

0.86

%⁵

0.85

0.86

0.85

%⁵

Net investment income (net operating loss)

(0.43

%)⁵

(0.38

(0.25

0.14

0.55

1.91

%⁵

Expense waiver/reimbursement⁶

0.10

%⁵

0.20

0.31

0.67

3.87

76.95

%⁵

Supplemental Data:

Net assets, end of period (000 omitted)

$150,060

$132,563

$62,747

$47,280

$16,985

$368

Portfolio turnover

117

104

148

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 Less than $0.01 per share.

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

5 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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 Valuation

Repurchase Agreements

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more 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 a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

1,056,247

1,155,396

Shares issued to shareholders in payment of distributions declared

314,729

Shares redeemed

(343,406

)

(366,754

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

1,027,570

788,642

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser 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

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.

Expense Reduction

The Fund directs certain portfolio trades to a broker that in turn pays a portion of the Fund's operating expenses. For the six months ended June 30, 2000, the Fund's expenses were reduced by $1,131 under these arrangements.

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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases	$	93,791,027
Sales	$	71,864,456

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

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

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Growth Strategies Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

We are pleased to present your Semi-Annual Report for Federated High Income Bond Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month period from January 1, 2000 through June 30, 2000, for Primary Shares and the two-month period from May 1, 2000 through June 30, 2000, for Service Shares. It begins with a commentary by the fund's portfolio manager, which is followed by a complete listing of the fund's portfolio bond holdings and financial statements.

For the reporting periods, the fund's broadly diversified, carefully researched portfolio held nearly 300 high-yield, lower-rated bonds.¹ Individual share class total return performance for the periods, including income distribution, follows.²

Total Return

Dividends

Net Asset Value Change

Primary Shares

(1.92%)

$0.926

$10.24 to $9.12 = (10.94%)

Service Shares

1.22%

$0.000

$ 9.01 to $9.12 = 1.22%

On June 30, 2000, Primary Shares net assets totaled $234.2 million and Service Shares net assets totaled $252.

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.

Very sincerely yours,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

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

2 Past performance is no guarantee 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. The performance information presented does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

Investment Review

The high yield market generated unattractive absolute and relative returns for the six-month reporting period ended June 30, 2000. For example, the Lehman Brothers Aggregate Bond Index,¹ a measure of high quality bond performance, returned 3.99% during the period versus (1.21%) for the Lehman Brothers High Yield Bond Index.² Three primary reasons accounted for the high yield market's underperformance. First, credit risk remained high as the default rate for high yield securities ran at a 5.2% annualized rate during the reporting period. Second, the Federal Reserve Board's campaign to slow the domestic economy created the possibility that a sustained business slowdown may be near which could possibly lead to even higher default rates. Third, high yield investment options experienced substantial redemption activity from January through May placing considerable selling pressure on the market. A modest reversal of shareholder activity in June did lead to a substantial rally in the market. Illustrating the market's weakness, the yield spread between the Credit Suisse First Boston High Yield Bond Index³ and U.S. Treasury securities widened from 573 basis points to 728 basis points during the reporting period.

The fund, on a gross return basis, modestly underperformed the Lehman Brothers High Yield Bond Index.² Several factors impacted performance. On the positive side, the fund's underweighted positions in CCC-rated and below securities aided performance as that sector traded lower in sympathy with above average default rates and the second quarter weakness in the NASDAQ. The fund's overweighted positions in the chemical and telecommunications sectors positively impacted performance. Specific positions in Albecca and R&B Falcon substantially outperformed the market based on good operating performance while International Home Foods, Verio and US Xchange announced plans to be acquired which led to strong performance by their securities. On the negative side, the fund's underweighted positions in energy, gaming and BB-rated securities negatively impacted performance as did poor performance by Regal Cinemas, Dade, U.S. Office Products, AEI Resources and NationsRent.

1 Lehman Brothers Aggregate Bond Index is composed of securities from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original amount invested. Indexes are unmanaged and are rebalanced monthly by market capitalization. Investments cannot be made in an index.

2 Lehman Brothers High Yield Bond Index is an unmanaged index that includes all fixed income securities having a maximum quality rating of Ba1, a minimum amount outstanding of $100m, and at least one year to maturity. Investments cannot be made in an index.

3 Credit Suisse First Boston High Yield Index: Serves as a benchmark to evaluate the performance of low quality bonds. Low quality is defined as those bonds in the range from BBB to CCC and defaults. Investments cannot be made directly in an index.

Credit and mutual fund flows will dictate the performance of high yield securities in the near term. We expect default rates to remain around 5 percent for the balance of 2000 but believe the bulk of the performance impact of deteriorating credit has already been felt with many issuers trading at distressed levels. Positive mutual fund inflows in June and the rally they triggered illustrate the fundamental value in the market. However, for the rally to continue through the third quarter, credit conditions and mutual fund flows need to stabilize.

From a portfolio perspective, our largest industry exposure continues to be the telecommunications sector given the strong growth characteristics of the segment coupled with what we believe will be a very healthy merger and acquisition environment. We have also been maintaining our exposure to the beaten down health care segment as specific companies look attractive relative to the overall market. From an overall market perspective, we believe substantial value exists in two general areas, selective BB-rated securities which are trading cheap to historical levels and issuers trading in the $75 to $90 range where credit fundamentals are stable to improving. We are seeking to capitalize in these areas while being always cognizant of the overall credit environment.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Principal
Amount

Value

CORPORATE BONDS--89.5%

Aerospace & Defense--0.4%

750,000

Anteon Corp., Sr. Sub. Note, 12.00%, 5/15/2009

690,000

325,000

^{1, 2}

Condor Systems, Inc., Sr. Sub. Note, 11.875%, 5/1/2009

159,250

TOTAL

849,250

Auto/Truck--0.6%

725,000

HDA Parts System, Inc., Sr. Sub. Note, 12.00%, 8/1/2005

525,625

900,000

^{1, 2}

J.L. French Automotive Castings, Inc., Sr. Sub. Note, 11.50%, 6/1/2009

823,500

TOTAL

1,349,125

Automobile--2.2%

675,000

Accuride Corp., Sr. Sub. Note, 9.25%, 2/1/2008

577,125

425,000

Aftermarket Technology Co., Sr. Sub. Note, 12.00%, 8/1/2004

427,125

350,000

Aftermarket Technology Co., Sr. Sub. Note, Series D, 12.00%, 8/1/2004

351,750

750,000

Collins & Aikman Products Co., Sr. Sub. Note, 11.50%, 4/15/2006

721,875

1,600,000

Lear Corp., Sr. Note, 8.11%, 5/15/2009

1,465,184

850,000

Lear Corp., Sub. Note, 9.50%, 7/15/2006

828,750

750,000

Oxford Automotive, Inc., Sr. Sub. Note, 10.125%, 6/15/2007

693,750

TOTAL

5,065,559

Automotive--1.0%

1,750,000

American Axle & Manufacturing, Inc., Company Guarantee, 9.75%, 3/1/2009

1,649,375

825,000

Motor Coach Industries International, Inc., Company Guarantee, 11.25%, 5/1/2009

721,875

TOTAL

2,371,250

Banking--1.1%

2,800,000

GS Escrow Corp., Sr. Note, 7.125%, 8/1/2005

2,494,744

Beverage & Tobacco--0.2%

500,000

National Wine & Spirits, Inc., Sr. Note, 10.125%, 1/15/2009

483,750

Broadcast Radio & Television--5.2%

750,000

ACME Television, LLC, Sr. Disc. Note, 0/10.875%, 9/30/2004

720,000

255,300

AMFM, Inc., Deb., 12.625%, 10/31/2006

294,871

Principal
Amount

Value

CORPORATE BONDS--continued

Broadcast Radio & Television--continued

1,100,000

Big City Radio, Inc., Company Guarantee, 0/11.25%, 3/15/2005

621,500

665,500

Capstar Broadcasting Partners, Inc., Sub. Deb., 12.00%, 7/1/2009

770,316

450,000

Capstar Broadcasting Partners, Inc., Sr. Sub. Note, 9.25%, 7/1/2007

453,375

2,675,000

Chancellor Media Corp., Sr. Sub. Note, 8.125%, 12/15/2007

2,698,406

800,000

Chancellor Media Corp., Sr. Sub. Note, 8.75%, 6/15/2007

812,000

2,475,000

Fox/Liberty Networks, LLC, Sr. Disc. Note, 0/9.75%, 8/15/2007

1,936,687

550,000

Lamar Media Corp., Sr. Sub. Note, 9.625%, 12/1/2006

554,125

1,000,000

Orion Network Systems, Sr. Note, 11.25%, 1/15/2007

585,000

1,425,000

Sinclair Broadcast Group, Inc., Sr. Sub. Note, 9.00%, 7/15/2007

1,278,937

650,000

Sinclair Broadcast Group, Inc., Sr. Sub. Note, 10.00%, 9/30/2005

626,437

800,000

^{1, 2}

XM Satellite Radio, Inc., Unit, 14.00%, 3/15/2010

710,000

TOTAL

12,061,654

Building & Development--0.9%

700,000

American Builders & Contractors Supply Co., Inc., Sr. Sub. Note, 10.625%, 5/15/2007

577,500

450,000

Building Materials Corp. of America, Sr. Note, Series B, 8.625%, 12/15/2006

378,000

800,000

Formica Corp., Sr. Sub. Note, 10.875%, 3/1/2009

620,000

325,000

Juno Lighting, Inc., Sr. Sub. Note, 11.875%, 7/1/2009

271,375

350,000

NCI Building Systems, Inc., Sr. Sub. Note, Series B, 9.25%, 5/1/2009

330,750

TOTAL

2,177,625

Business Equipment & Services--1.7%

975,000

Buhrmann US, Inc., Sr. Sub. Note, 12.25%, 11/1/2009

1,018,875

300,000

Electronic Retailing Systems International, Inc., Sr. Disc. Note, 0/13.25%, 2/1/2004

63,750

2,700,000

Fisher Scientific International, Inc., Sr. Sub. Note, 9.00%, 2/1/2008

2,517,749

1,750,000

U.S. Office Products Co., Sr. Sub. Note, 9.75%, 6/15/2008

393,750

TOTAL

3,994,124

Cable Television--10.7%

4,703

Australis Media Ltd., Sr. Disc. Note, 5/15/2003

275,000

Australis Media Ltd., Unit, 15.75%, 5/15/2003

4,125

500,000

CSC Holdings, Inc., Sr. Note, 7.875%, 12/15/2007

484,765

875,000

CSC Holdings, Inc., Sr. Sub. Note, 9.25%, 11/1/2005

879,375

Principal
Amount

Value

CORPORATE BONDS--continued

Cable Television--continued

650,000

CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 5/15/2006

656,500

350,000

CSC Holdings, Inc., Sr. Sub. Deb., 9.875%, 2/15/2013

355,250

4,775,000

Charter Communications Holdings Capital Corp., Sr. Disc. Note, 0/9.92%, 4/1/2011

2,733,687

1,175,000

Diamond Cable Communications PLC, Sr. Disc. Note, 0/10.75%, 2/15/2007

901,812

525,000

Diamond Cable Communications PLC, Sr. Note, 9.125%, 2/1/2008

490,875

2,500,000

Echostar Communication Corp., Sr. Note, 9.375%, 2/1/2009

2,437,500

2,325,000

International Cabletel, Inc., Sr. Defd. Cpn. Note, Series B, 0/11.50%, 2/1/2006

2,150,625

725,000

Lenfest Communications, Inc., Sr. Sub. Note, 8.25%, 2/15/2008

718,236

1,050,000

NTL, Inc., Sr. Defd. Note, Series B, 0/12.375%, 10/1/2008

682,500

3,875,000

NTL, Inc., Sr. Defd., 0/9.75%, 4/1/2008

2,441,250

500,000

NTL, Inc., Sr. Note, 11.50%, 10/1/2008

502,500

825,000

Pegasus Communications Corp., Sr. Note, 9.625%, 10/15/2005

800,250

525,000

Pegasus Communications Corp., Sr. Note, 9.75%, 12/1/2006

509,250

300,000

Pegasus Media, Note, 12.50%, 7/1/2005

313,500

1,150,000

RCN Corp., Sr. Disc. Note, 0/11.125%, 10/15/2007

707,250

475,000

RCN Corp., Sr. Disc. Note, 0/9.80%, 2/15/2008

258,875

400,000

Rogers Cablesystems Ltd., Sr. Sub. GTD. Note, 11.00%, 12/1/2015

430,000

1,900,000

TeleWest PLC, Sr. Disc. Deb., 0/11.00%, 10/1/2007

1,826,375

400,000

TeleWest PLC, Sr. Note, 11.25%, 11/1/2008

408,000

900,000

UIH Australia/Pacific, Sr. Disc. Note, 0/14.00%, 5/15/2006

823,500

4,325,000

^{1, 2}

United International Holdings, Inc., Sr. Secd. Disc. Note, 0/10.75%, 2/15/2008

3,005,875

1,300,000

United Pan-Europe Communications NV, Sr. Disc. Note, Series B 0/13.375%, 11/1/2009

637,000

TOTAL

25,158,946

Chemicals & Plastics--4.6%

900,000

Buckeye Cellulose Corp., Sr. Sub. Note, 9.25%, 9/15/2008

893,250

200,000

Foamex LP, Sr. Sub. Note, 13.50%, 8/15/2005

172,000

925,000

General Chemical Industrial Products, Inc., Sr. Sub. Note, 10.625%, 5/1/2009

809,375

550,000

Georgia Gulf Corp., Company Guarantee, 10.375%, 11/1/2007

572,000

1,250,000

^{1, 2}

Huntsman Corp., Sr. Sub. Note, 9.50%, 7/1/2007

1,131,250

900,000

Huntsman ICI Chemicals LLC, Sr. Sub. Note, 10.125%, 7/1/2009

909,000

Principal
Amount

Value

CORPORATE BONDS--continued

Chemicals & Plastics--continued

475,000

ISP Holding, Inc., Sr. Note, 9.75%, 2/15/2002

460,750

250,000

Lyondell Chemical Co., Sr. Secd. Note, Series A, 9.625%, 5/1/2007

248,750

2,050,000

Lyondell Chemical Co., Sr. Sub. Note, 10.875%, 5/1/2009

2,039,750

650,000

Polymer Group, Inc., Sr. Sub. Note, 8.75%, 3/1/2008

549,250

2,075,000

Polymer Group, Inc., Sr. Sub. Note, 9.00%, 7/1/2007

1,774,125

875,000

Sterling Chemicals Holdings, Inc., Sr. Disc. Note, 0/13.50%, 8/15/2008

328,125

400,000

Sterling Chemicals Holdings, Inc., Sr. Sub. Note, 11.75%, 8/15/2006

330,000

750,000

Texas Petrochemicals Corp., Sr. Sub. Note, 11.125%, 7/1/2006

641,250

TOTAL

10,858,875

Clothing & Textiles--0.7%

350,000

Collins & Aikman Floorcoverings, Inc., Sr. Sub. Note, 10.00%, 1/15/2007

341,250

625,000

Dyersburg Corp., Sr. Sub. Note, 9.75%, 9/1/2007

65,625

850,000

GFSI, Inc., Sr. Sub. Note, 9.625%, 3/1/2007

616,250

575,000

^{1, 3}

Glenoit Corp., Sr. Sub. Note, 11.00%, 4/15/2007

83,375

150,000

Pillowtex Corp., Sr. Sub. Note, 9.00%, 12/15/2007

53,250

1,350,000

Pillowtex Corp., Sr. Sub. Note, 10.00%, 11/15/2006

492,750

TOTAL

1,652,500

Conglomerates--0.4%

1,150,000

Eagle Picher Industries, Inc., Sr. Sub. Note, 9.375%, 3/1/2008

977,500

Consumer Products--4.3%

1,350,000

Albecca, Inc., Company Guarantee, 10.75%, 8/15/2008

1,140,750

700,000

Amscan Holdings, Inc., Sr. Sub. Note, 9.875%, 12/15/2007

577,500

1,150,000

Chattem, Inc., Sr. Sub. Note, 8.875%, 4/1/2008

925,750

200,000

Diamond Brands Operating Corp., Sr. Sub. Note, 10.125%, 4/15/2008

107,000

250,000

Diamond Brands, Inc., Sr. Disc. Deb., 0/12.875%, 4/15/2009

23,750

775,000

^{1, 2}

Jostens, Inc., Unit, 12.75%, 5/1/2010

771,125

750,000

NBTY, Inc., Sr. Sub. Note, 8.625%, 9/15/2007

656,250

1,025,000

Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003

999,375

625,000

Revlon Consumer Products Corp., Sr. Note, 8.125%, 2/1/2006

453,125

Principal
Amount

Value

CORPORATE BONDS--continued

Consumer Products--continued

2,250,000

Revlon Consumer Products Corp., Sr. Sub. Note, 8.625%, 2/1/2008

1,147,500

725,000

Sealy Mattress Co., Company Guarantee, 0/10.875%, 12/15/2007

525,625

200,000

Sealy Mattress Co., Sr. Sub. Note, 9.875%, 12/15/2007

194,000

500,000

Sleepmaster LLC, Sr. Sub. Note, 11.00%, 5/15/2009

472,500

329,000

The Boyds Collection, Ltd., Sr. Sub. Note, 9.00%, 5/15/2008

289,520

650,000

True Temper Sports, Inc., Sr. Sub. Note, 10.875%, 12/1/2008

640,250

600,000

United Industries Corp., Sr. Sub. Note, 9.875%, 4/1/2009

363,000

725,000

Volume Services America, Inc., Sr. Sub. Note, 11.25%, 3/1/2009

667,000

TOTAL

9,954,020

Container & Glass Products--1.2%

650,000

^{1, 2}

Huntsman Packaging Corp., Unit, 13.00%, 6/1/2010

669,500

750,000

Owens-Illinois, Inc., Sr. Note, 7.35%, 5/15/2008

664,717

450,000

Owens-Illinois, Inc., Sr. Note, 8.10%, 5/15/2007

422,928

725,000

Russell Stanley Holdings, Inc., Sr. Sub. Note, 10.875%, 2/15/2009

496,625

550,000

^{1, 2}

Tekni-Plex, Inc., Sr. Sub. Note, 12.75%, 6/15/2010

551,375

TOTAL

2,805,145

Ecological Services & Equipment--2.3%

6,400,000

Allied Waste North America, Inc., Sr. Sub. Note, Series B, 10.00%, 8/1/2009

5,376,000

Electronics--1.7%

750,000

^{1, 2}

Exodus Communications, Inc., Sr. Note, 11.625%, 7/15/2010

757,500

600,000

^{1, 2}

Fairchild Semiconductor Corp., Sr. Sub. Note, 10.375%, 10/1/2007

609,000

400,000

^{1, 2}

Flextronics International Ltd., Sr. Sub. Note, 9.875%, 7/1/2010

407,000

260,000

SCG Holding Corp./Semiconductor Components Industries, LLC, Sr. Sub. Note, 12.00%, 8/1/2009

279,500

2,025,000

Telecommunications Techniques Co., LLC, Sr. Sub. Note, 9.75%, 5/15/2008

1,873,125

TOTAL

3,926,125

Farming & Agriculture--0.2%

475,000

Royster-Clark, Inc., 1st Mtg. Note, 10.25%, 4/1/2009

387,125

Principal
Amount

Value

CORPORATE BONDS--continued

Food & Drug Retailers--0.4%

350,000

Community Distributors, Inc., Sr. Note, 10.25%, 10/15/2004

278,250

800,000

Del Monte Foods Co., Sr. Disc. Note, Series B, 0/12.50%, 12/15/2007

610,000

750,000

Jitney-Jungle Stores of America, Inc., Sr. Sub. Note, 10.375%, 9/15/2007

9,375

TOTAL

897,625

Food Products--1.7%

1,200,000

Agrilink Foods, Inc., Company Guarantee, 11.875%, 11/1/2008

966,000

500,000

Aurora Foods, Inc., Sr. Sub. Note, 9.875%, 2/15/2007

297,500

650,000

Eagle Family Foods, Inc., Sr. Sub. Note, 8.75%, 1/15/2008

386,750

1,200,000

International Home Foods, Inc., Sr. Sub. Note, 10.375%, 11/1/2006

1,290,000

1,100,000

Triarc Consumer Products Group, LLC, Sr. Sub. Note, 10.25%, 2/15/2009

1,067,000

TOTAL

4,007,250

Food Services--0.7%

700,000

Advantica Restaurant Group, Sr. Note, 11.25%, 1/15/2008

465,500

800,000

Carrols Corp., Sr. Sub. Note, 9.50%, 12/1/2008

668,000

500,000

Domino's, Inc., Company Guarantee, 10.375%, 1/15/2009

466,250

TOTAL

1,599,750

Forest Products--0.4%

50,000

Container Corp. of America, Sr. Note, 11.25%, 5/1/2004

51,000

100,000

Stone Container Corp., Sr. Note, 11.50%, 10/1/2004

104,000

800,000

Stone Container Corp., Sr. Note, 12.58%, 8/1/2016

828,000

TOTAL

983,000

Health Care--5.2%

900,000

CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008

828,000

1,200,000

Columbia/HCA Healthcare Corp., Sr. Note, 6.91%, 6/15/2005

1,097,448

1,175,000

Dade International, Inc., Sr. Sub. Note, 11.125%, 5/1/2006

663,875

525,000

Everest Healthcare Services Corp., Sr. Sub. Note, 9.75%, 5/1/2008

443,625

525,000

Genesis Health Ventures, Inc., Sr. Sub. Note, 9.25%, 10/1/2006

49,875

350,000

Genesis Health Ventures, Inc., Sr. Sub. Note, 9.875%, 1/15/2009

43,750

575,000

Hanger Orthopedic Group, Inc., Sr. Sub. Note, 11.25%, 6/15/2009

503,125

275,000

Hudson Respiratory Care, Inc., Sr. Sub. Note, 9.125%, 4/15/2008

193,875

1,600,000

Kinetic Concepts, Inc., Sr. Sub. Note, 9.625%, 11/1/2007

1,192,000

200,000

Tenet Healthcare Corp., Sr. Note, 7.625%, 6/1/2008

184,500

Principal
Amount

Value

CORPORATE BONDS--continued

Health Care--continued

3,275,000

Tenet Healthcare Corp., Sr. Note, 8.00%, 1/15/2005

3,168,563

2,000,000

^{1, 2}

Tenet Healthcare Corp., Sr. Note, 9.25%, 9/1/2010

2,025,000

200,000

Tenet Healthcare Corp., Sr. Sub. Note, 8.125%, 12/1/2008

185,000

1,550,000

Tenet Healthcare Corp., Sr. Sub. Note, 8.625%, 1/15/2007

1,491,875

TOTAL

12,070,511

Hotels, Motels, Inns & Casinos--2.1%

350,000

Courtyard by Marriott II LP, Sr. Note, 10.75%, 2/1/2008

345,625

1,625,000

Florida Panthers Holdings, Inc., Company Guarantee, 9.875%, 4/15/2009

1,531,563

2,575,000

HMH Properties, Inc., Sr. Note, Series B, 7.875%, 8/1/2008

2,327,156

900,000

HMH Properties, Inc., Sr. Note, Series C, 8.45%, 12/1/2008

832,500

TOTAL

5,036,844

Industrial Products & Equipment--3.3%

480,000

Amphenol Corp., Sr. Sub. Note, 9.875%, 5/15/2007

487,200

400,000

Blount, Inc., Company Guarantee, 13.00%, 8/1/2009

410,000

450,000

Cabot Safety Acquisition Corp., Sr. Sub. Note, 12.50%, 7/15/2005

452,250

750,000

Continental Global Group, Inc., Sr. Note, 11.00%, 4/1/2007

198,750

700,000

Euramax International PLC, Sr. Sub. Note, 11.25%, 10/1/2006

668,500

400,000

Hexcel Corporation, Sr. Sub. Note, Series B, 9.75%, 1/15/2009

366,000

600,000

ISG Resources, Inc., Sr. Sub. Note, 10.00%, 4/15/2008

550,500

225,000

International Utility Structures, Inc., Sr. Sub. Note, 10.75%, 2/1/2008

185,625

1,075,000

MMI Products, Inc., Sr. Sub. Note, 11.25%, 4/15/2007

1,058,875

850,000

Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007

654,500

400,000

Neenah Corp., Sr. Sub. Note, 11.125%, 5/1/2007

308,000

875,000

Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003

818,125

1,775,000

WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 6/1/2008

1,633,000

TOTAL

7,791,325

Leisure & Entertainment--1.6%

1,164,000

AMF Group, Inc., Sr. Sub. Disc. Note, 0/12.25%, 3/15/2006

238,620

1,850,000

Premier Parks, Inc., Sr. Disc. Note, 0/10.00%, 4/1/2008

1,271,875

250,000

Premier Parks, Inc., Sr. Note, 9.25%, 4/1/2006

238,125

1,500,000

Premier Parks, Inc., Sr. Note, 9.75%, 6/15/2007

1,455,000

2,125,000

Regal Cinemas, Inc., Sr. Sub. Note, 9.50%, 6/1/2008

520,625

TOTAL

3,724,245

Principal
Amount

Value

CORPORATE BONDS--continued

Machinery & Equipment--2.3%

900,000

^{1, 3}

Clark Material Handling Corp., Sr. Note, 10.75%, 11/15/2006

139,500

300,000

Columbus McKinnon Corp., Sr. Sub. Note, 8.50%, 4/1/2008

265,500

875,000

Fairchild Corp., Sr. Sub. Note, 10.75%, 4/15/2009

590,625

500,000

National Equipment Services, Inc., Sr. Sub. Note, 10.00%, 11/30/2004

417,500

775,000

National Equipment Services, Inc., Sr. Sub. Note, Series C, 10.00%, 11/30/2004

647,125

1,000,000

NationsRent, Inc., Company Guarantee, 10.375%, 12/15/2008

645,000

1,575,000

United Rentals, Inc., Company Guarantee, 9.25%, 1/15/2009

1,425,375

850,000

United Rentals, Inc., Sr. Sub. Note, Series B, 9.00%, 4/1/2009

756,500

675,000

WEC Co., Sr. Note, 12.00%, 7/15/2009

570,375

TOTAL

5,457,500

Metals & Mining--0.1%

1,025,000

^{1, 2}

AEI Holding Co., Inc., Sr. Note, 10.50%, 12/15/2005

210,125

1,000,000

^{1, 2}

AEI Resources, Inc., Sr. Sub. Note, 11.50%, 12/15/2006

105,000

TOTAL

315,125

Oil & Gas--2.7%

450,000

Comstock Resources, Inc., Company Guarantee, 11.25%, 5/1/2007

459,000

1,000,000

Continental Resources, Inc., Sr. Sub. Note, 10.25%, 8/1/2008

900,000

300,000

DI Industries, Inc., Sr. Note, 8.875%, 7/1/2007

286,500

700,000

Forest Oil Corp., Sr. Sub. Note, 10.50%, 1/15/2006

715,750

900,000

Pogo Producing Co., Sr. Sub. Note, Series B, 10.375%, 2/15/2009

922,500

1,300,000

R&B Falcon Corp., Sr. Note, 12.25%, 3/15/2006

1,436,500

500,000

R&B Falcon Corp., Sr. Note, Series B, 6.75%, 4/15/2005

452,500

450,000

RBF Finance Co., Sr. Secd. Note, 11.375%, 3/15/2009

488,250

600,000

Triton Energy Corp., Sr. Note, 8.75%, 4/15/2002

597,000

TOTAL

6,258,000

Printing & Publishing--0.4%

1,075,000

Garden State Newspapers, Inc., Sr. Sub. Note, 8.75%, 10/1/2009

983,625

Real Estate--0.2%

550,000

Trizec Finance Ltd., Sr. Note, 10.875%, 10/15/2005

555,500

Principal
Amount

Value

CORPORATE BONDS--continued

Services--2.9%

625,000

Coinmach Corp., Sr. Note, 11.75%, 11/15/2005

603,125

3,050,000

Crown Castle International Corp., Sr. Disc. Note, 0/10.375%, 5/15/2011

1,875,750

500,000

Crown Castle International Corp., Sr. Disc. Note, 0/11.25%, 8/1/2011

312,500

600,000

Crown Castle International Corp., Sr. Note, 10.75%, 8/1/2011

612,000

375,000

Metricom, Inc., Company Guarantee, 13.00%, 2/15/2010

253,125

950,000

^{1, 2}

NATG Holdings LLC/Orius Capital Corp., Sr. Sub. Note, 12.75%, 2/1/2010

983,250

650,000

SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006

594,750

1,250,000

^{1, 2}

SpectraSite Holdings, Inc., Sr. Disc. Note, 0/12.875%, 3/15/2010

693,750

750,000

^{1, 2}

URS Corp., Sr. Sub. Note, Series B, 12.25%, 5/1/2009

761,250

TOTAL

6,689,500

Steel--0.4%

600,000

Metals USA, Inc., Sr. Sub. Note, 8.625%, 2/15/2008

513,000

550,000

Republic Technologies International, Inc., Company Guarantee, 13.75%, 7/15/2009

71,500

325,000

Ryerson Tull, Inc., Sr. Note, 9.125%, 7/15/2006

310,320

TOTAL

894,820

Surface Transportation--2.0%

650,000

Allied Holdings, Inc., Sr. Note, 8.625%, 10/1/2007

578,500

700,000

^{1, 3}

AmeriTruck Distribution Corp., Sr. Sub. Note, Series B, 12.25%, 11/15/2005

17,500

1,000,000

Gearbulk Holding Ltd., Sr. Note, 11.25%, 12/1/2004

1,012,500

750,000

Railworks Corp., Sr. Sub. Note, 11.50%, 4/15/2009

723,750

750,000

Stena AB, Sr. Note, 8.75%, 6/15/2007

660,000

1,500,000

Stena AB, Sr. Note, 10.50%, 12/15/2005

1,477,500

300,000

Stena Line AB, Sr. Note, 10.625%, 6/1/2008

177,000

725,000

The Holt Group, Inc., Sr. Note, 9.75%, 1/15/2006

76,125

TOTAL

4,722,875

Telecommunications & Cellular--23.6%

500,000

Arch Communications, Inc., Sr. Note, Series B, 12.75%, 7/1/2007

402,500

1,850,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/8.94%, 8/15/2008

729,215

1,600,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/9.27%, 8/15/2007

765,920

1,150,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/10.80%, 5/15/2009

442,750

900,000

Centennial Cellular Corp., Sr. Sub. Note, 10.75%, 12/15/2008

904,500

900,000

Dolphin Telecom PLC, Sr. Disc. Note, 0/14.00%, 5/15/2009

319,500

700,000

E.Spire Communications, Inc., Sr. Disc. Note, 0/12.75%, 4/1/2006

302,750

Principal
Amount

Value

CORPORATE BONDS--continued

Telecommunications & Cellular--continued

4,800,000

Global Crossing Holdings Ltd., Sr. Note, 9.50%, 11/15/2009

4,632,000

900,000

Hermes Europe Railtel B.V., Sr. Note, 10.375%, 1/15/2009

751,500

1,375,000

Hermes Europe Railtel B.V., Sr. Note, 11.50%, 8/15/2007

1,210,000

1,625,000

Intermedia Communications, Inc., Sr. Disc. Note, 0/11.25%, 7/15/2007

1,291,875

1,400,000

Intermedia Communications, Inc., Sr. Disc. Note, 0/12.50%, 5/15/2006

1,337,000

1,250,000

Intermedia Communications, Inc., Sr. Disc. Note, Series B, 0/12.25%, 3/1/2009

743,750

650,000

Intermedia Communications, Inc., Sr. Note, 8.60%, 6/1/2008

601,250

450,000

Intermedia Communications, Inc., Sr. Note, 8.875%, 11/1/2007

424,125

3,250,000

Level 3 Communications, Inc., Sr. Disc. Note, 0/10.50%, 12/1/2008

1,950,000

2,775,000

Level 3 Communications, Inc., Sr. Note, 9.125%, 5/1/2008

2,504,438

1,900,000

McLeodUSA, Inc., Sr. Disc. Note, 0/10.50%, 3/1/2007

1,577,000

250,000

McLeodUSA, Inc., Sr. Note, 8.125%, 2/15/2009

226,250

375,000

McLeodUSA, Inc., Sr. Note, 8.375%, 3/15/2008

345,000

400,000

McLeodUSA, Inc., Sr. Note, 9.25%, 7/15/2007

388,000

375,000

McLeodUSA, Inc., Sr. Note, 9.50%, 11/1/2008

365,625

550,000

Metromedia Fiber Network, Inc., Sr. Note, 10.00%, 12/15/2009

541,750

2,100,000

Millicom International Cellular SA, Sr. Disc. Note, 0/13.50%, 6/1/2006

1,795,500

2,500,000

NEXTEL Communications, Inc., Sr. Disc. Note, 0/10.65%, 9/15/2007

1,975,000

3,425,000

NEXTEL Communications, Inc., Sr. Note, 9.375%, 11/15/2009

3,305,125

600,000

NEXTEL International, Inc., Sr. Disc. Note, 0/12.125%, 4/15/2008

394,038

390,000

NEXTEL Partners, Inc., Sr. Disc. Note, 0/14.00%, 2/1/2009

273,000

1,200,000

NEXTLINK Communications, Inc., Sr. Disc. Note, 0/9.45%, 4/15/2008

756,000

4,750,000

NEXTLINK Communications, Inc., Sr. Disc. Note, 0/12.25%, 6/1/2009

2,968,750

1,000,000

NEXTLINK Communications, Inc., Sr. Note, 9.00%, 3/15/2008

922,500

300,000

NEXTLINK Communications, Inc., Sr. Note, 10.75%, 6/1/2009

297,750

900,000

Northpoint Communications Group, Inc., Sr. Note, 12.875%, 2/15/2010

652,500

900,000

PSINet, Inc., Sr. Note, 10.00%, 2/15/2005

837,000

1,100,000

PSINet, Inc., Sr. Note, 11.00%, 8/1/2009

1,034,000

750,000

PSINet, Inc., Sr. Note, 11.50%, 11/1/2008

716,250

1,375,000

Qwest Communications International, Inc., Sr. Disc. Note, 0/9.47%, 10/15/2007

1,120,625

Principal
Amount
or Shares

Value

CORPORATE BONDS--continued

Telecommunications & Cellular--continued

600,000

^{1, 2}

Rhythms NetConnections, Inc., Sr. Note, 14.00%, 2/15/2010

435,000

1,750,000

Rogers Cantel Mobile, Inc., Sr. Sub. Note, 8.80%, 10/1/2007

1,750,000

650,000

Telesystem International Wireless, Inc., Sr. Disc. Note, 0/10.50%, 11/1/2007

393,250

1,525,000

Telesystem International Wireless, Inc., Sr. Disc. Note, 0/13.25%, 6/30/2007

1,075,125

1,650,000

Teligent AB, Sr. Disc. Note, 0/11.50%, 3/1/2008

800,250

1,000,000

Teligent AB, Sr. Note, 11.50%, 12/1/2007

795,000

1,575,000

Triton PCS Holdings, Inc., Sr. Disc. Note, 0/11.00%, 5/1/2008

1,157,625

775,000

US Unwired, Inc., Company Guarantee, Series B, 0/13.375%, 11/1/2009

430,125

725,000

US Xchange, LLC, Sr. Note, 15.00%, 7/1/2008

792,063

250,000

USA Mobile Communications, Inc., Sr. Note, 9.50%, 2/1/2004

186,250

650,000

Verio, Inc., Sr. Note, 10.625%, 11/15/2009

718,250

475,000

Verio, Inc., Sr. Note, 11.25%, 12/1/2008

529,625

500,000

Viatel, Inc., Sr. Note, 11.50%, 3/15/2009

382,500

850,000

Viatel, Inc., Unit, 0/12.50%, 4/15/2008

395,250

825,000

Viatel, Inc., Unit, 11.25%, 4/15/2008

622,875

2,900,000

VoiceStream Wireless Holding Corp., Sr. Disc. Note, 0/11.875%, 11/15/2009

1,957,500

400,000

VoiceStream Wireless Holding Corp., Sr. Note, 10.375%, 11/15/2009

418,000

1,250,000

Williams Communications Group, Inc., Sr. Note, 10.875%, 10/1/2009

1,225,000

1,864,000

^{1, 2}

WinStar Communications, Inc., Sr. Disc. Note, 0/14.75%, 4/15/2010

894,720

636,000

^{1, 2}

WinStar Communications, Inc., Sr. Note Deb., 12.75%, 4/15/2010

616,920

TOTAL

55,380,064

Utilities--0.1%

150,000

CMS Energy Corp., Sr. Note, 7.50%, 1/15/2009

134,466

TOTAL CORPORATE BONDS (IDENTIFIED COST $242,748,240)

209,445,342

PREFERRED STOCKS--3.0%

Banking--0.1%

10,000

California Federal Preferred Capital Corp., REIT Perpetual Pfd. Stock, Series A, $2.28

211,875

Broadcast Radio & Television--0.4%

600

Benedek Communications Corp., Sr. Exchangeable PIK

393,000

7,300

Sinclair Broadcast Group, Inc., Cumulative Pfd., $11.63

689,850

TOTAL

1,082,850

Shares

Value

PREFERRED STOCKS--continued

Cable Television--0.4%

1,006

Pegasus Communications Corp., Cumulative PIK Pfd., Series A, 12.75%

1,016,370

Food Services--0.0%

4,238

Nebco Evans Holding Co., Exchangeable Pfd. Stock

2,649

Health Care--0.1%

2,192

River Holding Corp., Sr. Exchangeable PIK

154,536

Industrial Products & Equipment--0.1%

150

Fairfield Manufacturing Co., Inc., Cumulative Exchangeable Pfd. Stock

128,250

^{1, 2}

International Utility Structures, Inc., Unit

18,063

100

^{1, 2}

International Utility Structures, Inc., Unit, $13.00

88,500

TOTAL

234,813

Oil & Gas--0.3%

582

R&B Falcon Corp., PIK Pfd., 13.875%

666,841

Printing & Publishing--1.2%

13,250

Primedia, Inc., Cumulative Pfd., Series D, $10.00

1,285,250

2,000

Primedia, Inc., Exchangeable Pfd. Stock, Series H, $2.16

171,000

14,400

Primedia, Inc., Pfd., $9.20

1,317,600

TOTAL

2,773,850

Telecommunications & Cellular--0.4%

666

NEXTEL Communications, Inc., Cumulative PIK Pfd., Series D, 13.00%

712,620

159

NEXTEL Communications, Inc., Exchangeable Pfd. Stock, Series E

154,230

TOTAL

866,850

TOTAL PREFERRED STOCKS (IDENTIFIED COST $7,814,826)

7,010,634

COMMON STOCKS--0.0%

Metals & Mining--0.0%

23,013

^{1, 3}

Royal Oak Mines, Inc.

115

Printing & Publishing--0.0%

^{1, 2, 3}

Medianews Group, Inc., Class A

7,500

TOTAL COMMON STOCKS (IDENTIFIED COST $4,057)

7,615

WARRANTS--0.1%

Business Equipment & Services--0.0%

300

^{1, 2, 3}

Electronic Retailing Systems International, Inc., Warrants

300

Cable Television--0.0%

1,175

UIH Australia/Pacific, Warrants

17,919

Chemicals & Plastics--0.0%

425

Sterling Chemicals Holdings, Inc., Warrants

3,719

Shares or
Principal
Amount

Value

WARRANTS--continued

Oil & Gas--0.1%

275

^{1, 2, 3}

R&B Falcon Corp., Warrants

144,444

Services--0.0%

525

Metricom, Inc., Warrants

10,631

Steel--0.0%

100

^{1, 2, 3}

Bar Technologies, Inc., Warrants

113

550

Republic Technologies International, Inc., Warrants

TOTAL

119

Telecommunications & Cellular--0.0%

800

^{1, 2, 3}

MetroNet Communications Corp., Warrants

104,000

TOTAL WARRANTS (IDENTIFIED COST $171,288)

281,132

REPURCHASE AGREEMENTS--6.0%⁴

14,135,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

14,135,000

TOTAL INVESTMENTS (IDENTIFIED COST $264,873,411)⁵

230,879,723

1 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At June 30, 2000, these securities amounted to $17,845,238 which represents 7.6% of net assets. Included in these amounts, securities which have been deemed liquid amounted to $16,683,310 which represents 7.1% of net assets.

2 Denotes a restricted security that has been deemed liquid by criteria approved by the fund's Board of Directors.

3 Non-income producing security.

4 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.

5 The cost of investments for federal tax purposes amounts to $264,873,411. The net unrealized depreciation of investments on a federal tax basis amounts to $33,993,688 which is comprised of $1,746,204 appreciation and $35,739,892 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($234,161,795) at June 30, 2000.

The following acronyms are used throughout this portfolio:

GTD	--Guaranteed
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, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $264,873,411)

230,879,723

Cash

582

Income receivable

4,592,611

Prepaid expenses

681

TOTAL ASSETS

235,473,597

Liabilities:

Payable for investments purchased

1,289,143

Accrued expenses

22,659

TOTAL LIABILITIES

1,311,802

Net assets for 25,686,549 shares outstanding

234,161,795

Net Assets Consist of:

Paid in capital

261,561,569

Net unrealized depreciation of investments

(33,993,688

)

Accumulated net realized loss on investments

(5,163,436

)

Undistributed net investment income

11,757,350

TOTAL NET ASSETS

234,161,795

Net Asset Value, Offering Price and Redemption Proceeds Per Share

Primary Shares:

$234,161,542 ÷ 25,686,521 shares outstanding

$9.12

Service Shares:

$252.47 ÷ 27.692 shares outstanding

$9.12

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends

433,008

Interest

12,154,858

TOTAL INCOME

12,587,866

Expenses:

Investment adviser fee

679,241

Administrative personnel and services fee

85,247

Custodian fees

7,281

Transfer and dividend disbursing agent fees and expenses

28,945

Directors'/Trustees' fees

1,448

Auditing fees

5,565

Legal fees

3,766

Portfolio accounting fees

37,265

Share registration costs

5,059

Printing and postage

19,630

Insurance premiums

894

Miscellaneous

3,289

TOTAL EXPENSES

877,630

Net investment income

11,710,236

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(3,292,122

)

Net change in unrealized depreciation of investments

(13,032,531

)

Net realized and unrealized loss on investments

(16,324,653

)

Change in net assets resulting from operations

(4,614,417

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

11,710,236

20,974,697

Net realized loss on investments ($(3,292,122) and $(1,810,599), respectively, as computed for federal tax purposes)

(3,292,122

)

(1,765,588

)

Net change in unrealized depreciation of investments

(13,032,531

)

(13,913,922

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(4,614,417

)

5,295,187

Distributions to Shareholders:

Distributions from net investment income

Primary Shares

(20,675,669

)

(17,123,350

)

Distributions from net realized gain on investments

Primary Shares

(1,456,394

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(20,675,669

)

(18,579,744

)

Share Transactions:

Proceeds from sale of shares

65,367,948

194,221,449

Net asset value of shares issued to shareholders in payment of distributions declared

20,675,665

18,579,744

Cost of shares redeemed

(65,680,198

)

(172,718,406

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

20,363,415

40,082,787

Change in net assets

(4,926,671

)

26,798,230

Net Assets:

Beginning of period

239,088,466

212,290,236

End of period (including undistributed net investment income of $11,757,350 and $20,722,783, respectively)

234,161,795

239,088,466

See Notes which are an integral part of the Financial Statements

Financial Highlights--Primary Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value, Beginning of Period

$10.24

$10.92

$10.95

$10.24

$ 9.79

$ 8.87

Income From Investment Operations:

Net investment income

0.50

0.88

0.87

0.88

0.85

Net realized and unrealized gain (loss) on investments

(0.69

)

(0.63

)

(0.57

)

0.48

0.45

0.89

TOTAL FROM INVESTMENT OPERATIONS

(0.19

)

0.25

0.30

1.36

1.33

1.74

Less Distributions:

Distributions from net investment income

(0.93

)

(0.86

)

(0.26

)

(0.61

)

(0.88

)

(0.82

)

Distributions from net realized gain on investments

(0.07

)

(0.07

)

(0.04

)

TOTAL DISTRIBUTIONS

(0.93

)

(0.93

)

(0.33

)

(0.65

)

(0.88

)

(0.82

)

Net Asset Value, End of Period

$ 9.12

$10.24

$10.92

$10.95

$10.24

$ 9.79

Total Return¹

(1.92

2.31

2.70

13.83

14.31

20.38

Ratios to Average Net Assets:

Expenses

0.78

%²

0.79

0.78

0.80

Net investment income

10.34

%²

9.20

9.01

8.70

9.23

9.27

Expense waiver/reimbursement³

0.09

0.59

3.40

Supplemental Data:

Net assets, end of period (000 omitted)

$234,162

$239,088

$212,290

$156,164

$66,043

$20,165

Portfolio turnover

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

2 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights--Service Shares

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

Period
Ended
(unaudited)
June 30,
2000

Net Asset Value, Beginning of Period

$ 9.01

Income From Investment Operations:

Net investment income

0.16

Net realized and unrealized loss on investments

(0.05

)

TOTAL FROM INVESTMENT OPERATIONS

0.11

Net Asset Value, End of Period

$ 9.12

Total Return²

1.22

Ratios to Average Net Assets:

Expenses

0.78

%³

Net investment income

10.34

%³

Supplemental Data:

Net assets, end of period (000 omitted)

Portfolio turnover

1 Reflects operations for the period from May 1, 2000 (date of initial public investment) to June 30, 2000.

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

3 Computed on an annualized basis.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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.

Effective May 1, 2000, the Fund commenced offering Services Shares and designated existing shares to be Primary Shares.

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 60 days or less at the time of purchase may be valued at amortized cost, which approximates fair market value. Securities for which there are no market quotations are valued at fair value according to procedures adopted by the Board of Trustees (the "Trustees").

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"). Dividend income and distributions to shareholders are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at fair value. The Fund offers multiple classes of shares, which differ in their respective distribution and service fees. All shareholders bear the common expenses of the Fund based on average daily net assets of each class, without distinction between share classes. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Federal Taxes

At December 31, 1999, the Fund, for federal tax purposes, had a capital loss carryforward of $1,810,599, which will reduce the Fund's taxable income arising from future net realized gains 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 2007.

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. 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 to the price provided by dealers in the secondary market or, if no market prices are available, at the fair value as determined by the Fund's pricing committee. Additional information on each restricted securities held at June 30, 2000 is as follows:

Security	Acquisition Date	Acquisition Cost
AmeriTruck Distribution Corp., 12.25%, 11/15/2005	11/10/1995 -- 10/22/1997	$715,134

Clark Material Handling Corp., 10.75%, 11/15/2006	10/23/1998	938,000

Dyersburg Corp., 9.75%, 9/1/2007	09/03/1997 -- 10/20/1997	636,938

Electronic Retailing Systems International, Inc., Warrants	01/21/1997	192,641

Glenoit Corp., 11.00%, 4/15/2007	03/26/1997 -- 08/19/1997	590,615

Royal Oak Mines, Inc.	07/31/1998 -- 02/24/1999	2,557

US Xchange, LLC, 15.00%, 7/1/2008	06/22/1998 -- 08/26/1999	724,438

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Six Months Ended
June 30, 2000

Year Ended
December 31, 1999

Primary Shares:

Shares

Amount

Shares

Amount

Shares sold

6,807,988

65,367,698

18,623,857

194,221,449

Shares issued to shareholders in payment of distributions declared

2,259,635

20,675,665

1,803,983

18,579,744

Shares redeemed

(6,719,555

)

(65,680,198

)

(16,532,486

)

(172,718,406)

NET CHANGE RESULTING FROM PRIMARY SHARES TRANSACTIONS

2,348,068

20,363,165

3,895,354

40,082,787

Period Ended
June 30, 2000¹

Service Shares:

Shares

Amount

Shares sold

250

Shares issued to shareholders in payment of distributions declared

Shares redeemed

NET CHANGE RESULTING FROM SERVICE SHARES TRANSACTIONS

250

NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS

2,348,096

20,363,415

1 Reflects operations for the period from May 1, 2000 (date of initial public investment) to June 30, 2000.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Administrative Fee

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholders Services Company ("FSSC"), the Fund may pay FSSC up to 0.25% of the 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, 2000, the Fund 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 in 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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases		$	24,103,454
Sales		$	19,546,071

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated High Income Bond Fund II

Primary Shares
Service Shares

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 2000

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
Cusip 313916843

G00433-02 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

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

This report covers the six-month period from January 1, 2000 through June 30, 2000. 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 total return by investing in companies based outside the United States.¹ At the end of the reporting period, the fund's $118-million portfolio was invested in 27 countries across more than 150 stocks. The fund's largest positions were in the United Kingdom, which represented 16.9% of the portfolio, and Japan, which represented 16.5% of the portfolio.

During the six-month reporting period, the fund produced a total return of (6.08%), capital gain distributions totaling $4.273 per share and a net asset value decrease of $5.20.²

I want to remind you that investing in international companies can be volatile. There will inevitably be periods of negative short-term fluctuation, such as this one, as well as periods of positive returns. Our group of global investment managers are optimistic about many countries' economic outlooks and continued enthusiasm for capitalism.

In this investment environment, I recommend that you add to your account on a regular basis to take advantage of price fluctuations by using the dollar-cost averaging method of investing, and to consider increasing a portion of your international investable dollars in the world's attractive markets.³

In the past two months, almost every international market has been affected by the rate increases imposed by the Federal Reserve Board ("the Fed"), although international markets do not normally correlate with domestic markets. The effects of the Fed's rate increase is to fend off fears of U.S. inflation and to slow U.S. economic growth, which affects markets worldwide. We believe the international markets will assert themselves as their respective economies mimic the United States' growth, and in many markets, as international equity prices become more attractive than U.S. stock valuations.

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

2 Past performance is no guarantee 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. The performance information presented does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

3 Systematic investing does not assure a profit or protect against loss in declining markets. Because dollar-cost-averaging involves continuous investment regardless of fluctuating price levels, investors should consider their financial ability to continue purchases during periods of low price levels.

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,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

Investment Review

An interview with the fund's portfolio manager, Alexandre de Bethmann, Vice President, Federated Global Investment Management Corp.

The 1999 tech rally continued through the first quarter of 2000.¹ However, this rally was short lived as old-line stocks such as food and beverage became too cheap to ignore going into the second quarter. This correction was further exacerbated by interest rate fears in the United States, which hurt technology, media and telecommunication (TMT) shares. This interest rate concern also hurt such markets as Hong Kong and Singapore. A bright spot was higher commodity prices such as oil, which drove the commodity sector to outperformance. Moreover, Japan was not immune from the TMT turmoil as such new economy favorites as Softbank Corp. and Hikaru Tsushin corrected sharply. In turn, investors rotated into better quality technology names like NEC Corp., and cyclical recovery plays like specialty retail and machinery stocks. Finally, Korea was also very volatile on the back of continued investment trust uncertainty, even though its economy continues to grow strongly. China was a stellar performer on the back of World Trade Organization admittance.

Federated International Equity Fund II produced a six-month total return of (6.08%).² This return was less than the (4.06%) return of the Morgan Stanley Capital International Europe, Australia, and Far East Index (EAFE) for the same period.³

Our continued overweight in TMT, which helped secure the fund's outperformance last year, has not worked so far this year. More specifically, some technology firms like United Pan-European Communications, Davnet and Wavcom, which have posted losses, fared especially badly during this reporting period. As a result, we have consolidated our TMT exposure to well established brands with visible earnings growth and trading at reasonable valuations, such as Alcatel, Philips and Nortel Networks.

1 Funds that have a higher concentration of investments in a specific industry or sector, such as technology, may be subject to a higher degree of market risk than funds whose investments are more diversified.

3 The EAFE Index is a market capitalization-weighted foreign securities index widely used to measure the performance of European, Australian, New Zealand, and Far Eastern stock markets. This index is unmanaged, and investments cannot be made in an index.

What individual stocks made a significant impact?

Diageo PLC (1.65% of net assets)--A UK based spirits company has been a good relative performer for the fund over this reporting period. A recovery in the spirits market plus asset rationalization of its Pillsbury, Guinness and Burger King subsidiaries make us enthusiastic about the prospects of this stock.

Alcatel (2.89% of net assets)--A leading telecom equipment company based in France. We consider this stock a value play within the sector given prospects for improving operating margins and growth in ADSL and optics.

NEC Corp. (0.93% of net assets)--A leading electronics company in Japan. This company should benefit from restructuring, accelerating demand for semiconductor chip sets and telecom equipment.

Recent purchases in the Federated International Equity Fund II include:

British Aerospace PLC (1.28% of net assets): A leading aerospace and defense company based in the United Kingdom.

Canon Inc. (0.56% of net assets): A leading Japanese imaging company.

Samsung Electronics Co. (0.53% of net assets): A leading electronics company in Korea.

We continue to remain bullish on the international equity markets, although stock selectivity is paramount. We continue to like large cap technology names like Nortel Networks Corp., Philips and Alcatel and would look to add on any pronounced weakness. We also continue to like Japan given reasonable valuations, restructuring potential and a recovering economy. On the emerging market front, we see good value in Korea and Hong Kong using a longer-term view.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value in
U.S. Dollars

COMMON STOCKS--92.7%

AUSTRALIA--2.7%

Electrical & Electronics--0.9%

134,800

Erg Ltd.

1,045,604

Media--1.5%

187,800

ISIS Communications Ltd.

94,343

20,500

News Corp. Ltd.

281,981

24,500

News Corp. Ltd., ADR

1,335,250

TOTAL

1,711,574

Software & Services--0.3%

67,950

Securenet Ltd.

374,678

TOTAL AUSTRALIA

3,131,856

BELGIUM--1.3%

Technology Hardware & Equipment--1.3%

33,800

Lernout and Hauspie Speech Products NV

1,489,313

Telecommunications--0.0%

196

Telinfo SA

TOTAL BELGIUM

1,489,315

BRAZIL--0.4%

Banks--0.4%

14,700

Unibanco Uniao de Bancos Brasileiros SA, GDR

422,625

CANADA--5.2%

Business & Public Services--1.1%

17,800

Descartes Systems Group, Inc.

529,189

63,200

Mosaic Group, Inc.

768,649

TOTAL

1,297,838

Electrical & Electronics--2.1%

16,100

C-MAC Industries

761,487

23,500

Nortel Networks Corp.

1,630,709

TOTAL

2,392,196

Energy--1.1%

1,168

Anderson Exploration Ltd.

21,229

36,000

Talisman Energy, Inc.

1,193,108

TOTAL

1,214,337

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

CANADA--continued

Telecommunications--0.9%

26,700

Quebecor World, Inc.

641,341

14,250

Rogers Communications, Inc., Class B

403,910

TOTAL

1,045,251

TOTAL CANADA

5,949,622

CHINA--0.3%

Energy--0.1%

657,000

Yanzhou Coal Mining Co., Class H

135,690

Transportation--0.2%

1,387,000

Zhejiang Expressway Co. Ltd.

236,637

TOTAL CHINA

372,327

DENMARK--1.0%

Health & Personal Care--1.0%

6,950

Novo-Nordisk, Class B

1,182,684

FINLAND--2.3%

Electrical & Electronics--1.7%

11,300

Nokia Oyj

576,625

27,950

Nokia Oyj, Class A

1,395,753

TOTAL

1,972,378

Electronic Components, Instruments--0.6%

22,200

Perlos Oyj

701,533

Software & Services--0.0%

1,400

Satama Interactive Oyj

5,413

TOTAL FINLAND

2,679,324

FRANCE--15.7%

Aerospace & Military Technology--0.5%

15,500

Thomson CSF

610,560

Broadcasting & Publishing--1.8%

1,700

Canal Plus

285,646

10,400

Lagardere S.C.A.

794,311

5,400

M6 Metropole Television

327,882

9,650

Societe Television Francaise 1

672,539

TOTAL

2,080,378

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

FRANCE--continued

Capital Goods--1.8%

2,015

Bouygues SA

1,346,605

4,725

Compagnie de St. Gobain

638,752

TOTAL

1,985,357

Consumer Durables & Apparel--1.0%

5,130

Christian Dior

1,163,183

Electrical & Electronics--4.6%

50,300

Alcatel

3,299,082

30,540

STMicroelectronics NV

1,924,332

TOTAL

5,223,414

Energy--1.5%

11,300

Total Fina SA, Class B

1,732,571

Food Beverage & Tobacco--0.6%

4,600

Groupe Danone

610,435

Insurance--0.8%

5,475

AXA

862,453

Pharmaceuticals & Biotechnology--1.0%

16,100

Aventis SA

1,175,088

Software & Services--0.0%

900

Liberty Surf Group SA

29,205

Telecommunications--0.4%

3,400

France Telecommunications

475,212

Utilities--1.7%

6,300

Suez Lyonnaise des Eaux

1,103,681

9,200

Vivendi

812,011

TOTAL

1,915,692

TOTAL FRANCE

17,863,548

GERMANY--8.1%

Automobiles--1.4%

52,400

Bayerische Motoren Werke AG

1,583,332

Banking--0.5%

18,495

Baader Wertpapierhandelsbank AG

577,390

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

GERMANY--continued

Business & Public Services--1.3%

3,060

GFK AG

151,240

3,000

Intershop Communications AG

1,354,720

TOTAL

1,505,960

Electrical & Electronics--2.3%

1,220

ADVA AG Optical Networking

693,017

5,600

Infineon Technologies AG

441,339

1,600

Ision Internet AG

71,793

9,400

Siemens AG

1,417,921

TOTAL

2,624,070

Electronic Components, Instruments--0.3%

3,050

Epcos AG

304,258

Financial Services--0.2%

1,650

DIS Deutsche Industrie Service

200,057

Pharmaceuticals & Biotechnology--0.7%

15,300

Schering AG

838,437

Telecommunications--0.8%

22,925

Suess Microtec AG

914,856

Wholesale & International Trade--0.6%

6,800

Medion AG

694,640

TOTAL GERMANY

9,243,000

GREECE--0.0%

Telecommunications--0.0%

4,038

Tiletypos SA

48,067

HONG KONG--2.2%

Automobiles--0.0%

220,000

Brilliance China Automotive Holdings Ltd.

37,817

Broadcasting & Publishing--0.5%

81,400

Television Broadcasting Ltd.

542,980

Commercial Services & Supplies--0.2%

275,000

Cosco Pacific Ltd.

216,952

Real Estate--0.3%

469,000

Amoy Properties Ltd.

312,847

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

HONG KONG--continued

Telecommunications--1.0%

3,400

China Telecom (Hong Kong) Ltd., ADR

604,563

264,000

China Unicom Ltd.

557,090

TOTAL

1,161,653

Utilities--0.2%

1,237,000

Beijing Datang Power

277,692

TOTAL HONG KONG

2,549,941

ISRAEL--0.3%

Software & Services--0.3%

18,000

Geo Interactive Media Group PLC

344,533

ITALY--0.8%

Automobiles--0.3%

22,500

Pininfarina SPA

379,350

Consumer Durables & Apparel--0.5%

41,950

Bulgari SPA

560,696

TOTAL ITALY

940,046

JAPAN--16.4%

Appliances & Household Durables--1.1%

14,000

Sony Corp.

1,306,253

Automobiles--0.4%

56,000

Yamaha Motor Co.

511,946

Banking--0.5%

145,000

Asahi Bank Ltd.

609,491

Broadcasting & Publishing--0.8%

1,410

Nippon TV Network

918,694

Business & Public Services--0.8%

27,500

Daiwabo Information System Co., Ltd.

497,620

6,000

Konami Co., Ltd.

378,870

TOTAL

876,490

Capital Goods--2.3%

61,000

Amada Co. Ltd.

517,412

83,000

Asahi Glass Co., Ltd.

926,959

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

JAPAN--continued

Capital Goods--continued

115,000

JGC Corp.

463,880

196,000

Kawasaki Heavy Industries Ltd.

299,251

87,000

Mitsubishi Heavy Industries Ltd.

385,373

TOTAL

2,592,875

Data Processing & Reproduction-0.6%

13,000

Canon, Inc.

646,906

Electrical & Electronics--2.6%

4,500

Hirose Electric Co., Ltd.

700,203

34,000

NEC Corp.

1,067,056

53,000

Toshiba Corp.

597,908

51,000

Yaskawa Electric Corp.

608,991

TOTAL

2,974,158

Electronic Component, Instruments--1.9%

4,900

Kyocera Corp.

830,790

21,000

Nikon Corp.

777,814

9,000

Taiyo Yuden Co.

563,216

TOTAL

2,171,820

Financial Services--1.0%

57,000

Nikko Securities Co. Ltd.

564,064

4,700

Takefuji Corp.

567,429

TOTAL

1,131,493

Food Beverage & Tobacco--0.5%

35,000

Fuji Oil Co. Ltd.

311,720

12,000

Katokichi Co.

303,662

TOTAL

615,382

Industrial Components--0.9%

27,000

Nippon Electric Glass Co., Ltd.

623,439

22,000

Sumitomo Electric Industries, Ltd.

376,947

TOTAL

1,000,386

Recreation, Other Consumer Goods--0.5%

15,000

Bandai Co., Ltd.

554,168

Retailing--0.5%

7,900

Paris Miki, Inc.

513,736

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

JAPAN--continued

Telecommunications--1.5%

DDI Corp.

471,043

NTT Mobile Communication Network, Inc.

568,022

Nippon Telegraph & Telephone Corp.

624,570

TOTAL

1,663,635

Utilities--0.5%

23,000

Tokyo Electric Power Co.

560,341

TOTAL JAPAN

18,647,774

KOREA--2.8%

Appliances & Household Durables--0.6%

1,835

Samsung Electronics Co.

607,264

Electrical & Electronics--1.3%

44,700

Hyundai Electronics Industries Co.

881,953

13,200

Samsung SDI Co. Ltd.

633,349

TOTAL

1,515,302

Telecommunications--0.9%

3,190

SK Telecom Co. Ltd.

1,044,237

TOTAL KOREA

3,166,803

MEXICO--0.4%

Telecommunications--0.4%

8,700

Telefonos de Mexico, Class L, ADR

496,988

NETHERLANDS--6.4%

Electrical & Electronics--4.3%

8,850

ASM International NV

232,350

8,950

ASM Lithography Holding NV

384,676

26,800

ASM Lithography Holding NV (NY Reg.)

1,182,550

39,650

BE Semiconductor Industries NV

618,911

47,200

Koninklijke (Royal) Philips Electronics NV

2,226,056

18,500

Toolex International NV

300,253

TOTAL

4,944,796

Food & Drug Retailing--1.5%

57,000

Ahold NV

1,677,705

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

NETHERLANDS--continued

Telecommunication Services--0.6%

1,200

OpenTV Corp., ADR

53,850

22,101

United Pan-Europe Communications NV, ADR

596,727

TOTAL

650,577

TOTAL NETHERLANDS

7,273,078

NORWAY--1.4%

Capital Goods--0.4%

15,800

Tomra Systems ASA

418,915

Energy--1.0%

43,400

Petroleum Geo-Services ASA, ADR

740,513

7,400

Smedvig ASA, Class A

133,675

16,700

Smedvig ASA, Class B

272,478

TOTAL

1,146,666

TOTAL NORWAY

1,565,581

PORTUGAL--1.1%

Telecommunications--1.1%

113,700

Portugal Telecom SA

1,276,541

SINGAPORE--0.6%

Technology Hardware & Equipment--0.6%

72,000

Chartered Semiconductor Manufacturing

629,531

SPAIN--0.3%

Broadcasting & Publishing--0.3%

8,390

Sogecable SA

298,130

SWEDEN--3.3%

Capital Goods--0.3%

23,400

SKF AB, Class B

391,327

Data Processing & Reproduction--0.6%

13,600

Modern Times Group MTG AB, Class B

647,619

Electrical & Electronics--1.3%

72,900

Telefonaktiebolaget LM Ericsson

1,442,296

Electronic Components, Instruments--0.4%

79,650

Readsoft AB

487,653

Health Care Equipment & Services--0.7%

97,400

Gambro AB, Class A

795,102

TOTAL SWEDEN

3,763,997

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

SWITZERLAND--0.9%

Business & Public Services--0.4%

110

Agefi Groupe SA

33,041

555

Publicitas Holding SA

415,068

TOTAL

448,109

Wholesale & International Trade--0.5%

2,900

Charles Voegele Holding AG

570,649

TOTAL SWITZERLAND

1,018,758

TAIWAN--1.4%

Electrical & Electronics--0.2%

14,700

Advanced Semiconductor Engineering Inc., GDR

248,063

Electronic Components, Instruments--1.2%

2,202

Macronix International Co. Ltd., ADR

56,289

33,565

Taiwan Semiconductor Manufacturing Co., ADR

1,300,644

TOTAL

1,356,933

TOTAL TAIWAN

1,604,996

THAILAND--0.5%

Electronic Components, Instruments --0.5%

69,600

Hana Microelectronics Co., Ltd.

545,429

UNITED KINGDOM--16.9%

Banking--1.5%

102,600

Royal Bank of Scotland PLC, Edinburgh

1,716,999

Capital Goods--1.9%

235,100

British Aerospace PLC

1,465,606

134,600

TI Group PLC

733,187

TOTAL

2,198,793

Data Processing & Reproduction--0.3%

40,400

Psion PLC

390,616

Electronic Components, Instruments--0.5%

17,816

ARM Holdings PLC, ADR

585,701

Energy Sources--0.5%

67,500

Enterprise Oil PLC

562,760

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

UNITED KINGDOM--continued

Food & Household Products--3.6%

93,100

Bass PLC

1,046,661

210,650

Diageo PLC

1,890,095

99,400

Reckitt Benckiser PLC

1,112,976

TOTAL

4,049,732

Health & Personal Care--0.5%

33,025

Shire Pharmaceuticals Group PLC

574,656

Insurance--0.4%

34,462

Prudential Corp. PLC

504,758

Media--0.9%

116,800

EMI Group PLC

1,060,380

Technology Hardware & Equipment--0.6%

46,246

Pace Micro Technology PLC

666,160

Telecommunication Services--2.7%

108,200

Cable & Wireless Communications PLC

1,831,997

15,600

Energis PLC

584,916

156,500

Vodafone AirTouch PLC

632,256

TOTAL

3,049,169

Transportation--2.7%

159,400

BAA PLC

1,278,297

112,400

Railtrack Group PLC

1,745,793

TOTAL

3,024,090

Utilities--0.8%

336,000

British Energy PLC

912,580

TOTAL UNITED KINGDOM

19,296,394

UNITED STATES--0.0%

Data Processing --0.0%

2,450

Infonet Services Corp., Class B

29,247

TOTAL COMMON STOCKS (IDENTIFIED COST $88,756,463)

105,830,135

Shares or
Principal
Amount

Value in
U.S. Dollars

PREFERRED STOCKS--0.1%

BRAZIL--0.1%

Metals-Steel--0.1%

12,300

Usinas Siderurgicas de Minas Gerais SA, Preference (identified cost $37,073)

56,879

REPURCHASE AGREEMENT--10.5%²

12,000,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

12,000,000

TOTAL INVESTMENTS (IDENTIFIED COST $100,793,536)³

117,887,014

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 $100,793,536. The net unrealized appreciation of investments on a federal tax basis amounts to $17,093,478 which is comprised of $19,708,972 appreciation and $2,615,494 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($114,112,671) at June 30, 2000.

The following acronyms are used throughout this portfolio:

ADR	--American Depositary Receipt
GDR	--Global Depositary Receipt

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $100,793,536)

117,887,014

Cash

3,672

Cash denominated in foreign currencies (identified cost $78,397)

78,256

Income receivable

166,731

Receivable for investments sold

3,162,115

Net receivable for foreign currency exchange contracts

2,870

TOTAL ASSETS

121,300,658

Liabilities:

Payable for investments purchased

7,092,056

Payable for capital gain taxes withheld

62,169

Accrued expenses

33,762

TOTAL LIABILITIES

7,187,987

Net assets for 5,084,863 shares outstanding

114,112,671

Net Assets Consist of:

Paid in capital

83,005,387

Net unrealized appreciation of investments and translation of assets and liabilities in foreign currency

17,097,267

Accumulated net realized gain on investments and foreign currency transactions

14,054,005

Accumulated net operating loss

(43,988

)

TOTAL NET ASSETS

114,112,671

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$114,112,671 ÷ 5,084,863 shares outstanding

$22.44

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends (net of foreign taxes withheld of $76,634)

400,750

Interest

480,492

TOTAL INCOME

881,242

Expenses:

Investment adviser fee

574,438

Administrative personnel and services fee

62,500

Custodian fees

38,500

Transfer and dividend disbursing agent fees and expenses

9,124

Directors'/Trustees' fees

795

Auditing fees

5,587

Legal fees

3,811

Portfolio accounting fees

30,083

Share registration costs

4,523

Printing and postage

14,732

Insurance premiums

587

Miscellaneous

2,213

TOTAL EXPENSES

746,893

Waivers:

Waiver of investment adviser fee

(26,592

)

Net expenses

720,301

Net investment income

160,941

Realized and Unrealized Loss on Investments and Foreign Currency Transactions:

Net realized gain on investments and foreign currency transactions (net of foreign taxes withheld of $4,027)

14,184,406

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

(22,349,498

)

Net realized and unrealized loss on investments and foreign currency transactions

(8,165,092

)

Change in net assets resulting from operations

(8,004,151

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income/operating loss

160,941

(207,702

)

Net realized gain on investments and foreign currency transactions ($14,184,406 and $17,728,885, respectively, as computed for federal tax purposes)

14,184,406

17,756,256

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

(22,349,498

)

28,576,156

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(8,004,151

)

46,124,710

Distributions to Shareholders:

Distributions from net realized gains on investments and foreign currency transactions

(17,739,949

)

(1,537,970

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS
TO SHAREHOLDERS

(17,739,949

)

(1,537,970

)

Share Transactions:

Proceeds from sale of shares

40,847,787

17,658,414

Net asset value of shares issued to shareholders in payment of distributions declared

17,739,927

1,537,970

Cost of shares redeemed

(23,831,245

)

(10,991,180

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

34,756,469

8,205,204

Change in net assets

9,012,369

52,791,944

Net Assets:

Beginning of period

105,100,302

52,308,358

End of period

114,112,671

105,100,302

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value, Beginning of Period

$27.64

$15.39

$12.27

$11.16

$10.35

$10.00

Income From Investment Operations:

Net investment income (net operating loss)

0.05

(0.02

)

0.03

0.07

0.11

0.07

Net realized and unrealized gain (loss) on investments and foreign currency transactions

(0.98

)

12.72

3.11

1.05

0.75

0.28

TOTAL FROM
INVESTMENT OPERATIONS

(0.93

)

12.70

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

(4.27

)

(0.45

)

(0.02

)

TOTAL DISTRIBUTIONS

(4.27

)

(0.45

)

(0.02

)

(0.01

)

(0.05

)

Net Asset Value, End of Period

$22.44

$27.64

$15.39

$12.27

$11.16

$10.35

Total Return³

(6.08

84.88

25.57

10.08

8.32

3.50

Ratios to Average Net Assets:

Expenses

1.25

%⁴

1.25

1.23

1.25

1.22

%⁴

Net investment income (net operating loss)

0.28

%⁴

(0.34

0.19

0.76

0.89

1.63

%⁴

Expense waiver/reimbursement⁵

0.05

%⁴

0.46

0.47

0.98

3.05

11.42

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$114,113

$105,100

$52,308

$36,575

$17,752

$4,760

Portfolio turnover

111

304

247

179

103

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 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more 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 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, 2000, the Fund had outstanding foreign currency commitment as set forth below:

Settlement Date

Contracts to
Deliver/Receive

In Exchange
For

Contracts at
Value

Unrealized
Appreciation
(Depreciation)

Contract Purchased:

7/3/2000

360,111 Pound Sterling

$ 542,166

$ 544,883

$ 2,717

7/5/2000

71,418 Pound Sterling

108,270

108,063

(207

)

Contracts Sold:

7/3/2000

507,432 Australian Dollar

$ 305,626

$ 303,469

$ 2,157

7/5/2000

829,986 Canadian Dollar

559,874

560,801

(927

)

7/3/2000

15,424,126 Japanese Yen

146,297

145,366

931

7/5/2000

10,506,825 Japanese Yen

99,815

99,023

792

7/5/2000

4,954,808 Swedish Krona

559,177

561,770

(2,593

)

NET UNREALIZED APPRECIATION ON FOREIGN CURRENCY EXCHANGE CONTRACTS

$ 2,870

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 rates 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. 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 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 a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

1,610,611

925,916

Shares issued to shareholders in payment of distributions declared

651,246

99,868

Shares redeemed

(979,914

)

(620,753

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

1,281,943

405,031

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Global Investment Management Corp., the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser 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

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 a scale that the ranges from 0.15% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

Shareholder Service 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.

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, 2000, the Fund amortized $1,146 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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases	$	129,049,127

Sales	$	112,125,261

RISKS OF FOREIGN INVESTING

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

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated International Equity Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

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

This high quality money market fund keeps your ready cash pursuing daily income while seeking to keep your principal stable,¹ and providing 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 (35.4%), variable rate notes (26.2%), loan participation notes (5.3%), short-term notes (1.9%), repurchase agreements (12.2%), corporate notes (7.7%), and certificates of deposit (11.1%).

During the reporting period, the fund paid dividends totaling $0.028 per share while maintaining a stable $1.00 share price. On June 30, 2000, net assets reached $163.9 million.

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

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

1 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek 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 money market instruments 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 past six months we have continued to see strong economic growth in the U.S. Thirty-year lows in the unemployment number, strong retail sales, increased home buying and strong productivity numbers led the Federal Reserve Board (the "Fed") to increase the federal funds target rate by 100 basis points. The Fed increased the interest rate in 25 basis point increments until May 2000, when it raised rates 50 basis points to 6.50%. During the past month we began to see signs of a moderate economic slowdown. Although we still think there is a risk of inflationary pressure, we think the Fed will remain on hold in the short term.

The 30-day commercial paper started the reporting period at 5.62% on January 3, 2000, and then rose as high as 6.58% on June 30, 2000. The commercial paper rates increased over this time frame in anticipation of the federal funds target rate increases.

The target average maturity range for Federated Prime Money Fund II remained in the 45-55 day target range for the entire reporting period, reflecting a positive position regarding Fed policy and the money market yield curve. 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, 2000, the net assets of Federated Prime Money Fund II decreased from $193.9 to $163.9 million while the 7-day net yield increased from 4.95% to 6.01%.¹ The effective average maturity of the fund on June 30, 2000, was 47 days.

1 Past performance is no guarantee of future results. Yields will vary. The performance information presented does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Principal
Amount

Value

SHORT-TERM NOTES--1.9%

Finance - Equipment--1.7%

772,062

CIT Equipment Collateral 2000-1, Class A1, 6.723%, 5/21/2001

772,090

124,071

Copelco Capital Funding LLC 1999-B, Class A-1, 5.937%, 10/18/2000

124,071

894,447

Copelco Capital Receivables LLC 2000-A, Class A-1, 6.507%, 5/14/2001

894,447

1,000,000

First Sierra Equipment Contract Trust 2000-2, Class A-1, 6.937%, 6/18/2001

1,000,000

TOTAL

2,790,608

Insurance--0.2%

264,214

Americredit Automobile Receivables Trust 2000-A, Class A1 (FSA INS) 6.040%, 2/5/2001

264,214

TOTAL SHORT-TERM NOTES

3,054,822

CERTIFICATES OF DEPOSIT--11.1%

Banking--11.1%

700,000

Australia & New Zealand Banking Group, Melbourne, 6.310%, 9/13/2000

699,969

3,200,000

Bank of Nova Scotia, Toronto, 6.880%, 4/3/2001 - 4/30/2001

3,199,370

700,000

Commerzbank AG, Frankfurt, 6.510%, 12/13/2000

700,031

500,000

Credit Agricole Indosuez, 6.870%, 3/28/2001

499,895

7,000,000

Deutsche Bank AG, 6.580%, 7/13/2000

7,000,000

1,000,000

Michigan National Bank, Farmington Hills, 6.900%, 4/3/2001

999,857

2,000,000

Royal Bank of Canada, Montreal, 6.460%, 10/23/2000

2,000,061

2,200,000

Svenska Handelsbanken, Stockholm, 6.765% - 6.880%, 3/22/2001 -- 4/30/2001

2,199,497

1,000,000

UBS AG, 6.130%, 11/29/2000

999,763

TOTAL CERTIFICATES OF DEPOSIT

18,298,443

COMMERCIAL PAPER--35.4%¹

Banking--15.4%

7,000,000

Barton Capital Corp., 6.560%, 7/11/2000

6,987,244

1,500,000

Den Danske Corp., Inc. (Den Danske Bank AS LOC) 6.630%, 12/26/2000

1,450,828

4,458,000

Gotham Funding Corp., 6.650% - 6.700%, 7/21/2000 - 7/28/2000

4,439,373

1,000,000

Internationale Nederlanden U.S. Funding Corp. (ING Bank NV LOC) 6.370%, 12/28/2000

968,150

4,000,000

Market Street Funding Corp. (PNC Bank, N.A. LOC) 6.560%, 7/17/2000

3,988,338

7,394,000

Park Avenue Receivables Corp., 6.560%, 7/17/2000

7,372,442

TOTAL

25,206,375

Principal
Amount

Value

COMMERCIAL PAPER--continued¹

Brokerage--6.7%

5,000,000

Goldman Sachs Group, Inc., 6.550%, 7/10/2000

4,991,813

6,000,000

Salomon Smith Barney Holdings, Inc., 6.600%, 7/13/2000

5,986,800

TOTAL

10,978,613

Container/Packaging--0.6%

1,000,000

Crown Cork & Seal Co., Inc., 6.930%, 7/14/2000

997,498

Finance - Commercial--10.9%

7,000,000

Amsterdam Funding Corp., 6.620%, 7/7/2000

6,992,277

5,000,000

Asset Securitization Cooperative Corp., 6.620%, 7/14/2000

4,988,047

5,000,000

Eureka Securitization Inc., 6.600%, 7/18/2000

4,984,417

1,000,000

General Electric Capital Corp., 6.220%, 10/18/2000

981,167

TOTAL

17,945,908

Insurance--1.8%

3,000,000

CXC, Inc., 6.090%, 8/25/2000

2,972,087

TOTAL COMMERCIAL PAPER

58,100,481

CORPORATE NOTES--7.7%

Banking--3.0%

5,000,000

Bank One, Illinois, N.A., 6.070% - 6.200%, 10/10/2000 -- 10/23/2000

4,999,292

Finance - Commercial--4.7%

2,700,000

Beta Finance, Inc. (Guaranteed by Beta Finance Corp.) 6.000% - 7.200%, 8/14/2000 - 6/28/2001

2,700,000

3,000,000

FINOVA Capital Corp., 6.570%, 3/19/2001

2,994,097

2,000,000

Sigma Finance, Inc. (Guaranteed by Sigma Finance Corp.) 6.780%, 2/28/2001

2,000,000

TOTAL

7,694,097

TOTAL CORPORATE NOTES

12,693,389

LOAN PARTICIPATION--5.3%

Electrical Equipment--0.4%

600,000

Mt. Vernon Phenol Plant Partnership (Guaranteed by General Electric Co.) 6.810%, 5/17/2001

600,000

Principal
Amount

Value

LOAN PARTICIPATION--continued

Finance - Automotive--4.3%

7,000,000

General Motors Acceptance Corp., Mortgage of PA (Guaranteed by General Motors Acceptance Corp.) 6.663%, 7/3/2000

6,997,409

Finance - Equipment--0.6%

1,000,000

Comdisco, Inc., 6.900%, 7/7/2000

1,000,000

TOTAL LOAN PARTICIPATION

8,597,409

NOTES - VARIABLE--26.2%²

Banking--14.6%

5,000,000

Abbey National Treasury Services, PLC (Abbey National Bank PLC, London LOC) 6.562%, 8/15/2000

4,996,276

105,000

Alabama State IDA (Wellborn Cabinet, Inc.) Tax Revenue Bonds (Fleet Bank N.A. LOC) 6.780%, 7/13/2000

105,000

1,325,000

Alder Creek Properties, LLC (KeyBank, N.A. LOC) 6.850%, 7/13/2000

1,325,000

1,000,000

Bond Holdings LP (SouthTrust Bank of Alabama, Birmingham LOC) 6.750%, 7/14/2000

1,000,000

5,000

Capital One Funding Corp., Series 1995-A (Bank One, Indiana, N.A. LOC) 6.700%, 7/13/2000

5,000

2,000,000

Chandler, AZ IDA, South Bay Circuits IDR, Series 1999B (Comerica Bank LOC) 6.730%, 7/12/2000

2,000,000

Comerica Bank, 6.630%, 7/10/2000

1,999,578

245,000

Edgefield County, SC, Series 1997 (Bondex Inc. Project) (HSBC Bank USA LOC) 6.780%, 7/13/2000

245,000

180,000

Franklin County, OH, Edison Welding, Series 1995 (Huntington National Bank, Columbus, OH LOC) 6.790%, 7/13/2000

180,000

4,600,000

Home City Ice Co. & H.C. Transport, Series 2000 (Firstar Bank, N.A. LOC) 6.760%, 7/13/2000

4,600,000

1,000,000

James F. Taylor, Series 1999 (SouthTrust Bank of Alabama, Birmingham LOC) 6.830%, 7/14/2000

1,000,000

380,000

La-Man Corp. (SouthTrust Bank of Alabama, Birmingham LOC) 6.830%, 7/14/2000

380,000

1,219,372

Liquid Asset Backed Securities Trust, Series 1997-1 (Westdeutsche Landesbank Girozentrale Swap Agreement) 6.651%, 7/31/2000

1,219,371

400,000

Lynn Haven, FL, Taxable Revenue Bond (Series 1998-B) (Bank One, Ohio, N.A. LOC) 6.900%, 7/13/2000

400,000

545,000

Madison, WI Community Development Authority, Series 1997-B Hamilton Point Apts. (Bank One, Wisconsin, N.A. LOC) 6.890%, 7/13/2000

545,000

Principal
Amount

Value

NOTES - VARIABLE--continued²

Banking--continued

780,000

Maryland Economic Development Corp. (Allfirst LOC) 6.780%, 7/14/2000

780,000

158,000

Maryland State IDFA, Human Genome, Series 1994 (Allfirst LOC) 6.670%, 7/7/2000

158,000

133,598

Rabobank Optional Redemption Trust, Series 1997-101, 6.281%, 7/31/2000

133,598

285,000

Roby Company Ltd. Partnership (Huntington National Bank, Columbus, OH LOC) 6.790%, 7/13/2000

285,000

1,090,000

Trap Rock Industries, Inc., Series 1997 (First Union National Bank, Charlotte, N.C. LOC) 6.830%, 7/19/2000

1,090,000

105,000

Vista Funding Corp., Series 1994-A (Fifth Third Bank of Northwestern OH LOC) 6.790%, 7/13/2000

105,000

1,400,000

Westdeutsche Landesbank Girozentrale, 6.568%, 7/31/2000

1,399,410

TOTAL

23,951,233

Finance - Commercial--3.3%

5,400,000

Sigma Finance, Inc. (Guaranteed by Sigma Finance Corp.) 6.651% - 7.010%, 7/31/2000

5,400,000

Finance - Equipment--0.6%

1,000,000

Copelco Capital Receivables LLC 2000-A, Class A2A, 6.130%, 3/19/2001

1,000,000

Homebuilding--0.8%

1,300,000

Centex Corp., 6.833%, 7/31/2000

1,300,000

Insurance--6.9%

1,000,000

Allstate Life Insurance Co., 6.785%, 7/31/2000

1,000,000

5,000,000

Anchor National Life Insurance Co., 6.370%, 7/31/2000

5,000,000

1,000,000

First Allmerica Financial Life Insurance Co., 6.647%, 8/31/2000

1,000,000

GE Life and Annuity Assurance Co., 6.940%, 9/30/2000

1,000,000

2,000,000

Jackson National Life Insurance Co., 6.740% - 6.908%, 7/31/2000

2,000,000

261,314

Liquid Asset Backed Securities Trust, Series 1997-3, Senior Notes (AMBAC INS) 6.740%, 7/31/2000

261,314

1,000,000

Travelers Insurance Co., 6.869%, 9/30/2000

1,000,000

TOTAL

11,261,314

TOTAL NOTES -- VARIABLE

42,912,547

Principal
Amount

Value

REPURCHASE AGREEMENTS--12.2%³

5,000,000

Bank of America, 6.930%, dated 6/30/2000, due 7/3/2000

5,000,000

10,000,000

Deutsche Bank Financial, Inc., 6.900%, dated 6/30/2000, due 7/3/2000

10,000,000

5,000,000

Donaldson, Lufkin and Jenrette Securities Corp., 6.600%, dated 6/30/2000, due 7/3/2000

5,000,000

TOTAL REPURCHASE AGREEMENTS

20,000,000

TOTAL INVESTMENTS (AT AMORTIZED COST)⁴

163,657,091

1 Each issue shows the rate of discount at the time of purchase.

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 ($163,918,136) at June 30, 2000.

The following acronyms are used throughout this portfolio:

AMBAC	--American Municipal Bond Assurance Corporation
FSA	--Financial Security Assurance
IDA	--Industrial Development Authority
IDFA	--Industrial Development Finance Authority
IDR	--Industrial Development Revenue
INS	--Insured
LOC	--Letter of Credit

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Investments in repurchase agreements

20,000,000

Investments in securities

143,657,091

Total investments in securities, at amortized cost and value

163,657,091

Cash

5,498

Income receivable

1,005,993

Prepaid expenses

36,835

TOTAL ASSETS

164,705,417

Liabilities:

Income distribution payable

766,662

Accrued expenses

20,619

TOTAL LIABILITIES

787,281

Net assets for 163,918,136 shares outstanding

163,918,136

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$163,918,136 ÷ 163,918,136 shares outstanding

$1.00

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Interest

4,831,406

Expenses:

Investment adviser fee

391,831

Administrative personnel and services fee

59,010

Custodian fees

5,295

Transfer and dividend disbursing agent fees and expenses

8,575

Directors'/Trustees' fees

949

Auditing fees

5,112

Legal fees

2,289

Portfolio accounting fees

19,775

Share registration costs

3,741

Printing and postage

21,540

Insurance premiums

3,791

Miscellaneous

1,691

TOTAL EXPENSES

523,599

Waiver:

Waiver of investment adviser fee

(6,382

)

Net expenses

517,217

Net investment income

4,314,189

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

4,314,189

6,421,458

Distributions to Shareholders:

Distributions from net investment income

(4,314,189

)

(6,421,458

)

Share Transactions:

Proceeds from sale of shares

433,786,516

594,965,372

Net asset value of shares issued to shareholders in payment of distributions declared

3,552,946

6,413,607

Cost of shares redeemed

(467,291,065

)

(510,605,822

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

(29,951,603

)

90,773,157

Change in net assets

(29,951,603

)

90,773,157

Net Assets:

Beginning of period

193,869,739

103,096,582

End of period

163,918,136

193,869,739

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value, Beginning of Period

$ 1.00

Income From Investment Operations:

Net investment income

0.03

0.05

Less Distributions:

Distributions from net investment income

(0.03

)

(0.05

)

(0.05

)

(0.05

)

(0.05

)

(0.05

)

Net Asset Value, End of Period

$ 1.00

Total Return¹

2.79

4.63

4.92

4.93

4.75

5.20

Ratios to Average Net Assets:

Expenses

0.66

%²

0.73

0.80

Net investment income

5.51

%²

4.60

4.80

4.84

4.68

5.12

Expense waiver/reimbursement³

0.01

%²

0.01

0.20

0.57

2.69

Supplemental Data:

Net assets, end of period (000 omitted)

$163,918

$193,870

$103,097

$59,659

$45,655

$17,838

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

2 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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

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. The Fund, along with other affiliated investment companies may utilize a joint account for the purpose of entering into one or more 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 Act.

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

433,786,516

594,965,372

Shares issued to shareholders in payment of distributions declared

3,552,946

6,413,607

Shares redeemed

(467,291,065

)

(510,605,822

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

(29,951,603

)

90,773,157

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion.

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Funds with administrative personnel and services. The fee paid to FServ is based on a scale that ranges from 0.15% to 0.075% of the average daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

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.

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Prime Money Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

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

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

For the six-month reporting period, the fund produced a total return of (1.26%). Dividend income paid totaled $0.427 per share, and the fund paid capital gains totaling $0.284 per share.² On June 30, 2000, net assets totaled $188.6 million.

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

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

1 International investing involves special risks.

Investment Review

In a turbulent period for the broad market, the utility sector had extraordinarily divergent results. Conventional electric and gas utilities were the strongest, companies tied to the tight markets for natural gas and power generation flourished, but many telecommunications stocks fell sharply despite fine growth prospects.

The Standard & Poor's (S&P) Utility Index returned 15.3%, and the S&P Communications Index returned (15.1%), for a blended market benchmark return of 0.1%.¹ The Federated Utility Fund II returned (1.26%).²

The generally negative returns from our relatively large stake in telecommunications stocks more than offset the generally positive returns from our large stake in natural gas stocks.³ Though the growth in demand for new telecommunications services remains robust, investors seemed troubled by the uncertainty of the rapid changes occurring in the industry along with regulatory actions. Emerging telecommunications company stocks were hit hard despite excellent growth prospects. Our convertible holding of Winstar returned (24.0%) during the reporting period. At the other extreme, our large holding of U.S. West returned 21.0% as it approached the closing of its merger with Qwest Communications. Leading foreign carriers were down as well, as British Telecom, for example, declined 26.0% during the reporting period.

Despite the generally weak performance of the telecommunications sector, we consider the stocks attractive. The telecommunications sector continues to grow faster than the overall economy, and the stocks seem undervalued, particularly on a cash flow to growth basis.

Natural gas continued to benefit from record high natural gas prices. El Paso Energy, our largest holding in the sector, returned 32.0%. This diversified gas company's activities range from the well head to the local gas utility. We consider its shares undervalued still, as the company's exploration, production and power generation activities benefit from a shortage of natural gas and electricity.

Electric utilities held up well amid the market turbulence. The S&P Electric Index¹ returned 5.7% in the half, as higher earnings and tight power markets contributed to the sector's outperformance. Electric utilities remain the smallest portion of the portfolio, and our focus is on unregulated power producers, such as AES and Calpine. Their assets and management provide rapid growth prospects. Our Calpine convertible shares returned 84.0% on rising profit expectations, while AES returned more than 21.0%.

Our relative investments remain largely in telecommunications and natural gas. We favor these sectors because of the accelerating industry growth, the quality of the management teams and still reasonable valuation support.

We continue to believe that the three main utility sectors--telecommunications, natural gas and electricity--are highly attractive relative to the rest of the market. They offer an attractive combination of growth and value as the importance of reliable telecommunications and electric power to the Internet economy grows steadily.

1 S&P Utility Index is an unmanaged market cap-weighted index of natural gas and electric companies. The S&P Communications Index is an unmanaged market cap-weighted index of communications companies. The S&P Electric Index is a market cap-weighted index of common stocks in utilities. These indexes are unmanaged and investments cannot be made in an index.

3 Funds whose investments are concentrated in a specific industry or sector may be subject to a higher degree of market risk than funds whose investments are diversified.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value

COMMON STOCKS--51.6%

Communication Services--22.9%

56,600

Adelphia Business Solutions, Inc.

1,312,413

26,500

Allegiance Telecom, Inc.

1,696,000

70,800

Alltel Corp.

4,385,175

71,800

BellSouth Corp.

3,060,475

13,400

British Telecommunication PLC, ADR

1,772,150

62,700

GTE Corp.

3,903,075

64,800

MCI Worldcom, Inc.

2,972,700

NEXTLINK Communications, Inc., Class A

28,500

Nippon Telegraph & Telephone Corp., ADR

1,948,687

74,100

SBC Communications, Inc.

3,204,825

89,000

Sprint Corp.

4,539,000

33,200

Telefonica SA, ADR

2,126,875

44,600

Telefonos de Mexico, Class L, ADR

2,547,775

16,600

Telephone and Data System, Inc.

1,664,150

42,000

U.S. West, Inc.

3,601,500

22,800

Viatel, Inc.

651,225

12,000

VoiceStream Wireless Corp.

1,395,562

45,100

Western Wireless Corp., Class A

2,457,950

1,152

WinStar Communications, Inc.

39,024

TOTAL

43,278,578

Consumer Staples--0.4%

30,600

RCN Corp.

776,475

Energy--2.0%

53,500

Burlington Resources, Inc.

2,046,375

32,800

Phillips Petroleum Co.

1,662,550

TOTAL

3,708,925

Technology--3.1%

58,300

Nokia Oyj, ADR

2,911,356

45,000

Motorola, Inc.

1,307,813

23,500

Tellabs, Inc.

1,608,281

TOTAL

5,827,450

Shares

Value

COMMON STOCKS--continued

Utilities--23.2%

44,500

Columbia Energy Group

2,920,312

37,500

Duke Energy Corp.

2,114,062

43,400

Dynegy, Inc., Class A

2,964,763

170,200

Edison International

3,489,100

143,300

El Paso Energy Corp.

7,299,344

83,400

Enron Corp.

5,379,300

47,100

FPL Group, Inc.

2,331,450

95,700

KeySpan Corp.

2,942,775

70,500

Montana Power Co.

2,489,531

92,500

NICOR, Inc.

3,017,813

44,800

Peoples Energy Corp.

1,450,400

72,800

TXU Corp.

2,147,600

123,200

Williams Cos., Inc. (The)

5,135,900

TOTAL

43,682,350

TOTAL COMMON STOCKS (IDENTIFIED COST $89,837,794)

97,273,778

PREFERRED STOCKS--36.0%

Communication Services--17.0%

45,600

^{2, 3}

Alliant Energy Corp., Conv. Pfd., $5.73 (into McLeod USA)

3,137,052

44,900

BroadWing, Inc., Cumulative Conv. Pfd., Series B, $3.38

2,110,300

61,200

Cox Communications, Inc., PRIDES, $6.59 (into Sprint PCS)

6,793,200

13,500

Global Crossing Ltd., Conv. Pfd., $17.06

3,005,437

103,600

Global TeleSystems Group, Inc., Conv. Pfd., $3.63

2,331,000

21,000

NEXTLINK Communications, Inc., Conv. Pfd., $3.25

3,614,625

41,600

^{2, 3}

Qwest Communications International, Inc., Conv. Pfd., $2.40

3,315,853

30,200

^{2, 3}

Viatel, Inc., Conv. Pfd., $3.88

1,121,175

110,400

Vodafone Airtouch, DECS, $3.15

4,471,200

1,000

^{2, 3}

WinStar Communications, Inc., Conv. Pfd., $2.02

982,580

1,100

^{2, 3}

WinStar Communications, Inc., Series F

1,083,500

TOTAL

31,965,922

Consumer Staples--1.1%

33,600

Cox Communications, Inc., PRIDES, $3.54

2,064,300

Shares or Principal
Amount

Value

PREFERRED STOCKS--continued

Energy--3.9%

74,500

Apache Corp., Conv. Pfd., $2.02

3,855,375

68,700

Kerr-McGee Corp., DECS, $1.83 (into Devon Energy)

3,417,825

TOTAL

7,273,200

Technology--1.3%

24,200

Metromedia Fiber Network, Inc., DECS, $2.46

1,660,725

26,000

^{2, 3}

PsiNet, Inc., Conv. Pfd., $3.50

888,550

TOTAL

2,549,275

Utilities--12.7%

54,000

^{2, 3}

AES Corp., Conv. Pfd., $3.00

3,196,152

107,100

CMS Energy Corp., Conv. Pfd., $3.63

2,998,800

21,600

^{2, 3}

Calpine Corp., Conv. Pfd., $2.88

2,579,386

180,000

Coastal Corp., PRIDES, $1.66

6,300,000

121,700

Enron Corp., Note, $1.56

3,772,700

67,700

K N Energy, Inc., Conv. Pfd., $3.55

3,215,750

87,000

Utilicorp United, Inc., Conv. Pfd., $2.44

2,066,250

TOTAL

24,129,038

TOTAL PREFERRED STOCKS (IDENTIFIED COST $64,753,689)

67,981,735

CORPORATE BONDS--6.1%

Communication Services--4.9%

850,000

^{2, 3}

ITC DeltaCom, Inc., Conv. Bond, 4.50%, 5/15/2006

883,244

2,905,000

Level 3 Communications, Inc., Conv. Bond, 6.00%, 3/15/2010

2,672,890

2,300,000

^{2, 3}

NEXTEL Communications, Inc., Conv. Bond, 5.25%, 1/15/2010

2,408,928

3,935,000

^{2, 3}

NTL, Inc., Conv. Bond, 5.75%, 12/15/2009

3,174,837

TOTAL

9,139,899

Energy--1.2%

1,980,000

Kerr-McGee Corp., Conv. Bond, 5.25%, 2/15/2010

2,277,851

TOTAL CORPORATE BONDS (IDENTIFIED COST $11,775,618)

11,417,750

Principal
Amount

Value

REPURCHASE AGREEMENT--8.3%⁴

15,595,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

15,595,000

TOTAL INVESTMENTS (IDENTIFIED COST $181,962,101)⁵

192,268,263

1 Non-income producing security.

2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. At June 30, 2000, these securities amounted to $24,837,507 which represents 13.2% of net assets. Included in these amounts, securities which have been deemed liquid amounted to $22,771,257 which represents 12.1% of net assets.

3 Denotes a restricted security that has been deemed liquid by criteria approved by the fund's Board of Trustees.

5 The cost of investments for federal tax purposes amounts to $181,962,101. The net unrealized appreciation of investments on a federal tax basis amounts to $10,306,162 which is comprised of $25,326,880 appreciation and $15,020,718 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($188,588,615) at June 30, 2000.

The following acronyms are used throughout this portfolio:

ADR	--American Depositary Receipt
DECS	--Dividend Enhanced Convertible Stock
PRIDES	--Preferred Redeemable Increased Dividend Equity Securities

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $181,962,101)

192,268,263

Cash

4,563

Income receivable

611,145

TOTAL ASSETS

192,883,971

Liabilities:

Payable for investments purchased

4,283,895

Accrued expenses

11,461

TOTAL LIABILITIES

4,295,356

Net assets for 13,980,886 shares outstanding

188,588,615

Net Assets Consist of:

Paid in capital

175,570,833

Net unrealized appreciation of investments and translation of assets and liabilities in foreign currency

10,306,162

Accumulated net realized loss on investments and foreign currency transactions

(27,036

)

Undistributed net investment income

2,738,656

TOTAL NET ASSETS

188,588,615

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$188,588,615 ÷ 13,980,886 shares outstanding

$13.49

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends (net of foreign taxes withheld of $3,755)

3,122,786

Interest

480,132

TOTAL INCOME

3,602,918

Expenses:

Investment adviser fee

700,283

Administrative personnel and services fee

70,311

Custodian fees

9,812

Transfer and dividend disbursing agent fees and expenses

17,604

Directors'/Trustees' fees

1,308

Auditing fees

5,653

Legal fees

6,517

Portfolio accounting fees

27,695

Share registration costs

7,092

Printing and postage

24,701

Insurance premiums

559

Taxes

Miscellaneous

3,210

TOTAL EXPENSES

874,792

Fees paid indirectly from directed broker arrangements

(9,005

)

Net expenses

865,787

Net investment income

2,737,131

Realized and Unrealized Gain (Loss) on Investments and Foreign Currency:

Net realized gain on investments and foreign currency transactions

480,930

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

(5,618,202

)

Net realized and unrealized loss on investments and foreign currency

(5,137,272

)

Change in net assets resulting from operations

(2,400,141

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

2,737,131

5,624,553

Net realized gain on investments and foreign currency transactions ($480,930 and $3,713,913, respectively, as computed for federal tax purposes)

480,930

3,446,603

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

(5,618,202

)

(6,031,451

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(2,400,141

)

3,039,705

Distributions to Shareholders:

Distributions from net investment income

(5,581,092

)

(4,089,640

)

Distributions from net realized gain on investments and foreign currency transactions

(3,709,373

)

(8,002,480

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(9,290,465

)

(12,092,120

)

Share Transactions:

Proceeds from sale of shares

25,172,770

62,849,877

Net asset value of shares issued to shareholders in payment of distributions declared

9,290,462

12,092,114

Cost of shares redeemed

(21,850,260

)

(40,261,149

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

12,612,972

34,680,842

Change in net assets

922,366

25,628,427

Net Assets:

Beginning of period

187,666,249

162,037,822

End of period (including undistributed net investment income of $2,738,656 and $5,582,617, respectively)

188,588,615

187,666,249

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(Unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value, Beginning of Period

$14.35

$15.27

$14.29

$11.81

$11.03

$ 9.29

Income From Investment Operations:

Net investment income

0.20

0.42

0.37

0.40

0.42

0.45

Net realized and unrealized gain (loss) on investments and foreign currency transactions

(0.35

)

(0.23

)

1.55

2.62

0.82

1.74

TOTAL FROM INVESTMENT OPERATIONS

(0.15

)

0.19

1.92

3.02

1.24

2.19

Less Distributions:

Distributions from net investment income

(0.43

)

(0.37

)

(0.13

)

(0.28

)

(0.41

)

(0.45

)

Distributions from net realized gain on investments and foreign currency transactions

(0.28

)

(0.74

)

(0.81

)

(0.26

)

(0.05

)

TOTAL DISTRIBUTIONS

(0.71

)

(1.11

)

(0.94

)

(0.54

)

(0.46

)

(0.45

)

Net Asset Value, End of Period

$13.49

$14.35

$15.27

$14.29

$11.81

$11.03

Total Return¹

(1.26

1.69

13.95

26.63

11.56

24.18

Ratios to Average Net Assets:

Expenses

0.94

%²

0.94

0.93

0.85

Net investment income

2.92

%²

3.20

3.41

3.92

4.62

Expense waiver/reimbursement³

0.07

0.27

0.51

2.24

Supplemental Data

Net assets, end of period (000 omitted)

$188,589

$187,666

$162,038

$104,462

$63,558

$29,679

Portfolio turnover

119

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

2 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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 Valuation

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

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Expenses and Distributions

Federal Taxes

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

When-Issued and Delayed Delivery Transactions

Foreign Exchange Contracts

Foreign Currency Translation

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 or losses arise from changes in the value of assets and liabilities other than investment 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.

Additional information on the restricted security held at June 30, 2000 is as follows:

Security

Acquisition
Date

Acquisition
Cost

Utilicorp United, Inc., Conv. Pfd., $2.44

9/23/1999 - 5/19/2000

$2,155,232

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

1,814,332

4,384,563

Shares issued to shareholders in payment of distributions declared

657,499

895,049

Shares redeemed

(1,569,358

)

(2,814,347

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

902,473

2,465,265

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Administrative Fee

Shareholder Services Fee

Transfer and Dividend Disbursing Agent Fees and Expense

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.

Expense Reduction

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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases	$	111,069,784

Sales	$	111,266,606

Risks of Foreign Investing

The Funds invests in securities of non-U.S. issuers. The political or economic development 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 current holdings.

At June 30, 2000, the diversification of non-U.S. countries was as follows:

Country		Percentage of Net Assets
Finland		1.5%
Mexico		1.4%
Spain		1.1%
Japan		1.0%
United Kingdom		0.9%

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Utility Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

Federated
Federated Utility Fund II
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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

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, a portfolio of Federated Insurance Series.

The report covers the six-month period from January 1, 2000 through June 30, 2000. It begins with an investment review by the fund's portfolio manager, which is followed by a complete listing of the fund's holdings and financial statements.

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

During the six-month reporting period, the fund paid dividends totaling $0.557 per share. Due to a rising rate environment that caused bond prices to decline, the fund's share price declined from $10.56 to $10.38. The fund's total return was 3.68% for the reporting period.¹ On June 30, 2000, the fund's net assets reached $133.5 million.

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

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

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), Fannie Mae (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.

U.S. economic growth set a longevity record during the reporting period as consumers and businesses continued to spend at a rapid rate. Such demand growth raised concerns over inflationary pressures. The Federal Reserve Board (the "Fed") acted on these concerns, raising the federal funds target rate on three separate occasions over the reporting period. Treasury securities were mixed as short yields rose while longer maturity yields declined based on fundamental and technical developments. Mortgage and agency spreads widened.

Economic activity was robust at the outset led in part by strong demand for homes and autos. Citing concern that demand growth may outstrip supply resulting in inflation, the Fed raised the federal funds target rate 100 basis points to 6.50%. In the latter stages of the six-month reporting period, indications of moderating economic growth appeared as retail sales and manufacturing activity slowed.

Short-term Treasury yields, which rose over the reporting period, reacted to Fed actions while long-term yields declined due to technical and fundamental factors. The U.S. Treasury's buyback program announcement in conjunction with a reduced issuance schedule led to a rally in longer maturity notes and bonds. Budgetary surpluses of recent years have reduced borrowing needs and debt buybacks were initiated for the first time since 1930. Approximately $30 billion of Treasurys are expected to be repurchased in 2000. As initial purchases concentrated on long maturities, a scarcity rally ensued. Two- and ten-year Treasurys yielded 6.36% and 6.02% as of June 30, 2000, representing an increase and decrease of 12 and 42 basis points, respectively.

Treasurys out-performed mortgage backed securities (MBS) and agency securities over the reporting period as spreads widened. Government sponsored enterprise (GSE) debt issuance increased while government officials called for a review of GSE activity, bringing into question the GSE/government relationship. Political and technical events fueled spread widening to historically wide levels. FNMA's 3-, 5- and 10-year Benchmark security spreads widened 21, 39 and 50 basis points, respectively. Mortgage-to-Treasury spreads widened in sympathy as current coupon 30-year GNMA and FNMA spreads widened 31 and 46 basis points each.

As MBS spreads widened, the mortgage allocation of the portfolio was increased to approximately 71% of assets. Despite political and technical developments, we believe the mortgage sector provides attractive return potential relative to Treasurys over the longer term. Beneficial spreads, prepayments and supply/demand factors underlie our favorable sector view. Similarly, we have continued to overweight agency securities versus Treasury debt, believing the sizable incremental yield provides a favorable risk/reward profile.

The MBS and Treasury/agency asset allocation closed the period at 71% and 29%, respectively. Fund duration¹ is 4.54 years versus the blended benchmark's 4.51 years (two-thirds Lehman Mortgage Backed Securities Index and one-third Lehman Government Index).² The fund's net total return for the six-month reporting period ended June 30, 2000 was 3.68%³ versus 4.10% for the unmanaged index.

1 Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.

2 The Lehman Brothers Mortgage Backed Securities Index is composed of all fixed rate, securitized mortgage pools by GNMA, FNMA and FHLMC. 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.

3 Past performance is no guarantee 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. The performance information presented does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Principal
Amount

Value

INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS--13.6%

1,000,000

Federal Farm Credit Bank, 7.350%, 3/24/2005

1,008,910

2,500,000

Federal Home Loan Bank, 4.875%, 1/22/2002

2,425,200

1,000,000

Federal Home Loan Bank, 5.125%, 2/26/2002

971,970

2,500,000

Federal Home Loan Bank, 5.500%, 1/21/2003

2,417,375

1,000,000

Federal Home Loan Bank, 5.530%, 1/15/2003

967,170

2,200,000

Federal Home Loan Bank, 5.660%, 1/13/2003

2,134,462

2,500,000

Federal Home Loan Bank, 5.905%, 3/27/2008

2,322,750

750,000

Federal Home Loan Bank, 6.185%, 5/6/2008

708,720

1,200,000

Federal Home Loan Bank, 6.500%, 8/14/2009

1,145,436

2,000,000

Federal Home Loan Bank, 6.750%, 2/15/2002

1,993,480

1,000,000

Federal Home Loan Bank, 7.125%, 2/15/2005

1,000,830

1,000,000

Federal Home Loan Bank, 7.660%, 7/20/2004

1,019,710

TOTAL INTERMEDIATE-TERM U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $18,622,100)

18,116,013

LONG-TERM U.S. GOVERNMENT OBLIGATIONS--70.1%

Federal Home Loan Mortgage Corporation--24.6%

1,400,000

6.500%, 1/1/2029

1,320,816

2,000,000

8.000%, 1/1/2029

2,010,620

5,752,621

6.000%, 1/1/2014 - 11/1/2028

5,345,822

9,108,527

6.500%, 5/1/2024 - 7/1/2029

8,597,883

7,727,464

7.000%, 8/1/2028 - 6/1/2030

7,466,793

6,975,721

7.500%, 6/1/2029 - 5/1/2030

6,879,805

999,900

8.500%, 5/1/2030

1,019,898

198,116

9.000%, 2/1/2025 - 5/1/2025

204,307

TOTAL

32,845,944

Fannie Mae--28.9%

3,000,000

8.000%, 1/1/2029

3,012,180

2,796,191

6.000%, 5/1/2014

2,645,029

13,915,159

6.500%, 11/1/2014 - 4/1/2030

13,206,668

10,445,076

7.000%, 3/1/2015 - 10/1/2029

10,142,294

5,515,532

7.500%, 5/1/2015 - 9/1/2028

5,466,218

4,050,793

8.000%, 10/1/2027 - 2/1/2030

4,068,681

TOTAL

38,541,070

Principal
Amount

Value

LONG-TERM U.S. GOVERNMENT OBLIGATIONS--continued

Government National Mortgage Association--16.6%

1,194,700

6.000%, 9/15/2028 - 4/15/2029

1,100,247

5,998,824

6.500%, 12/15/2023 - 7/15/2029

5,707,164

5,355,331

7.000%, 5/15/2028 - 12/15/2028

5,206,800

4,345,445

7.500%, 10/15/2026 - 10/15/2029

4,314,205

5,050,998

8.000%, 5/20/2022 - 4/20/2030

5,083,827

316,467

8.500%, 6/15/2027

323,885

478,759

9.500%, 11/15/2016

497,613

TOTAL

22,233,741

TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $95,694,722)

93,620,755

U.S. TREASURY OBLIGATIONS--14.5%

600,000

U.S. Treasury Bonds, 6.000%, 2/15/2026

586,842

2,250,000

U.S. Treasury Bonds, 6.125%, 11/15/2027

2,244,285

2,300,000

U.S. Treasury Bonds, 8.000%, 11/15/2021

2,775,709

2,200,000

U.S. Treasury Bonds, 9.250%, 2/15/2016

2,850,276

1,390,000

U.S. Treasury Bonds, 11.250%, 2/15/2015

2,046,289

1,000,000

U.S. Treasury Notes, 5.250%, 5/15/2004

965,590

4,076,000

U.S. Treasury Notes, 5.625%, 5/15/2008

3,934,644

2,500,000

U.S. Treasury Notes, 5.875%, 11/30/2001 - 11/15/2004

2,476,075

1,500,000

U.S. Treasury Notes, 6.250%, 2/28/2002

1,496,040

TOTAL U.S. TREASURY OBLIGATIONS (IDENTIFIED COST $19,610,015)

19,375,750

REPURCHASE AGREEMENTS--5.6%²

6,300,000

Credit Suisse First Boston, Inc., 6.460%, dated 6/13/2000, due 7/17/2000

6,300,000

1,195,000

Warburg Dillon Reed LLC, 6.900%, dated 6/30/2000, due 7/3/2000

1,195,000

TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST)

7,495,000

TOTAL INVESTMENTS (IDENTIFIED COST $141,421,837)⁴

138,607,518

1 These securities are subject to dollar roll transactions.

2 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.

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 $141,421,837. The net unrealized depreciation of investments on a federal tax basis amounts to $2,814,319 which is comprised of $249,845 appreciation and $3,064,164 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($133,551,810) at June 30, 2000.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $141,421,837)

138,607,518

Cash

158

Income receivable

1,242,064

Prepaid expenses

45,359

TOTAL ASSETS

139,895,099

Liabilities:

Payable for dollar roll transactions

6,309,780

Accrued expenses

33,509

TOTAL LIABILITIES

6,343,289

Net assets for 12,867,315 shares outstanding

133,551,810

Net Assets Consist of:

Paid-in capital

134,376,817

Net unrealized depreciation of investments

(2,814,319

)

Accumulated net realized loss on investments

(2,008,736

)

Undistributed net investment income

3,998,048

TOTAL NET ASSETS

133,551,810

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$133,551,810 ÷ 12,867,315 shares outstanding

$10.38

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Interest (net of dollar roll expense of $296,723)

4,510,710

Expenses:

Investment adviser fee

391,626

Administrative personnel and services fee

56,613

Custodian fees

6,503

Transfer and dividend disbursing agent fees and expenses

15,215

Directors'/Trustees' fees

1,010

Auditing fees

5,688

Legal fees

5,452

Portfolio accounting fees

20,113

Share registration costs

2,265

Printing and postage

18,080

Insurance premiums

448

TOTAL EXPENSES

523,013

Net investment income

3,987,697

Realized and Unrealized Gain (Loss) on Investments:

Net realized loss on investments

(1,652,771

)

Net change in unrealized depreciation of investments

2,395,995

Net realized and unrealized gain on investments

743,224

Change in net assets resulting from operations

4,730,921

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

3,987,697

6,781,645

Net realized loss on investments ($(1,652,771) and $(355,965), respectively, as computed for federal tax purposes)

(1,652,771

)

(355,965

)

Net change in unrealized depreciation of investments

2,395,995

(7,012,515

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

4,730,921

(586,835

)

Distributions to Shareholders:

Distributions from net investment income

(6,771,294

)

(4,657,725

)

Distributions from net realized gain on investments

(919,156

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(6,771,294

)

(5,576,881

)

Share Transactions:

Proceeds from sale of shares

30,104,060

66,466,729

Net asset value of shares issued to shareholders in payment of distributions declared

6,771,291

5,576,878

Cost of shares redeemed

(35,020,818

)

(43,492,695

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

1,854,533

28,550,912

Change in net assets

(185,840

)

22,387,196

Net Assets:

Beginning of period

133,737,650

111,350,454

End of period (including undistributed net investment income of $3,998,048 and $6,781,645, respectively)

133,551,810

133,737,650

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

2000

1999

1998

1997

1996

1995

Net Asset Value, Beginning of Period

$10.56

$11.15

$10.54

$10.09

$10.29

$ 9.99

Income From Investment Operations:

Net investment income

0.34

0.51

0.44

0.58

0.59

0.54

Net realized and unrealized gain (loss) on investments

0.04

(0.57

)

0.36

0.26

(0.18

)

0.30

TOTAL FROM INVESTMENT OPERATIONS

0.38

(0.06

)

0.80

0.84

0.41

0.84

Less Distributions:

Distributions from net investment income

(0.56

)

(0.44

)

(0.18

)

(0.39

)

(0.57

)

(0.54

)

Distributions from net realized gain on investments

(0.09

)

(0.01

)

(0.04

)

TOTAL DISTRIBUTIONS

(0.56

)

(0.53

)

(0.19

)

(0.39

)

(0.61

)

(0.54

)

Net Asset Value, End of Period

$10.38

$10.56

$11.15

$10.54

$10.09

$10.29

Total Return¹

3.68

(0.60

7.66

8.58

4.20

8.77

Ratios to Average Net Assets:

Expenses

0.80

%²

0.84

0.85

0.80

Net investment income

6.11

%²

5.47

5.44

5.98

6.00

Expense waiver/reimbursement³

0.00

%⁴

0.08

0.45

1.01

4.81

Supplemental Data:

Net assets, end of period (000 omitted)

$133,552

$133,738

$111,350

$63,099

$34,965

$12,264

Portfolio turnover

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

2 Computed on an annualized basis.

3 This voluntary expense decrease is reflected in both the expense and net income ratios shown above.

4 Amount represents less than 0.01%.

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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 Valuation

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

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Expenses and Distributions

Federal Taxes

At December 31, 1999, the Fund, for federal tax purposes, had a capital loss carryforward of $355,965, 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 2007.

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 12 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 a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

2,906,583

6,220,284

Shares issued to shareholders in payment of distributions declared

665,810

526,121

Shares redeemed

(3,370,540

)

(4,071,941

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

201,853

2,674,464

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser 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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases	$	58,478,313

Sales	$	65,801,630

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

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, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

We are pleased to present the second Semi-Annual Report for Federated Small Cap Strategies Fund II, a portfolio of Federated Insurance Series. This report covers the six-month period from January 1, 2000 through June 30, 2000. 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 by owning a highly diversified portfolio of small capitalization stocks.¹ These stocks, issued by companies with a typical market capitalization of less than $1 billion, 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 130 stocks spread across 11 industry sectors.

For the six-month reporting period, the fund produced a total return of (9.63%) and paid capital gains totaling $0.648 per share while the net asset value decreased by $1.88.² On June 30, 2000, the fund's net assets reached $5.4 million.

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

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

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

2 Past performance is no guarantee 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. The performance information does not include the charges and expenses imposed by the insurance company under the variable insurance product contract. The inclusion of such charges would lower performance. Please refer to the variable insurance product prospectus for a complete listing of these expenses.

Investment Review

Federated Small Cap Strategies Fund II underperformed the market during the reporting period. The average Lipper Small Cap Core Fund¹ was down 2.2%, the Standard & Poor's 600 Small Cap Index² ("S&P 600") was up 6.9%, the Russell 2000 Small Cap Index³ was up 3.0%, while the S&P 500 Index⁴ was down 0.4%. The fund's total return was down 9.63% during the six-month reporting period, underperforming both large cap and small cap indices. The small cap growth style underperformed the small cap value style during this time period. Small cap growth companies outperformed small cap value companies during the quarter by 402 basis points.⁵

Even with the recent performance of small cap stocks, especially small cap growth stocks, the market remains very attractive for long term investors. Two powerful longer term drivers are (1) valuation levels of small company stocks are extremely attractive versus larger caps, and (2) earnings growth in the small cap market is expected to outpace larger cap stocks over the next 3-5 years. Our analysis of the smaller cap 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.

Characteristics of this fund which can make it an ideal investment vehicle for this market: (1) sector discipline--we stay invested in all major economic sectors at all times with appropriate overweights and underweights (one half to two times sector bands), and (2) small cap discipline--we've kept the majority of the portfolio invested in small capitalization companies. 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 1999, given a 15-year holding period, small caps outperformed large caps 78% of the time.⁶

The Federated Small Cap Strategies Fund II typically targets smaller companies with market capitalizationswithin the range of the S&P 600. Our strategy is to remain fully invested in small, fast growing, attractively valued companies. We use 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 seek strong long-term performance for our shareholders by investing in the best small companies within each of 11 economic sectors.

1 Lipper figures represent the average total returns reported by all variable annuity funds designated by Lipper Analytical Services as falling into the respective categories indicated. Figures do not reflect sales charges.

2 S&P 600 Small Cap Index is an unmanaged capitalization- weighted index representing all major industries in the mid-range of the U.S. stock market. Investments may not be made in an index.

3 Russell 2000 Small Stock Index is an unmanaged capitalization-weighted index consisting of 2,000 small capitalization common stocks. Investments cannot be made in an index.

4 S&P 500 Index is an unmanaged 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. Investments cannot be made in an index.

5 Source: S&P 600/Barra Growth Index vs. S&P 600/Barra Value Index.

6 Source: Ibbotson & Assoc.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value

COMMON STOCKS--78.0%

Basic Materials--2.6%

1,400

Cambrex Corp.

63,000

1,300

International Fibercom, Inc.

33,150

600

Stillwater Mining Co.

16,725

1,400

USX-U.S. Steel Group, Inc.

25,987

TOTAL

138,862

Capital Goods--8.8%

1,000

Applied Power, Inc., Class A

33,500

1,600

C&D Technologies, Inc.

90,400

700

Carlisle Cos., Inc.

31,500

850

Dycom Industries, Inc.

39,100

1,000

Excel Technology, Inc.

50,312

1,500

Federal Signal Corp.

24,750

700

Harman International Industries, Inc.

42,700

1,500

Shaw Group, Inc.

70,688

1,600

Spartech Corp.

43,200

1,800

Terex Corp.

25,425

400

Three-Five Systems, Inc.

23,600

TOTAL

475,175

Communication Services--1.8%

900

Adelphia Business Solutions, Inc.

20,869

300

AirGate PCS, Inc.

15,769

1,800

Alaska Communications Systems Holdings, Inc.

18,675

700

MGC Communications, Inc.

41,956

TOTAL

97,269

Consumer Cyclicals--6.1%

1,300

Centex Corp.

30,550

700

Convergys Corp.

36,312

700

DigitalThink, Inc.

25,112

800

Gentex Corp.

20,100

800

Houghton Mifflin Co.

37,350

1,600

Lear Corp.

32,000

600

Media Metrix, Inc.

15,263

Shares

Value

COMMON STOCKS--continued

Consumer Cyclicals--continued

1,000

Modem Media, Inc.

12,438

500

Ross Stores, Inc.

8,531

1,000

Tech Data Corp.

43,563

2,000

United Rentals, Inc.

34,250

1,000

Zale Corp.

36,500

TOTAL

331,969

Consumer Staples--3.5%

2,000

Charter Communications, Inc.

32,875

900

Emmis Communications, Corp., Class A

37,237

700

Patterson Dental Co.

35,700

1,850

Tetra Tech, Inc.

42,319

300

TiVo, Inc.

10,500

800

XM Satellite Radio Holdings, Inc., Class A

29,950

TOTAL

188,581

Energy--2.5%

200

Atwood Oceanics, Inc.

8,875

1,300

Global Industries Ltd.

24,537

1,100

Newfield Exploration Co.

43,038

1,000

Petroleum Geo-Services ASA, ADR

17,063

1,000

Pride International, Inc.

24,750

700

Varco International, Inc.

16,275

TOTAL

134,538

Finance--2.9%

1,100

Affiliated Managers Group

50,050

1,400

Amex Financial Select Standard & Poor Depository Receipt

33,250

Imperial Bancorp

500

1,200

Intercept Group, Inc.

20,400

1,000

Jefferies Group, Inc.

20,187

600

SEI Investments, Co.

23,888

300

Southwest Securities Group, Inc.

11,175

TOTAL

159,450

Shares

Value

COMMON STOCKS--continued

Health Care--7.0%

2,100

Advance Paradigm, Inc.

43,050

400

Celgene Corp.

23,550

400

Cephalon, Inc.

23,950

1,700

Charles River Laboratories International, Inc.

37,719

600

Cubist Pharmaceuticals, Inc.

29,550

200

Human Genome Sciences, Inc.

26,675

650

Jones Pharma, Inc.

25,959

500

Medimmune, Inc.

37,000

300

Millennium Pharmaceuticals, Inc.

33,562

200

Myriad Genetics, Inc.

29,616

2,300

Omnicare, Inc.

20,844

200

Techne Corp.

26,000

200

United Therapeutics Corp.

21,675

TOTAL

379,150

Technology--41.4%

200

724 Solutions, Inc.

8,775

500

ACTV, Inc.

7,469

1,000

Active Software, Inc.

77,688

400

Adaptive Broadband Corp.

14,700

200

Aether Systems, Inc.

41,000

1,000

Airnet Communications Corp.

26,125

600

Alteon Websystems, Inc.

60,038

1,000

Ancor Communications, Inc.

35,766

400

Applied Micro Circuits Corp.

39,500

300

AudioCodes Ltd.

36,000

300

Avanex Corp.

28,650

200

Broadcom Corp.

43,788

900

Broadvision, Inc.

45,731

600

C-Cube Microsystems, Inc.

11,775

700

Clarent Corp.

50,050

200

Coherent, Inc.

16,775

500

Comverse Technology, Inc.

46,500

564

Conexant Systems, Inc.

27,425

300

Cree Research, Inc.

40,050

800

Crossroads Systems, Inc.

20,200

Shares

Value

COMMON STOCKS--continued

Technology--continued

500

Digex, Inc.

33,969

600

Digital Lightwave, Inc.

60,300

200

E-Tek Dynamics, Inc.

52,763

300

E.piphany, Inc.

32,156

400

F5 Networks, Inc.

21,825

1,000

FactSet Research Systems, Inc.

28,250

1,600

Firepond, Inc.

57,600

200

Foundry Networks, Inc.

22,100

1,600

GSI Lumonics, Inc.

56,200

400

GlobeSpan, Inc.

48,831

917

Harmonic Lightwaves, Inc.

22,696

1,800

iGATE Capital Corp.

24,750

450

Interlink Electronics, Inc.

18,844

2,014

Internet Pictures Corp.

30,462

400

Juniper Networks, Inc.

58,225

500

Kana Communications, Inc.

30,937

500

Keynote Systems, Inc.

35,281

200

MCX Communications, Inc.

4,625

600

Mercury Interactive Corp.

58,050

700

Methode Electronics, Inc., Class A

27,037

800

Micrel, Inc.

34,750

1,000

Netro Corp.

57,375

1,300

Oak Technology, Inc.

28,031

400

Orbotech, Ltd.

37,150

1,100

Paradyne Networks, Inc.

35,819

200

Phone.com, Inc.

13,025

500

Photon Dynamics, Inc.

37,344

1,200

Puma Technology, Inc.

32,175

900

Qlogic Corp.

59,456

800

Quantum Effect Devices, Inc.

45,600

200

RF Micro Devices, Inc.

17,525

200

SDL, Inc.

57,037

400

Sandisk Corp.

24,475

500

Semtech Corp.

38,242

275

Sierra Wireless

14,799

Shares or
Principal
Amount

Value

COMMON STOCKS--continued

Technology--continued

100

Stratos Lightwave, Inc.

2,787

400

Sycamore Networks, Inc.

44,150

500

TIBCO Software, Inc.

53,617

700

Varian Semiconductor Equipment Associates, Inc.

43,969

1,000

Virata Corp.

59,625

500

Vitesse Semiconductor Corp.

36,781

1,000

WebTrends Corp.

38,688

400

Zoran Corp.

26,375

TOTAL

2,241,701

Transportation--0.7%

900

USFreightways Corp.

22,106

900

Yellow Corp.

13,275

TOTAL

35,381

Utilities--0.7%

900

Avista Corp.

15,694

1,100

Utilicorp United, Inc.

21,863

TOTAL

37,557

TOTAL COMMON STOCKS (IDENTIFIED COST $3,738,661)

4,219,633

REPURCHASE AGREEMENT--20.1%²

1,090,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

1,090,000

TOTAL INVESTMENTS (IDENTIFIED COST $4,828,661)³

5,309,633

1 Non-income producing security.

3 The cost of investments for federal tax purposes amounts to $4,828,661. The net unrealized appreciation of investments on a federal tax basis amounts to $480,972 which is comprised of $905,528 appreciation and $424,556 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($5,412,052) at June 30, 2000.

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, 2000 (UNAUDITED)

Assets:

Investments in securities

4,219,633

Investment in repurchase agreements

1,090,000

Total investments in securities, at value (identified and tax cost $4,828,661)

5,309,633

Cash

1,209

Receivable for investments sold

84,948

Income receivable

665

Prepaid expenses

65,269

TOTAL ASSETS

5,461,724

Liabilities:

Payable for investments purchased

10,771

Payable for auditing fees

6,532

Payable for directors'/trustees' fees

419

Payable for fund tax expense

2,829

Payable for insurance expense

639

Payable for legal fees

3,487

Payable for portfolio accounting fees

703

Payable for share registration fees

22,153

Accrued expenses

2,139

TOTAL LIABILITIES

49,672

Net assets for 449,758 shares outstanding

5,412,052

Net Assets Consist of:

Paid-in capital

5,135,752

Net unrealized appreciation of investments

480,972

Accumulated net realized loss on investments

(208,154

)

Undistributed net investment income

3,482

TOTAL NET ASSETS

5,412,052

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$5,412,052 ÷ 449,758 shares outstanding

$12.03

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends

3,874

Interest

20,034

TOTAL INCOME

23,908

Expenses:

Investment adviser fee

14,340

Administrative personnel and services fee

56,416

Custodian fees

1,951

Transfer and dividend disbursing agent fees and expenses

6,143

Directors'/Trustees' fees

Auditing fees

6,645

Legal fees

2,793

Portfolio accounting fees

16,962

Share registration costs

840

Printing and postage

8,291

Insurance premiums

639

Miscellaneous

1,137

TOTAL EXPENSES

116,207

Waiver and Reimbursement:

Waiver of investment adviser fee

(14,340

)

Reimbursement of other operating expenses

(81,441

)

TOTAL WAIVER AND REIMBURSEMENT

(95,781

)

Net expenses

20,426

Net investment income

3,482

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(206,731

)

Net change in unrealized appreciation of investments

(24,730

)

Net realized and unrealized loss on investments

(231,461

)

Change in net assets resulting from operations

(227,979

)

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Period Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income (net operating loss)

3,482

(1,933

)

Net realized gain (loss) on investments ($(206,731) and $162,066 respectively, as computed for federal tax purposes)

(206,731

)

162,066

Net change in unrealized appreciation of investments

(24,730

)

505,702

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(227,979

)

665,835

Distributions to Shareholders:

Distributions from net realized gain on investments

(161,556

)

Share Transactions:

Proceeds from sale of shares

3,955,073

2,819,216

Net asset value of shares issued to shareholders in payment of distributions declared

125,091

Cost of shares redeemed

(981,018

)

(782,610

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

3,099,146

2,036,606

Change in net assets

2,709,611

2,702,441

Net Assets:

Beginning of period

2,702,441

End of period (including undistributed net investment income of $3,482 and $0, respectively)

5,412,052

2,702,441

1 Reflects operations for the period from May 28, 1999 (date of initial public investment) to December 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,
2000

Period Ended
December 31,
1999

Net Asset Value, Beginning of Period

$13.91

$10.00

Income From Investment Operations:

Net investment income (net operating loss)

0.01

(0.01

)

Net realized and unrealized gain (loss) on investments

(1.24

)

3.92

TOTAL FROM INVESTMENT OPERATIONS

(1.23

)

3.91

Less Distributions:

Distributions from net realized gain on investments

(0.65

)

Net Asset Value, End of Period

$12.03

$13.91

Total Return²

(9.63

39.10

Ratios to Average Net Assets:

Expenses

1.07

%³

1.03

%³

Net investment income (net operating loss)

0.18

%³

(0.17

%)³

Expense waiver/reimbursement⁴

5.01

%³

12.12

%³

Supplemental Data:

Net assets, end of period (000 omitted)

$5,412

$2,702

Portfolio turnover

110

1 Reflects operations for the period from May 28, 1999 (date of initial public investment) to December 31, 1999.

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

3 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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 investment objective of the Fund is to provide capital appreciation.

SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation

Repurchase Agreements

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more 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 a trade date basis.

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:

Six Months
Ended
June 30,
2000

Period Ended
December 31,
1999

Shares sold

308,152

265,888

Shares issued to shareholders in payment of distributions declared

8,668

Shares redeemed

(61,385

)

(71,565

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

255,435

194,323

1 Reflects operations for the period from May 28, 1999 (date of initial public investment) to December 31, 1999.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.75% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/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, annually, to compensate FSC. For the six months ended June 30, 2000, the Fund did not incur a distribution services 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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases		$5,823,943

Sales		$3,434,303

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Small Cap Strategies Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

We are pleased to present the second Semi-Annual Report for Federated Quality Bond Fund II, a portfolio of Federated Insurance Series. The portfolio is managed to offer shareholders current income through a diversified mix of investment grade, fixed income securities, such as U.S. Treasury and U.S. government agency securities, as well as corporate bonds.

During the reporting period, the fund recorded a total return of 3.13%¹ and paid dividends totaling $0.096 per share. Its net asset value increased from $9.80 at the beginning of the reporting period to $10.01 at the end of the reporting period. As of June 30, 2000, net assets grew to $58.0 million.

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,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

Investment Review

The six-month reporting period was one of more moderate economic growth and mixed price performance for most high quality fixed income sectors. While the economy continued to move forward, the pace of advance slowed (5.00% annual rate) from the rapid acceleration experienced in the prior six months (7.00% annual rate). The treasury yield curve inverted dramatically, on a significant pickup in treasury debt buybacks and reduced new issuance, compared to being slightly positively sloped at year-end. Two-year treasury yields rose 12 basis points during the first half of the new year while 30-year treasurys fell some 58 basis points.

The Federal Reserve Board (the "Fed") increased the federal funds target rate at the February, March and May Federal Open Market Committee (FOMC) meetings, while concluding that no change was necessary at its late June meeting. The federal funds target rate now stands at 6.50%. Generally speaking, the six interest rate hikes executed over the past year appear to be having the desired effect of slowing consumer spending and thus, overall economic growth. Particularly noteworthy are slowdowns in such consumer indicators as housing and auto sales. Inflation remains a concern, with a tight labor market and oil prices holding above $30 per barrel at quarter end and was further accentuated by the Fed's narrative release after its June 28, 2000 meeting that a tightening bias remained in place.

In terms of relative fixed income sector performance, the reporting period demonstrated wide variance in the spread sectors versus pure U.S. Treasury securities. In general, the higher quality spread sectors performed relatively well, while the lower quality sectors underperformed the treasury market. The sectors performing reasonably well included asset-backed securities ("ABS"), mortgage-backed securities ("MBS") and agencies, while the underperforming sectors included investment grade corporates and especially the lower quality high yield and emerging debt markets. The lower quality sectors were undoubtedly dragged down by stock market volatility and nervousness that spread worldwide.

QUALITY BOND FUND II PORTFOLIO REVIEW

The portfolio passed the one year-old mark on April 28, 2000. The fund maintained a majority of the portfolio in corporate bonds throughout the reporting period, but was underweighted in corporates relative to the benchmark. The fund mitigated the risk of a corporate underweight by being overweighted in other spread product (agencies, ABS, MBS). We used the relatively weak performance of corporate securities during the reporting period to decrease the corporate underweight and bring the percentage of corporates in the portfolio to 51% or neutral to the benchmark.

Looking ahead, transactions will focus on adding spread product such as corporates, MBS and ABS to more clearly reflect the portfolio's comparison to the benchmark. We expect to transition to a portfolio overweighted in corporates and slightly longer in duration compared to the benchmark.¹ Our yield curve stance for now will remain roughly laddered.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Principal
Amount

Value

ASSET-BACKED SECURITIES--2.2%

1,250,000

MBNA Master Credit Card Trust Series 2000-A, Class A, 7.35%, 7/16/2007 (identified cost $1,249,717)

1,270,712

CORPORATE BONDS--50.7%

Air Transportation--2.0%

78,454

Continental Airlines, Inc., Pass Thru Cert., Series 1999-2 Class C1, 7.73%, 3/15/2011

76,255

400,000

Delta Air Lines, Inc., Note, 8.30%, 12/15/2029

352,516

750,000

Northwest Airlines Corp., Pass Thru Cert., Series 2000-1, 8.072%, 10/1/2019

756,712

TOTAL

1,185,483

Automobile--1.6%

600,000

Dana Corp., Note, 6.25%, 3/1/2004

569,748

200,000

General Motors Corp., MTN, 9.45%, 11/1/2011

222,006

160,000

Hertz Corp., Sr. Note, 7.00%, 1/15/2028

138,640

TOTAL

930,394

Banking--3.9%

250,000

Banco Santander Central Hispano, SA, Bank Guarantee, 7.875%, 4/15/2005

251,547

275,000

City National Bank, Sub. Note, 6.375%, 1/15/2008

241,652

750,000

National Bank of Canada, Montreal, Sub. Note, 8.125%, 8/15/2004

769,282

285,000

PNC Funding Corp., Unsecd. Sub. Note, 6.875%, 7/15/2007

268,122

750,000

Regional Diversified Funding, Sr. Note, 9.25%, 3/15/2030

748,607

TOTAL

2,279,210

Beverage & Tobacco--1.3%

500,000

Anheuser-Busch Cos., Inc., Note, 7.00%, 9/1/2005

492,245

250,000

Anheuser-Busch Cos., Inc., Sr. Note, 7.10%, 6/15/2007

245,527

TOTAL

737,772

Cable Television--0.9%

500,000

Continental Cablevision, Sr. Deb., 9.50%, 8/1/2013

546,645

Principal
Amount

Value

CORPORATE BONDS--continued

Consumer Products--0.9%

500,000

Alberto-Culver Co., Unsecd. Note, 8.25%, 11/1/2005

507,895

Ecological Services & Equipment--0.2%

125,000

USA Waste Services, Inc., Sr. Note, 7.125%, 10/1/2007

114,397

Education--0.6%

250,000

Boston University, 7.625%, 7/15/2097

225,192

100,000

Columbia University, MTN, 8.62%, 2/21/2001

101,051

TOTAL

326,243

Finance - Automotive--1.5%

500,000

Ford Motor Credit Co., Note, 7.375%, 10/28/2009

484,520

400,000

General Motors Acceptance Corp., MTN, 6.75%, 12/10/2002

394,668

TOTAL

879,188

Financial Intermediaries--4.7%

1,000,000

Amvescap PLC, Sr. Note, 6.60%, 5/15/2005

938,230

500,000

FINOVA Capital Corp., Note, 7.25%, 11/8/2004

438,125

500,000

FMR Corp., Deb., 7.57%, 6/15/2029

467,355

250,000

Lehman Brothers Holdings, Inc., MTN, 7.00%, 5/15/2003

244,075

435,000

Marsh & McLennan Cos., Inc., Sr. Note, 7.125%, 6/15/2009

413,463

250,000

PaineWebber Group, Inc., 7.625%, 12/1/2009

236,215

TOTAL

2,737,463

Financial Services--0.4%

250,000

General Electric Capital Corp., MTN, 6.65%, 9/3/2002

247,635

Food & Drug Retailers--0.4%

250,000

Kroger Co., Inc., 7.25%, 6/1/2009

236,140

Forest Products--0.9%

250,000

Donohue Forest Products, 7.625%, 5/15/2007

248,597

150,000

Fort James Corp., Deb., 8.375%, 11/15/2001

151,296

100,000

Fort James Corp., MTN, 7.65%, 12/26/2000

100,291

TOTAL

500,184

Insurance--3.5%

250,000

Conseco, Inc., Sr. Note, 10.50%, 12/15/2004

178,750

500,000

Continental Corp., Note, 7.25%, 3/1/2003

479,935

400,000

Delphi Financial Group, Inc., Sr. Note, 8.00%, 10/1/2003

390,916

350,000

GEICO Corp., Deb., 9.15%, 9/15/2021

370,121

Principal
Amount

Value

CORPORATE BONDS--continued

Insurance--continued

400,000

USF&G Capital II, Company Guarantee, 8.47%, 1/10/2027

362,084

250,000

Union Central Life Insurance Co., Note, 8.20%, 11/1/2026

237,280

TOTAL

2,019,086

Leisure & Entertainment--1.9%

750,000

International Speedway Corp., Company Guarantee, 7.875%, 10/15/2004

734,220

107,000

Paramount Communications, Inc., Sr. Note, 7.50%, 1/15/2002

107,256

250,000

Paramount Communications, Inc., Sr. Deb., 8.25%, 8/1/2022

239,597

TOTAL

1,081,073

Metals & Mining--2.1%

500,000

Barrick Gold Finance, Inc. Company Guarantee, 7.50%, 5/1/2007

490,740

625,000

Noranda, Inc., Deb., 8.125%, 6/15/2004

622,550

125,000

Noranda, Inc., Deb., 8.625%, 7/15/2002

125,902

TOTAL

1,239,192

Oil & Gas--4.3%

250,000

Husky Oil Ltd., Deb., 7.55%, 11/15/2016

226,088

500,000

Husky Oil Ltd., Sr. Unsecd. Note, 7.125%, 11/15/2006

470,855

300,000

Pemex Finance Ltd., Note, 9.03%, 2/15/2011

305,613

735,000

Tosco Corp., Unsecd. Note, 8.125%, 2/15/2030

743,967

750,000

Yosemite Securities Trust I, Bond, 8.25%, 11/15/2004

745,733

TOTAL

2,492,256

Pharmaceutical--0.7%

380,000

American Home Products Corp., Note, 7.90%, 2/15/2005

386,924

Printing & Publishing--0.9%

250,000

News America Holdings, Inc., Sr. Deb., 10.125%, 10/15/2012

269,850

250,000

News America Holdings, Inc., Sr. Note, 8.50%, 2/15/2005

256,183

TOTAL

526,033

Rail Industry--0.4%

250,000

Burlington Northern Santa Fe, Pass Thru Cert., 7.57%, 1/2/2021

243,700

Retailers--7.3%

250,000

Dayton-Hudson Corp., Deb., 10.00%, 12/1/2000

253,100

250,000

Federated Department Stores, Inc., Sr. Note, 10.00%, 2/15/2001

253,870

250,000

Harcourt General, Inc., Sr. Note, 6.70%, 8/1/2007

229,320

250,000

May Department Stores Co., Deb., 9.875%, 6/15/2021

267,225

400,000

Safeway, Inc., Sr. Unsecd. Note, 6.05%, 11/15/2003

383,404

600,000

Safeway, Inc., Note, 7.25%, 9/15/2004

592,134

250,000

Sears, Roebuck & Co., MTN, 10.00%, 2/3/2012

281,275

Principal
Amount

Value

CORPORATE BONDS--continued

Retailers--continued

750,000

TJX Cos., Inc., 7.45%, 12/15/2009

718,320

750,000

Target Corp., Sr. Unsecd. Note, 7.50%, 2/15/2005

761,153

500,000

Wal-Mart Stores, Inc., Sr. Unsecd. Note, 6.875%, 8/10/2009

489,645

TOTAL

4,229,446

Sovereign--0.8%

450,000

Korea Development Bank, Unsecd. Bond, 6.50%, 11/15/2002

435,699

Sovereign Government--1.5%

250,000

Quebec, Province of, Deb., Series NN, 7.125%, 2/9/2024

234,853

500,000

Sweden, Government of, Deb., 10.25%, 11/1/2015

617,720

TOTAL

852,573

Supranational--1.1%

500,000

Corp Andina De Fomento, Unsecd. Note, 8.875%, 6/1/2005

517,110

100,000

Corp Andina De Fomento, Sr. Note, 7.75%, 3/1/2004

99,105

TOTAL

616,215

Technology Services--1.1%

600,000

Unisys Corp., Sr. Note, 11.75%, 10/15/2004

642,000

Telecommunications & Cellular--4.5%

500,000

Deutsche Telekom International Finance, Company Guarantee, 8.25%, 6/15/2030

509,465

250,000

Lucent Technologies, Inc., Note, 6.90%, 7/15/2001

249,908

250,000

MetroNet Communications Corp., Sr. Note, 12.00%, 8/15/2007

283,750

200,000

MetroNet Escrow Corp., Sr. Note, 10.625%, 11/1/2008

222,500

750,000

Sprint Capital Corp., Company Guarantee, 6.375%, 5/1/2009

678,908

750,000

Telecom de Puerto Rico, Sr. Note, 6.65%, 5/15/2006

705,360

TOTAL

2,649,891

Utilities--1.3%

650,000

Israel Electric Corp. Ltd., Note, 8.25%, 10/15/2009

645,834

100,000

Israel Electric Corp. Ltd., Sr. Note, 7.875%, 12/15/2026

90,635

TOTAL

736,469

TOTAL CORPORATE BONDS (IDENTIFIED COST $29,590,654)

29,379,206

MORTGAGE BACKED SECURITIES--29.8%

Federal Home Loan Mortgage Corporation--14.2%

8,700,577

5.75%-7.50%, 7/15/2004 - 8/1/2029

8,255,848

Federal National Mortgage Association--14.1%

8,323,635

6.00%-7.125%, 1/15/2010 -- 1/15/2030

8,185,441

Principal
Amount
or Shares

Value

MORTGAGE BACKED SECURITIES--continued

Government National Mortgage Association--1.5%

835,179

8.00%, 8/15/2029

844,049

TOTAL MORTGAGE BACKED SECURITIES (IDENTIFIED COST $17,176,079)

17,285,338

MUNICIPAL--0.5%

Municipal Services--0.5%

250,000

Minneapolis/St. Paul, MN Airport Commission, UT GO Taxable Revenue Bonds, Series 9, 8.95% (Minneapolis/St. Paul, MN), 1/1/2022 (identified cost $269,010)

268,710

U.S. TREASURY OBLIGATIONS--10.0%

5,825,000

U.S. Treasury Notes, 5.875% -7.00%, 8/15/2004 - 7/15/2006
(identified cost $5,795,698)

5,807,787

PREFERRED STOCKS--0.8%

Financial Intermediaries--0.4%

5,000

Citigroup, Inc., Cumulative Pfd., $3.18

235,000

Telecommunications & Cellular--0.4%

10,000

TCI Communications Financing, Pfd., $2.50

254,375

TOTAL PREFERRED STOCKS (IDENTIFIED COST $503,205)

489,375

REPURCHASE AGREEMENT--5.2%²

3,010,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

3,010,000

TOTAL INVESTMENTS (IDENTIFIED COST $57,594,363)³

57,511,128

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, 2000, these securities amounted to $3,241,057 which represents 5.6% of net assets.

3 The cost of investments for federal tax purposes amounts to $57,594,363. The net unrealized depreciation of investments on a federal tax basis amounts to $83,235 which is comprised of $374,364 appreciation and $457,599 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($57,976,018) at June 30, 2000.

The following acronyms are used throughout this portfolio:

GO	--General Obligation
MTN	--Medium Term Note
UT	--Unlimited Tax

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $57,594,363)

57,511,128

Cash

3,544

Income receivable

973,833

TOTAL ASSETS

58,488,505

Liabilities:

Payable for investments purchased

499,655

Accrued expenses

12,832

TOTAL LIABILITIES

512,487

Net assets for 5,791,140 shares outstanding

57,976,018

Net Assets Consist of:

Paid in capital

56,805,268

Net unrealized depreciation of investments

(83,235

)

Accumulated net realized gain on investments

21,112

Undistributed net investment income

1,232,873

TOTAL NET ASSETS

57,976,018

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$57,976,018 ÷ 5,791,140 shares outstanding

$10.01

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends

20,456

Interest

1,445,442

TOTAL INCOME

1,465,898

Expenses:

Investment adviser fee

120,493

Administrative personnel and services fee

62,158

Custodian fees

2,185

Transfer and dividend disbursing agent fees and expenses

7,962

Directors'/Trustees' fees

1,029

Auditing fees

5,949

Legal fees

3,312

Portfolio accounting fees

22,067

Shareholder services fee

50,205

Share registration costs

6,614

Printing and postage

7,284

Insurance premiums

839

Miscellaneous

989

TOTAL EXPENSES

291,086

Waivers and Reimbursement:

Waiver of investment adviser fee

(89,254

)

Waiver of shareholder services fee

(50,205

)

Reimbursement of other operating expenses

(11,084

)

TOTAL WAIVERS AND REIMBURSEMENT

(150,543

)

Net expenses

140,543

Net investment income

1,325,355

Realized and Unrealized Gain on Investments:

Net realized gain on investments

91,965

Net change in unrealized depreciation of investments

213,298

Net realized and unrealized gain on investments

305,263

Change in net assets resulting from operations

1,630,618

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Period Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

1,325,355

345,107

Net realized gain (loss) on investments ($91,965 and $(69,468), respectively, as computed for federal tax purposes)

91,965

(70,853

)

Net change in unrealized depreciation of investments

213,298

(296,533

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

1,630,618

(22,279

)

Distributions to Shareholders:

Distributions from net investment income

(437,589

)

Share Transactions:

Proceeds from sale of shares

45,536,170

22,863,431

Net asset value of shares issued to shareholders in payment of distributions declared

437,589

Cost of shares redeemed

(7,813,031

)

(4,218,891

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

38,160,728

18,644,540

Change in net assets

39,353,757

18,622,261

Net Assets:

Beginning of period

18,622,261

End of period (including undistributed net investment income of $1,232,873 and $345,107, respectively)

57,976,018

18,622,261

1 For the period from April 28, 1999 (date of initial public investment) to December 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Period Ended
December 31,

2000

1999

Net Asset Value, Beginning of Period

$ 9.80

$10.00

Income From Investment Operations:

Net investment income

0.13

0.18

Net realized and unrealized gain (loss) on investments

0.18

(0.38

)

TOTAL FROM INVESTMENT OPERATIONS

0.31

(0.20

)

Less Distributions:

Distributions from net investment income

(0.10

)

Net Asset Value, End of Period

$10.01

$ 9.80

Total Return²

3.13

(2.00

Ratios to Average Net Assets:

Expenses

0.70

%³

0.68

%³

Net investment income

6.60

%³

6.11

%³

Expense waiver/reimbursement⁴

0.75

%³

2.82

%³

Supplemental Data:

Net assets, end of period (000 omitted)

$57,976

$18,622

Portfolio turnover

119

1 Reflects operations for the period from April 28, 1999 (date of initial public investment) to December 31, 1999.

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

3 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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 investment objective of the Fund 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. 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

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Expenses and Distributions

Federal Taxes

At December 31, 1999, the Fund, for federal tax purposes, had a capital loss carryforward of $69,468, which will reduce the Fund's taxable income arising from future net realized gains 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 2007.

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

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Six Months
Ended
June 30,
2000

Period Ended
December 31,
1999

Shares sold

4,636,834

2,328,653

Shares issued to shareholders in payment of distributions declared

44,470

Shares redeemed

(789,851

)

(428,966

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

3,891,453

1,899,687

1 For the period from April 28, 1999 (date of initial public investment) to December 31, 1999.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

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

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 a scale that the ranges from 0.15% to 0.075% of the average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

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. 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 (and in-kind contributions), for the six months ended June 30, 2000, were as follows:

Purchases	$	55,469,909

Sales	$	19,010,895

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Quality Bond Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

Federated is a registered mark of Federated Investors, Inc. 2000 ©Federated Investors, Inc.

SEMI-ANNUAL REPORT

President's Message

Dear Fellow Shareholder:

We are pleased to present the Semi-Annual Report for Federated Equity Income Fund II, a portfolio of Federated Insurance Series.

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 BankAmerica, Du Pont, Exxon Mobil, Ford, General Electric, General Mills, Wal-Mart and Walt Disney--are household names.

For the six-month reporting period, the fund produced a total return of 1.96% through income totaling $0.170 per share, and a $0.16 increase in net asset value.¹ By the end of the reporting period, fund net assets reached $108 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,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

Investment Review

MARKET OBSERVATIONS

The stock market in the second quarter saw negative returns in each of the major indices, with the Dow Jones Industrial Average ("Dow") down 3.99%, the Standard & Poor's 500 Index¹ ("S&P 500") down 2.66% and the technology dominated NASDAQ Composite Index ("NASDAQ") falling 13.27%. Ned Davis Research, Inc. reports that large capitalization stocks continued their first quarter outperformance versus small-capitalization stocks by 0.40% in the quarter. As in the first quarter, large-capitalization growth stocks outperformed large capitalization value stocks by 2.00%. This occurred during a volatile period in which the NASDAQ lost 37% of its value from March to May, only to begin a strong rally in June. Among S&P 500 sectors, healthcare provided the best returns by far in the quarter, up 22.8%, while communication services and basic materials lost 14.3% and 14.9%, respectively. These sector performances suggest that investors believe the Federal Reserve Board (the "Fed") interest rate increases are slowing the U.S. economy. A slowdown would pressure earnings from cyclical sectors such as basic materials, and find investors buying stocks of companies with stable earnings expectations, such as pharmaceuticals.

Federated Equity Income Fund II returned (5.30%) in the second quarter, versus (1.36%) for the Average Lipper VA Equity Income Fund.² Federated Equity Income Fund II finished the 6-month reporting period with a total return of 1.96% versus (2.52%) for the Average Lipper VA Equity Income Fund.³

The markets have reacted strongly to Fed interest rate increases, which began one year ago. Numerous signs are now appearing that these rate increases are slowing the U.S. economy. The future course of the stock market will be determined by the Fed's success in accomplishing a "soft landing," wherein economic growth slows somewhat and inflation remains tame. Given the widespread belief that the Fed will now become less aggressive, the stock market will focus on earnings. Companies which provide disappointing earnings results will find their stocks punished.

In this environment, the fund will continue to focus on holding the stocks of leading companies in each sector. We will maintain a significant exposure to stocks with a history of consistent annual dividend increases, as well as convertible bonds and preferred stocks.

1 The S&P 500 Index is an unmanaged 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. Investments cannot be made in an index.

2 Lipper figures represent the average total returns reported by all variable annuity funds designated by Lipper Analytical Services as falling into the respective categories indicated. They do not reflect sales charges.

COMMENTS ON SELECTED TRANSACTIONS

In the Capital Goods sector, we sold Emerson Electric Company when the stock reached our target price. We purchased Koninklijke (Royal) Philips Electronics NV, a worldwide leading manufacturer of lighting, consumer electronics, multimedia devices, semiconductors, communication systems and industrial electronics.

In the Communication Services sector, we sold Sprint Corp. and MCI Worldcom, Inc., given concerns that their expected merger would not be approved thereby limiting their appreciation potential. We purchased Global Crossing Ltd. 6.75% Convertible Preferred Stock and NTL, Inc. 5.75% Convertible Bonds. Both companies are global diversified emerging telecommunication providers.

In the Financials sector we sold Federal Home Loan Mortgage Corp., whose stock has not advanced in light of interest rate increases and political-risk concerns. We also sold the common stock and Convertible Preferred Stock of Lincoln National Corp., with the recovery of insurance stocks in the recent quarter. We purchased Metropolitan Life Insurance, 8.00%, Convertible Preferred Stock upon the company's demutualization in April 2000. MetLife is a leading global provider of insurance and financial services with an attractive earnings growth outlook.

In the Technology sector, we sold Citrix Systems, Inc. Convertible Bonds after an earnings disappointment left the company's future growth prospects uncertain. We purchased Juniper Networks, Inc. 4.75% Convertible Bonds, a leader in the fast growing market for Internet backbone routers. We also swapped Motorola, Inc., with concerns regarding its wireless telephone business profitability for Nokia Oyj, the leading manufacturer of mobile telephones which we purchased at an attractive price. Finally, we sold Verio, Inc. 6.75% Convertible Preferred Stock, when the company agreed to be purchased for a significant cash premium by NTT Communications. We purchased JDS Uniphase Corp., one of the top providers of advanced fiberoptic components and modules to the telecommunications industry, at an attractive price.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value

COMMON STOCKS--57.4%

Basic Materials--1.8%

21,700

Air Products & Chemicals, Inc.

668,631

28,186

Du Pont (E.I.) de Nemours & Co.

1,233,137

TOTAL

1,901,768

Capital Goods--6.8%

11,600

Corning, Inc.

3,130,550

49,500

General Electric Co.

2,623,500

33,900

Koninklijke (Royal) Philips Electronics NV, ADR

1,610,250

TOTAL

7,364,300

Consumer Cyclicals--4.5%

30,800

Ford Motor Co.

1,324,400

28,685

Home Depot, Inc.

1,432,457

26,400

New York Times Co., Class A

1,042,800

4,033

Visteon Corp.

48,897

18,600

Wal-Mart Stores, Inc.

1,071,825

TOTAL

4,920,379

Consumer Staples--4.4%

98,400

AT&T Corp. - Liberty Media Group, Inc., Class A

2,386,200

33,400

General Mills, Inc.

1,277,550

29,400

Walt Disney Co.

1,141,087

TOTAL

4,804,837

Energy--4.3%

15,800

BP Amoco PLC, ADR

893,687

8,800

Chevron Corp.

746,350

45,896

Conoco, Inc., Class B

1,127,320

24,581

Exxon Mobil Corp.

1,929,608

TOTAL

4,696,965

Financials--11.9%

37,000

Allstate Corp.

823,250

18,281

BankAmerica Corp.

786,083

33,450

Chase Manhattan Corp.

1,540,791

Shares

Value

COMMON STOCKS--continued

Financials--continued

14,100

Chubb Corp.

867,150

43,900

Citigroup, Inc.

2,644,975

13,100

Marsh & McLennan Cos., Inc.

1,368,131

26,400

Mellon Financial Corp.

961,950

12,700

Merrill Lynch & Co., Inc.

1,460,500

24,000

Morgan Stanley, Dean Witter & Co.

1,998,000

9,400

Post Properties, Inc.

413,600

TOTAL

12,864,430

Health Care--7.2%

27,600

Abbott Laboratories

1,229,925

15,500

Baxter International, Inc.

1,089,844

34,800

Bristol-Myers Squibb Co.

2,027,100

45,375

Pfizer, Inc.

2,178,000

25,700

Schering Plough Corp.

1,297,850

TOTAL

7,822,719

Technology--14.9%

33,706

Apple Computer, Inc.

1,765,352

26,600

Cisco Systems, Inc.

1,690,762

22,070

EMC Corp. Mass

1,698,011

12,100

Intel Corp.

1,617,619

10,100

International Business Machines Corp.

1,106,581

12,800

JDS Uniphase Corp.

1,534,400

8,300

Lexmark International Group, Inc., Class A

558,175

14,000

Microsoft Corp.

1,120,000

42,000

Nokia Oyj, Class A, ADR

2,097,375

13,200

RF Micro Devices, Inc.

1,156,650

20,100

Sun Microsystems, Inc.

1,827,844

TOTAL

16,172,769

Utilities--1.6%

26,126

Enron Corp.

1,685,127

TOTAL COMMON STOCKS (IDENTIFIED COST $46,251,444)

62,233,294

Shares or
Principal
Amount

Value

CONVERTIBLE PREFERRED STOCKS--17.1%

Basic Materials--1.9%

46,000

Monsanto Co., Conv. Pfd., $2.60

2,081,500

Capital Goods--0.9%

45,400

Ingersoll-Rand Co., PRIDES, Series 6.75%

925,025

Communication Services--2.9%

8,500

Global Crossing Ltd., Conv. Pfd., $16.88

1,892,313

7,000

NEXTLINK Communications, Inc., Conv. Pfd., $3.24

1,204,875

TOTAL

3,097,188

Consumer Staples--5.4%

19,600

Cox Communications, Inc., PRIDES, $0.88

1,204,175

15,100

Cox Communications, Inc., PRIDES, $1.71, Series Sprint PCS Group

1,676,100

26,700

Reliant Energy, Inc., ZENS, $1.17, Series TWX

1,992,488

10,300

Suiza Foods Corp., Conv. Pfd., $2.75

393,336

16,500

Suiza Foods Corp., Conv. Pfd., $2.75, Registered

630,102

TOTAL

5,896,201

Financials--2.0%

31,000

Metropolitan Life Insurance Co., Conv. Pfd., $4.00

2,144,813

Technology--2.5%

22,000

Amdocs Automatic Com Exchange Ltd., Conv. Pfd., $1.52

1,388,750

19,200

Metromedia Fiber Network DECS, Trust VI, Inc,. $2.48

1,317,600

TOTAL

2,706,350

Transportation--0.6%

16,000

Union Pacific Cap Trust, Conv. Pfd. $3.12

668,304

Utilities--0.9%

25,250

TXU Corp., PRIDES, $4.63

981,594

TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $17,490,330)

18,500,975

CONVERTIBLE CORPORATE BONDS--20.1%

Capital Goods--2.2%

970,000

SCI Systems, Inc., Conv. Bond, 3.00%, 3/15/2007

953,432

700,000

Sanmina Corp., Conv. Bond, 4.25%, 5/1/2004

1,420,216

TOTAL

2,373,648

Principal
Amount

Value

CONVERTIBLE CORPORATE BONDS--continued

Communication Services--2.5%

1,500,000

NEXTEL Communications, Inc., Conv. Bond, 5.25%, 1/15/2010

1,571,040

1,400,000

NTL, Inc., Conv. Bond, 5.75%, 12/15/2009

1,129,548

TOTAL

2,700,588

Consumer Cyclicals--2.3%

700,000

Amazon.com, Inc., Conv. Sub. Note, 4.75%, 2/1/2009

441,896

900,000

Digital Island, Inc., Conv. Sub. Note, 6.00%, 2/15/2005

641,250

300,000

DoubleClick, Inc., Conv. Bond, 4.75%, 3/15/2006

323,769

130,000

Omnicom Group, Inc., Conv. Sub. Deb, 4.25%, 1/3/2007

368,209

380,000

Omnicom Group, Inc., Conv. Sub. Deb, 2.25%, 1/6/2013

702,932

TOTAL

2,478,056

Health Care--1.2%

1,530,000

Roche Holdings, Inc., LYON, 1/19/2015, Series DNA

1,371,262

Technology--11.9%

350,000

ASM Lithography Holding NV, Conv. Sub. Note, 4.25%, 11/30/2004

474,471

85,000

America Online, Inc., Conv. Sub. Note, 4.00%, 11/15/2002

688,594

460,000

Conexant Systems, Inc., Conv. Sub. Note, 4.00%, 2/1/2007

359,950

340,000

Cypress Semiconductor Corp., Conv. Sub. Note, 3.75%, 7/1/2005

329,800

210,000

Cypress Semiconductor Corp., Conv. Sub. Note, 6.00%, 10/1/2002

382,381

585,000

Exodus Communications, Inc., Conv. Sub. Note, 4.75%, 7/15/2008, Registered

853,246

750,000

Exodus Communications, Inc., Conv. Sub. Note 4.75%, 7/15/2008

1,092,030

1,580,000

Juniper Networks, Inc., Conv. Sub. Note, 4.75%, 3/15/2007

1,746,327

230,000

LSI Logic Corp., Conv. Bond, 4.25%, 3/15/2004

809,973

Principal
Amount

Value

CONVERTIBLE CORPORATE BONDS--continued

Technology--continued

300,000

LSI Logic Corp., Conv. Bond, 4.25%, 3/15/2004

1,058,736

1,180,000

Level 3 Communications, Inc., Conv. Bond, 6.00%, 3/15/2010

1,085,718

575,000

Veritas Software Corp., Conv. Bond, 1.856%, 8/13/2006

1,869,825

2,310,000

Vitesse Semiconductor Corp., Conv. Sub. Deb, 4.00%, 3/15/2005

2,112,010

TOTAL

12,863,061

TOTAL CONVERTIBLE CORPORATE BONDS (IDENTIFIED COST $19,114,889)

21,786,615

REPURCHASE AGREEMENT--4.5%³

4,830,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

4,830,000

TOTAL INVESTMENTS (IDENTIFIED COST $87,686,663)⁴

107,350,884

1 Non-income producing security.

4 The cost of investments for federal tax purposes amounts to $87,686,663. The net unrealized appreciation of investments on a federal tax basis amounts to $19,664,221 which is comprised of $23,810,296 appreciation and $4,146,075 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($108,375,607) at June 30, 2000.

The following acronyms are used throughout this portfolio:

ADR	--American Depositary Receipt
DECS	--Dividend Enhanced Convertible Stock
LYON	--Liquid Yield Option Note
PRIDES	--Preferred Redeemable Increased Dividend Equity Securities
ZENS	--Zero Premium Exchangeable Subordinated Notes

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $87,686,663)

107,350,884

Income receivable

301,949

Receivable for investments sold

1,848,854

TOTAL ASSETS

109,501,687

Liabilities:

Payable for investments purchased

1,122,519

Accrued expenses

3,561

TOTAL LIABILITIES

1,126,080

Net assets for 6,592,193 shares outstanding

108,375,607

Net Assets Consist of:

Paid in capital

88,666,444

Net unrealized appreciation of investments

19,664,221

Accumulated net realized loss on investments

(751,323

)

Undistributed net investment income

796,265

TOTAL NET ASSETS

108,375,607

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$108,375,607 ÷ 6,592,193 shares outstanding

$16.44

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Dividends (net of foreign taxes withheld of $1,053)

869,408

Interest

390,635

TOTAL INCOME

1,260,043

Expenses:

Investment adviser fee

367,467

Administrative personnel and services fee

62,159

Custodian fees

5,415

Transfer and dividend disbursing agent fees and expenses

6,902

Directors'/Trustees' fees

902

Auditing fees

5,405

Legal fees

3,588

Portfolio accounting fees

17,054

Share registration costs

5,057

Printing and postage

1,524

Insurance premiums

636

Miscellaneous

1,007

TOTAL EXPENSES

477,116

Waiver and Expense Reduction:

Waiver of investment adviser fee

(14,413

)

Fees paid indirectly from directed broker arrangements

(922

)

TOTAL WAIVER AND EXPENSE REDUCTION

(15,335

)

Net expenses

461,781

Net investment income

798,262

Realized and Unrealized Gain (Loss) on Investments:

Net realized gain on investments

1,013,459

Net change in unrealized depreciation of investments

(369

)

Net realized and unrealized gain (loss) on investments

1,013,090

Change in net assets resulting from operations

1,811,352

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Year Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

798,262

1,002,762

Net realized gain (loss) on investments and foreign currency transactions ($1,013,459 and ($1,719,590) respectively, as computed for federal tax purposes)

1,013,459

(1,715,760

)

Net change in unrealized appreciation/depreciation

(369

)

12,941,056

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

1,811,352

12,228,058

Distributions to Shareholders:

Distributions from net investment income

(1,003,430

)

(939,566

)

Distributions from net realized gains

(760,548

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(1,003,430

)

(1,700,114

)

Share Transactions:

Proceeds from sale of shares

23,333,559

26,465,248

Net asset value of shares issued to shareholders in payment of distributions declared

1,003,429

1,700,112

Cost of shares redeemed

(4,388,483

)

(8,573,130

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

19,948,505

19,592,230

Change in net assets

20,756,427

30,120,174

Net Assets:

Beginning of period

87,619,180

57,499,006

End of period (including undistributed net investment income of $796,265 and $1,001,433, respectively)

108,375,607

87,619,180

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Year Ended December 31,

Period Ended
December 31,

2000

1999

1998

1997

Net Asset Value, Beginning of Period

$16.28

$14.15

$12.31

$10.47

Income From Investment Operations:

Net investment income

0.10

0.22

0.23

Net realized and unrealized gain (loss) on investments and foreign currency

0.23

2.32

1.69

1.76

TOTAL FROM INVESTMENT OPERATIONS

0.33

2.54

1.91

1.99

Less Distributions:

Distributions from net investment income

(0.17

)

(0.23

)

(0.07

)

(0.15

)

Distributions from net realized gain on investments

(0.18

)

TOTAL DISTRIBUTIONS

(0.17

)

(0.41

)

(0.07

)

(0.15

)

Net Asset Value, End of Period

$16.44

$16.28

$14.15

$12.31

Total Return³

1.96

18.39

15.57

19.19

Ratios to Average Net Assets:

Expenses

0.94

%⁴

0.94

0.93

0.85

%⁴

Net investment income

1.63

%⁴

1.48

2.04

2.41

%⁴

Expense waiver/reimbursement⁵

0.03

%⁴

0.20

0.43

1.44

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$108,376

$87,618

$57,499

$32,875

Portfolio turnover

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

2 Calculated using the average shares method.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 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

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

Investment Valuations

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

Repurchase Agreements

It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Funds 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.

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Expenses and Distributions

Federal Taxes

At December 31, 1999, the Fund, for federal tax purposes, had a capital loss carryforward of $1,719,590 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 2007.

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 maintain 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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Restricted Securities

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

Use of Estimates

Other

Investment transactions are accounted for on a trade date basis.

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:

Six Months
Ended
June 30,
2000

Year Ended
December 31,
1999

Shares sold

1,420,016

1,773,765

Shares issued to shareholders in payment of distributions declared

57,273

119,642

Shares redeemed

(266,883

)

(574,863

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

1,210,406

1,318,544

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

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

Administrative Fee

Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on a scale that ranges from 0.15% to 0.075% of the aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc., subject to a $125,000 minimum per portfolio and $30,000 per each additional class.

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund may 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 month period ended June 30, 2000, the Fund did not incur a shareholder services fee.

Distribution Services Fee

The Funds have 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 six-month period ended June 30, 2000, the Fund did not incur a distribution 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 each Fund's average daily net assets for the period, plus out-of-pocket expenses.

Expense Reduction

The Fund directs certain portfolio trades to a broker that, in turn, pays a portion of the Fund's operating expenses. For the six-month period ended June 30, 2000, the Fund's expenses were reduced by $922 under these arrangements.

Interfund Transactions

During the six-month period ended June 30, 2000, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sales transactions complied with Rule 17a-7 under the Act and amounted to $7,543,759 and $6,760,347, respectively.

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 (and in-kind contributions), for the six-month period ended June 30, 2000, were as follows:

Purchases	$	55,914,006
Sales	$	39,713,330

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Equity Income Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

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 (8/00)

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

Federated International Small Company Fund II, a portfolio of Federated Insurance Series, was created May 1, 2000, and we are pleased to present its first Semi-Annual Report.

This fund's portfolio managers select well-researched small-cap international stocks from 21 countries outside the United States.¹ The average market cap is $800+ million and its holdings represent various industry sectors from healthcare products to technology to airlines. These are exciting companies that can ignite your imagination. Furthermore, these stocks are in areas that have historically experienced remarkable investment growth: domestic consumption, product and service leaders, and technology. As of June 30, 2000, this $9.5 million fund was invested in more than 290 small-cap stocks in 21 countries across 4 continents.²

This report covers the two-month period from May 1, 2000 through June 30, 2000. It begins with an interview with the fund's portfolio manager, Leonardo A. Vila, Vice President of Federated Global Investment Management Corp. and is followed by a complete listing of the fund's global investments and its financial statements.

Broad diversification and outstanding stock selection are the hallmarks of this fund. For the two-month reporting period, the fund produced a total return of (6.10%) through a net asset value decrease of $0.61 per share.³

Please remember that investing in international small companies can be volatile. There will inevitably be periods of negative short-term fluctuation, such as this one, as well as periods of positive returns. Our group of global investment managers are optimistic about many countries' economic outlooks and continued enthusiasm for capitalism.

1 Small company stocks may be less liquid and subject to greater price volatility than large capitalization stocks.

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

4 Systematic investing does not assure a profit or protect against loss in declining markets. Because dollar-cost averaging involves continuous investing regardless of fluctuating price levels, investors should consider their financial ability to continue purchases during periods of low price levels.

In the past two months, almost every international market has been affected by the rate increases imposed by the Federal Reserve Board ("the Fed"), although international markets do not normally correlate with domestic markets. The result of the Fed's rate increases was to fend off fears of U.S. inflation and to slow U.S. economic growth which affects markets worldwide. We believe the international markets will assert themselves as their respective economies mimic the United States' growth, and in many markets, as international equity prices become more attractive than U.S. stock valuations.

Thank you for participating in Federated International Small Company Fund II.

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

Investment Review

CURRENT STRATEGY

The Market

The performance of the MSCI World ex-U.S. Small Cap Index,¹ measured in U.S. dollars, was 0.26% in the second quarter. The Pacific was the best performing region, returning 4.63%, led primarily by Australia, 9.71% and Japan, 6.28%. Europe was the worst performing region with a (4.30%) return in the second quarter of the year.

The 1999 tech rally continued through the first quarter of 2000, but ended abruptly in the middle of March. Concerns about higher interest rates in the U.S. and the sustainability of lofty valuations in the technology, media and telecommunications (TMT) sectors reversed the upward trend.² The bearishness and weakness in these sectors continued into the second quarter. A sector rotation into "old" economy stocks became prevalent. Defensive industries like food and beverage, and healthcare were at the forefront of investors' minds.

One of the most obvious effects of the increasing volatility in the small cap market was the number of postponements or cancellations of corporate issues. Although some initial public offerings (IPOs) were successfully completed, a significant slowing of IPOs and secondary offerings took place. Volatility in the international small cap market was exacerbated by decreasing trading volume and an imbalance of sellers and buyers.

Looking at the broader market, it is becoming clear that continuing volatility, particularly in the TMT sectors, is beginning to refocus investors' attention on fundamentals and earnings visibility. In short, overall valuation is becoming more important as investors become more rational.

FUND PERFORMANCE

Since inception (May 1, 2000) to the end of the second quarter, Federated International Small Company Fund II had a total return of (6.10%)³ which underperformed the 7.50% return of the MSCI World ex-U.S. Small Cap Index over the same period.

Most of the second quarter of 2000 has been characterized by a continuation of the negative trends seen in the beginning of March. Despite sharp price drops in the TMT sectors, we have found opportunities in defensive growth areas and the less volatile buoyant oil sector. The increase in gasoline prices prompted us to look at opportunities in the oil exploration and production sector which have proven to be good investments for the fund. However, we continue to remain overweight in TMT relative to our benchmark index as we believe that the growth opportunities still exist in these sectors.

1 The MSCI World ex-U.S. Small Cap Index is created by selecting companies within the market capitalization range of USD 200-800 million. The dollar-denominated range is applied across all 23 developed markets. Indexes are unmanaged and investments cannot be made in an index.

2 Funds that have a higher concentration of investments in a specific industry or sector, such as technology, may be subject to a higher degree of market risk than funds whose investments are more diversified.

3 Past performance is no guarantee of future results.

OUTLOOK

A slower U.S. economy implies a weaker dollar, and further recovery for the Euro. The growth in continental Europe should be less affected than other regions by a U.S. slowdown. In fact, nearly all economic data and surveys show that growth in Europe is accelerating. A strengthening Euro would thus confirm European investors' current preference for less economically sensitive sectors. After a dull first half of the year, we expect Europe to perform well, as a strengthening Euro should produce more inflows into the region.

In Japan, the markets are currently preparing for a normalization in monetary policy. Central bank Governor Masaru Hayami has indicated on several occasions that the zero interest rate policy adopted by the Bank of Japan will be brought to an end as soon as the economic recovery is firmly in place. Following the strong growth in the first quarter (10% annualized), driven mainly by private demand and exports, the time seems to be nearing.

In addition, OPEC's recent decision to raise the output of oil should have lowered the oil price, but the continued strength increases the risk of inflationary pressures globally.

STRATEGY

We will continue to follow our investment strategy of investing in local consumption stocks and secondary beneficiaries of global trade. This strategy has produced results over the long-term that have reinforced this approach.

We expect Europe to perform better this year than last year. Strong economic indicators, particularly from Germany, initially gives us confidence for an economic recovery for the region. As such, we will maintain our weightings as follows: overweight Europe, underweight Asia/Pacific and Japan and underweight Latin America.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value in
U.S. Dollars

COMMON STOCKS--94.9%

AUSTRALIA--1.8%

Energy--0.4%

14,000

Santos Ltd.

42,617

Software & Services--0.3%

6,000

Securenet Ltd.

33,084

Technology Hardware & Equipment--0.7%

8,000

ERG Ltd.

62,054

Telecommunication Services--0.4%

5,000

AAPT Ltd.

16,387

22,000

Amcom Telecommunications Ltd.

20,525

TOTAL

36,912

TOTAL AUSTRALIA

174,667

AUSTRIA--0.5%

Pharmaceuticals & Biotechnology--0.4%

750

Sanochemia Pharmazeutika AG

39,525

Software & Services--0.1%

100

EMTS Technologies AG

6,804

TOTAL AUSTRIA

46,329

CANADA--9.0%

Banks--0.5%

1,500

AGF Management Ltd.

43,885

Capital Goods--0.8%

2,300

GSI Lumonics, Inc.

80,655

Energy--3.3%

2,500

Bonavista Petroleum Ltd.

43,919

2,100

Canadian Hunter Exploration Ltd.

44,625

2,300

Crestar Energy, Inc.

35,044

1,150

Ensign Resource Service Group, Inc.

37,919

5,500

Genesis Exploration Ltd.

40,878

6,000

Gulf Canada Resources Ltd.

27,973

1,300

Precision Drilling Corp.

50,243

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

CANADA--continued

Energy--continued

200

Rio Alto Exploration Ltd.

3,662

750

Talisman Energy, Inc.

24,856

TOTAL

309,119

Materials--0.3%

8,000

Methanex Corp.

26,757

Media--0.4%

1,500

Corus Entertainment, Inc., Class B

40,034

Software & Services--2.2%

1,500

Cognicase, Inc.

27,466

3,700

DataMirror Corp.

45,375

700

Descartes Systems Group, Inc.

20,811

3,000

MGI Software Corp.

41,047

3,500

Mosaic Group, Inc.

42,568

3,600

TECSYS, Inc.

31,622

TOTAL

208,889

Technology Hardware & Equipment--1.3%

1,000

Mitel Corp.

20,878

450

Sierra Wireless, Inc.

24,324

6,000

SR Telecom, Inc.

32,838

1,600

Wi-Lan, Inc.

45,081

TOTAL

123,127

Telecommunication Services--0.2%

500

Clearnet Communications, Inc., Class A

13,851

Transportation--0.0%

300

Air Canada

3,953

TOTAL CANADA

850,264

CHINA--0.5%

Materials--0.2%

150,000

Beijing Yanhua Petrochemical Co., Ltd., Class H

17,318

Transportation--0.3%

150,000

China Shipping Development Co., Ltd.

27,516

TOTAL CHINA

44,834

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

DENMARK--2.3%

Capital Goods--0.7%

800

NEG Micon AS

28,967

1,000

Vestas Wind Systems AS

36,721

TOTAL

65,688

Commercial Services & Supplies--0.4%

280

Group 4 Falck AS

44,925

Food Beverage & Tobacco--0.3%

800

Danisco AS

26,715

Pharmaceuticals & Biotechnology--0.5%

620

NeuroSearch AS

48,390

Transportation--0.4%

1,600

DSV, De Sammensluttede Vognmad AS

35,825

TOTAL DENMARK

221,543

FINLAND--2.0%

Automobiles & Components--0.2%

600

Nokian Renkaat

16,612

Consumer Durables & Apparel--0.4%

1,500

Amer Group Ltd., Class A

41,243

Technology Hardware & Equipment--1.4%

1,700

Elcoteq Network Corp., Class A

37,248

7,630

Jot Automation Group Oyj

50,918

1,270

Perlos Oyj

40,133

500

Tecnomen Oyj

4,296

TOTAL

132,595

TOTAL FINLAND

190,450

FRANCE--8.6%

Capital Goods--1.6%

160

Egide SA

36,660

2,500

Pinguely-Haulotte

52,031

230

Radiall SA

29,643

150

Zodiac SA

30,517

TOTAL

148,851

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

FRANCE--continued

Commercial Services & Supplies--0.7%

1,500

Elior

18,946

480

Generale Location SA

45,803

TOTAL

64,749

Food Beverage & Tobacco--0.3%

870

Remy Cointreau SA

28,282

Health Care Equipment & Services--0.4%

1,030

LVL Medical SA

43,169

Hotels Restaurants & Leisure--0.7%

320

Club Mediterranee SA

43,351

460

Pierre & Vacances

27,448

TOTAL

70,799

Media--0.8%

930

Groupe Sonopar

45,281

330

IPSOS

34,656

TOTAL

79,937

Pharmaceuticals & Biotechnology--0.5%

610

Genset SA

43,678

Retailing--0.6%

500

Marionnaud Parfumeries

53,941

Software & Services--2.1%

250

ALTEN

38,403

1,300

Genesys Telecommunications Laboratories, Inc.

56,408

330

Groupe Crit

49,778

2,020

Integra - Net SA

18,244

2,800

Valtech

35,018

TOTAL

197,851

Technology Hardware & Equipment--0.9%

160

Avenir Telecom

32,078

370

Ingenico SA

33,134

100

Silicon-On-Insulator Technologies (SOITEC)

23,390

TOTAL

88,602

TOTAL FRANCE

819,859

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

GERMANY, FEDERAL REPUBLIC OF--11.2%

Capital Goods--0.9%

1,000

Jenoptik AG

28,689

900

Pfeiffer Vacuum Technology AG

34,799

440

Singulus Technologies AG

26,044

TOTAL

89,532

Commercial Services & Supplies--0.4%

340

DIS Deutsche Industrie Service AG

41,224

Consumer Durables & Apparel--0.5%

770

Zapf Creation AG

48,150

Diversified Financials--0.3%

297

Tecis Holding AG

28,340

Food Beverage & Tobacco--0.2%

610

Kamps AG

19,509

Media--0.8%

1,050

GFK AG

51,896

475

Kinowelt Medien AG

23,490

TOTAL

75,386

Pharmaceuticals & Biotechnology--0.5%

470

GPC Biotech AG

24,006

700

Girindus AG

20,784

TOTAL

44,790

Retailing--0.5%

420

Medion AG

42,904

Software & Services--3.6%

160

Biodata Information Technology AG

51,936

170

Brokat Infosystems AG

13,227

290

Comroad AG

44,852

2,000

Datasave AG Informations Systeme

37,615

250

GFT Ges Fuer Technologiecon AG

47,735

250

Heyde AG Beratung

38,904

540

Norcom Information Technology AG

44,336

960

Sinnerschrader AG

25,204

1,010

Telesens AG

40,498

TOTAL

344,307

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

GERMANY, FEDERAL REPUBLIC OF--continued

Technology Hardware & Equipment--2.5%

ADVA AG Optical Networking

28,402

820

Elmos Semiconductor AG

41,491

750

Kontron Embedded Computers AG

67,664

170

LPKF Laser & Electronics

46,255

160

Pandatel AG

20,622

800

Suess Microtec AG

31,925

TOTAL

236,359

Transportation--0.5%

455

Thiel Logistik AG

42,787

Utilities--0.5%

1,250

Wedeco AG Water Technology

48,451

TOTAL GERMANY, FEDERAL REPUBLIC OF

1,061,739

HONG KONG--4.9%

Banks--0.3%

13,000

Wing Hang Bank Ltd.

32,269

Capital Goods--0.3%

350,000

Shenzhen International Holdings Ltd.

25,143

Commercial Services & Supplies--0.4%

50,000

Cosco Pacific Ltd.

39,446

Diversified Financials--0.8%

20,000

Beijing Enterprises Holdings Ltd.

23,603

66,000

China Everbright Ltd.

51,222

TOTAL

74,825

Food & Drug Retailing--0.2%

34,000

Ng Fung Hong Ltd.

18,209

Media--0.5%

13,000

Asia Satellite Telecommunications Holdings Ltd.

44,442

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

HONG KONG--continued

Real Estate--0.8%

286,000

Beijing North Star Co., Ltd.

27,883

17,000

Great Eagle Holdings Ltd.

26,823

17,000

Kerry Properties Ltd.

17,882

TOTAL

72,588

Retailing--1.2%

38,000

Esprit Asia Holdings Ltd.

39,728

13,000

Giordano International Ltd.

19,761

12,000

Li & Fung Ltd.

60,035

TOTAL

119,524

Technology Hardware & Equipment--0.2%

6,000

ASM Pacific Technology Ltd.

22,475

Utilities--0.2%

60,000

Huaneng Power International, Inc.

19,627

TOTAL HONG KONG

468,548

IRELAND--0.4%

Software & Services--0.4%

3,530

ITG Group PLC

37,228

ISRAEL--2.5%

Diversified Financials--0.3%

1,700

Ampal-American Israel Corp., Class A

25,500

Health Care Equipment & Services--0.5%

1,100

Card-Guard Scientific Survival Ltd.

52,259

Pharmaceuticals & Biotechnology--0.5%

1,870

Oridion Systems Ltd.

49,407

Software & Services--0.5%

2,400

Geo Interactive Media Group PLC

45,938

Technology Hardware & Equipment--0.7%

400

BATM Advanced Communications Ltd.

34,741

1,700

On Track Innovations Ltd.

29,944

TOTAL

64,685

TOTAL ISRAEL

237,789

ITALY--1.5%

Automobiles & Components--0.5%

4,462

Brembo SPA

46,007

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

ITALY--continued

Banks--0.3%

4,000

Bayerische Vita SPA

34,255

Consumer Durables & Apparel--0.4%

700

Ferretti SPA

1,831

4,000

Marzotto (Gaetano) & Figli SPA

32,651

TOTAL

34,482

Technology Hardware & Equipment--0.3%

500

Ericsson AB

29,166

TOTAL ITALY

143,910

JAPAN--17.6%

Capital Goods--3.4%

20,000

Bunka Shutter Co., Ltd.

50,893

20,000

Furukawa Co., Ltd.

51,459

7,000

Hino Motors Ltd.

25,597

2,000

Hitachi AIC, Inc.

24,900

8,000

Hitachi Koki Co., Ltd.

28,651

24,000

Nachi Fujikoshi Corp.

45,238

4,000

Nippon Thompson Co., Ltd.

60,695

7,000

Tsugami Corp.

34,833

TOTAL

322,266

Commercial Services & Supplies--0.4%

3,000

Amano Corp.

33,476

Consumer Durables & Apparel--1.9%

13,000

Gunze Ltd.

50,478

1,000

Kose Corp.

32,327

17,000

Renown, Inc.

24,834

9,000

Seiren Co., Ltd.

34,777

18,000

Toyobo Co., Ltd.

35,455

TOTAL

177,871

Diversified Financials--0.5%

15,000

Nichiei Co., Ltd.

44,814

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

JAPAN--continued

Food Beverage & Tobacco--1.2%

2,000

Kirin Beverage Corp.

53,155

10,000

Nichirei Corp.

42,599

400

Rock Field Co., Ltd.

21,450

TOTAL

117,204

Health Care Equipment & Services--0.3%

1,000

Santen Pharmaceutical Co., Ltd.

24,127

Hotels Restaurants & Leisure--0.8%

1,100

Saint Marc Co., Ltd.

38,877

Yoshinoya D&C Co., Ltd.

40,714

TOTAL

79,591

Household & Personal Products--0.6%

10,000

Kanebo Ltd.

30,913

6,000

Lion Corp.

24,824

TOTAL

55,737

Materials--3.3%

6,000

Central Glass Co., Ltd.

31,836

25,000

Daido Steel Co., Ltd.

58,433

2,000

Daio Paper Corp.

19,980

8,000

Dowa Mining Co., Ltd.

26,012

28,000

Nippon Denko Co., Ltd.

44,861

11,000

Nippon Paint Co., Ltd.

39,188

10,000

Nippon Sanso Corp.

34,777

11,000

Pacific Metals Co., Ltd.

32,864

20,000

Showa Denko K.K.

29,405

TOTAL

317,356

Pharmaceuticals & Biotechnology--1.2%

4,000

Dainippon Pharmaceutical Co., Ltd.

53,306

4,000

Hisamitsu Pharmaceutical Co., Inc.

61,486

TOTAL

114,792

Real Estate--0.2%

900

Meiwa Estate Co., Ltd.

23,750

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

JAPAN--continued

Retailing--1.6%

500

Right On Co., Ltd.

40,573

13,000

Seiyu Ltd.

55,134

4,000

Uny Co., Ltd.

55,228

TOTAL

150,935

Software & Services--0.3%

700

Meitec Corp.

27,708

Technology Hardware & Equipment--1.6%

6,000

Dainippon Screen Manufacturing Co., Ltd.

57,057

2,000

Kinseki Ltd.

33,834

1,200

Toyo Corp.

34,720

1,000

Zuken, Inc.

29,216

TOTAL

154,827

Utilities--0.3%

14,000

Toho Gas Co., Ltd.

27,313

TOTAL JAPAN

1,671,767

NETHERLANDS--3.2%

Commercial Services & Supplies--0.5%

1,560

Buhrmann NV

44,606

Energy--0.4%

630

Fugro NV

35,937

Food Beverage & Tobacco--0.4%

1,000

Nutreco Holding NV

38,188

Retailing--0.7%

1,170

Beter Bed Holding NV

35,074

1,350

Macintosh Retail Group NV

37,699

TOTAL

72,773

Software & Services--0.8%

1,120

Ordina Beheer NV

37,424

790

Unit 4

37,673

TOTAL

75,097

Technology Hardware & Equipment--0.2%

1,190

BE Semiconductor Industries NV

18,575

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

NETHERLANDS--continued

Transportation--0.2%

650

Koninlijke Luchtvaart Maatschapppij NV (KLM)

17,500

TOTAL NETHERLANDS

302,676

NEW ZEALAND--0.6%

Energy--0.4%

11,500

Fletcher Challenge Energy

37,493

Transportation--0.2%

17,000

Air New Zealand Ltd., Class B

17,305

TOTAL NEW ZEALAND

54,798

NORWAY--2.8%

Energy--0.8%

2,600

ProSafe ASA

38,483

2,900

TGS Nopec Geophysical Co., ASA

38,360

TOTAL

76,843

Pharmaceuticals & Biotechnology--0.3%

7,110

Nutri Pharma ASA

32,731

Software & Services--0.9%

2,430

Norman ASA

39,648

390

Opticom ASA

41,861

TOTAL

81,509

Transportation--0.8%

2,150

Bergesen d.y. ASA, Class B

41,218

2,500

Frontline Ltd.

30,593

TOTAL

71,811

TOTAL NORWAY

262,894

SINGAPORE--1.9%

Commercial Services & Supplies--0.4%

6,400

Sembcorp Logistics Ltd.

35,947

Real Estate--0.2%

14,000

Keppel Land Ltd.

18,564

Technology Hardware & Equipment--0.9%

6,000

Datacraft Asia Ltd.

52,800

20,000

JIT Holdings Ltd.

34,974

TOTAL

87,774

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

SINGAPORE--continued

Telecommunication Services--0.4%

31,000

Keppel Telecom & Transportation, Ltd.

40,208

TOTAL SINGAPORE

182,493

SPAIN--1.1%

Capital Goods--0.3%

1,200

Abengoa SA

32,078

Pharmaceuticals & Biotechnology--0.5%

790

Zeltia SA

47,515

Technology Hardware & Equipment--0.3%

1,700

Radiotronica SA

30,171

TOTAL SPAIN

109,764

SWEDEN--3.3%

Commercial Services & Supplies--0.4%

1,400

Proffice AB

37,460

Media--0.4%

810

Modern Times Group, Class B

38,571

Software & Services--1.7%

7,000

Aspiro Information AB

22,302

6,500

Enea Data AB

44,218

1,700

HIQ International AB

16,383

1,390

Sigma AB, Class B

37,508

5,850

Telelogic AB

43,112

TOTAL

163,523

Technology Hardware & Equipment--0.8%

3,300

SwitchCore AB

34,422

1,900

Teligent AB

37,698

TOTAL

72,120

TOTAL SWEDEN

311,674

SWITZERLAND--11.2%

Banks--0.6%

Bank Sarasin & Cie

51,493

Capital Goods--2.2%

Bobst AG

45,056

Geberit International AG

17,707

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

SWITZERLAND--continued

Capital Goods--continued

140

Rieter Holdings Ltd.

47,202

Saurer AG Arbon

49,923

100

Swisslog Holding AG

49,041

TOTAL

208,929

Diversified Financials--0.5%

OZ Holding AG

50,021

Health Care Equipment & Services--2.8%

Disetronic Holdings AG

66,818

1,300

Jomed NV

51,401

Straumann Holding AG

60,075

Tecan AG

47,845

Unilabs AG

42,911

TOTAL

269,050

Hotels Restaurants & Leisure--0.2%

Reiseburo Kuoni AG, Class B

13,885

Materials--0.9%

Gretag-Macbeth Holding AG

39,723

Mikron Holding AG

44,173

TOTAL

83,896

Retailing--0.4%

Jelmoli Holding AG

37,700

Technology Hardware & Equipment--3.6%

Esec Holding AG

49,286

100

Feintool International Holding AG

44,137

200

Gretag Imaging Group

38,497

Kudelski SA

62,895

Logitech International SA

49,819

Micronas Semiconductor Holding AG

44,627

SEZ Holding AG

54,913

TOTAL

344,174

TOTAL SWITZERLAND

1,059,148

Shares

Value in
U.S. Dollars

COMMON STOCKS--continued

UNITED KINGDOM--8.0%

Capital Goods--0.5%

6,000

Chloride Group PLC

17,501

6,700

Enodis PLC

32,830

TOTAL

50,331

Commercial Services & Supplies--0.9%

2,010

Guardian IT PLC

41,590

19,900

Securicor PLC

41,101

TOTAL

82,691

Diversified Financials--0.4%

5,070

Man (ED&F) Group PLC

40,735

Media--1.7%

6,000

HIT Entertainment PLC

39,492

8,280

Saatchi & Saatchi PLC

53,289

11,300

Scoot.com PLC

26,331

10,250

Taylor Nelson Sofres PLC

41,100

TOTAL

160,212

Pharmaceuticals & Biotechnology--1.9%

1,150

Cambridge Antibody Technology Group PLC

51,506

1,430

Oxford GlycoSciences PLC

40,916

3,380

Shire Pharmaceuticals Group PLC

58,814

24,230

SkyePharma PLC

31,530

TOTAL

182,766

Retailing--0.4%

5,130

Matalan PLC

40,441

Software & Services--1.2%

3,000

Baltimore Technologies PLC

22,696

2,800

Eidos PLC

20,548

2,200

Glotel PLC

24,800

1,000

Orchestream Ltd.

4,812

3,780

RM PLC

38,435

TOTAL

111,291

Shares or
Principal
Amount

Value in
U.S. Dollars

COMMON STOCKS--continued

UNITED KINGDOM--continued

Technology Hardware & Equipment--1.0%

800

Dialog Semiconductor PLC

40,479

3,550

Pace Micro Technology PLC

51,137

TOTAL

91,616

TOTAL UNITED KINGDOM

760,083

TOTAL COMMON STOCKS (IDENTIFIED COST $8,849,786)

9,012,457

REPURCHASE AGREEMENT--2.0%³

185,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

185,000

TOTAL INVESTMENTS (IDENTIFIED COST $9,034,786)⁴

9,197,457

1 Non-income producing security.

4 The cost of investments for federal tax purposes amounts to $9,034,786. The net unrealized appreciation of investments on a federal tax basis amounts to $162,671 which is comprised of $691,724 appreciation and $529,053 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($9,492,584) at June 30, 2000.

The following acronyms are used throughout this portfolio:

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, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $9,034,786)

9,197,457

Cash

4,066

Cash denominated in foreign currencies (identified cost $81,771)

81,891

Income receivable

4,874

Receivable for investments sold

255,774

Other assets

15,018

TOTAL ASSETS

9,559,080

Liabilities:

Payable for investments purchased

65,291

Net payable for foreign currency exchange contracts

1,205

TOTAL LIABILITIES

66,496

Net assets for 1,010,395 shares outstanding

9,492,584

Net Assets Consist of:

Paid in capital

10,097,639

Net unrealized appreciation of investments and translation of assets and liabilities in foreign currency

162,759

Accumulated net realized loss on investments and foreign currency transactions

(771,897

)

Undistributed net investment income

4,083

TOTAL NET ASSETS

9,492,584

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$9,492,584 ÷ 1,010,395 shares outstanding

$9.39

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED JUNE 30, 2000 (UNAUDITED)¹

Investment Income:

Dividends (net of foreign taxes withheld of $2,682)

16,333

Interest

10,581

TOTAL INCOME

26,914

Expenses:

Investment adviser fee

18,971

Administrative personnel and services fee

20,833

Custodian fees

2,384

Transfer and dividend disbursing agent fees and expenses

806

Directors'/Trustees' fees

Audit fees

2,988

Legal fees

367

Portfolio accounting fees

2,292

Shareholder services fee

1,518

Share registration costs

1,249

Printing and postage

1,046

Insurance premiums

Miscellaneous

237

TOTAL EXPENSES

52,808

Waiver and Reimbursement:

Waiver of investment adviser fee

(18,971

)

Reimbursement of other operating expenses

(11,006

)

TOTAL WAIVER AND REIMBURSEMENT

(29,977

)

Net expenses

22,831

Net investment income

4,083

Realized and Unrealized Gain (Loss) on Investments and Foreign Currency Transactions:

Net realized loss on investments and foreign currency transactions

(771,897

)

Net change in unrealized appreciation transaction of investments and translation of assets and liabilities in foreign currency

162,759

Net realized and unrealized loss on investments and foreign currency transactions

(609,138

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(605,055

)

1 Reflects operations for the period from May 1, 2000 (date of initial public investment) to June 30, 2000.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Period Ended
(unaudited)
June 30,
2000

Increase (Decrease) in Net Assets

Operations:

Net investment income

4,083

Net realized loss on investments and foreign currency transactions ($(771,897), as computed for federal tax purposes)

(771,897

)

Net change in unrealized appreciation of investments and translation of assets and liabilities in foreign currency

162,759

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(605,055

)

Share Transactions:

Proceeds from sale of shares

10,097,639

Change in net assets

9,492,584

Net Assets:

Beginning of period

End of period (including undistributed net investment income of $4,083)

9,492,584

1 Reflects operations for the period from May 1, 2000 (date of initial public investment) to June 30, 2000.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

Period Ended
(unaudited)
June 30,

2000

Net Asset Value, Beginning of Period

$10.00

Income From Investment Operations:

Net investment income

0.00

Net realized and unrealized gain (loss) on investments and foreign currency transactions

(0.61

)

TOTAL FROM INVESTMENT OPERATIONS

(0.61

)

Net Asset Value, End of Period

$ 9.39

Total Return³

(6.10%

)

Ratios to Average Net Assets:

Expenses

1.50

%⁴

Net investment income

0.27

%⁴

Expense waiver⁵

1.98

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$9,493

Portfolio turnover

1 Reflects operations for the period from May 1, 2000 (date of initial public investment) to June 30, 2000.

2 Amount represents less than $0.01 per share.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 portfolios. The financial statements included herein are only those of Federated International Small Company 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 long term growth of capital.

SIGNIFICANT ACCOUNTING POLICIES

Investment Valuation

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 foreign and domestic 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

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Expenses and Distributions

Federal Taxes

However, federal taxes may be imposed on the Fund upon the disposition of certain investments in passive foreign investment companies. Withholding taxes on foreign interest and dividends have been provided for in accordance with the 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 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 purposes as unrealized until the settlement date.

At June 30, 2000, the Fund had outstanding foreign currency commitments as set forth below:

Settlement Date

Contracts to
Deliver/Receive

In Exchange
For

Contracts at
Value

Unrealized
Appreciation
(Depreciation)

Contracts Purchased:

7/3/2000

3,287,191 Japanese Yen

$31,292

$30,981

$ (311

)

Contracts Sold:

7/3/2000

5,520 British Pound Sterling

8,247

8,352

(105

)

7/5/2000

7,200 British Pound Sterling

10,916

10,895

7/5/2000

7,192 Canadian Dollar

4,863

4,859

7/3/2000

90,560 Euro Dollar

85,484

86,457

(973

)

7/5/2000

23,715 Euro Dollar

22,568

22,641

(73

)

7/5/2000

3,962,383 Japanese Yen

37,642

37,344

298

7/5/2000

126,160 Swedish Krona

14,238

14,304

(66

)

NET UNREALIZED DEPRECIATION ON FOREIGN CURRENCY EXCHANGE CONTRACTS

$ (1,205

)

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. 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 a trade date basis.

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:

Period Ended
June 30, 2000¹

Shares sold

1,010,395

Shares issued to shareholders in payment of distributions declared

Shares redeemed

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

1,010,395

1 Reflects operations for the period from May 1, 2000 (date of initial public investment) to June 30, 2000.

INVESTMENT ADVISER 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 adviser fee equal to 1.25% 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

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund may 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, 2000, the Fund did not incur a shareholder services fee.

Transfer and Dividend Disbursing Agent Fees and Expenses

Portfolio Accounting Fees

FServ maintains the 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 (and in-kind contributions), for the period ended June 30, 2000, were as follows:

Purchases	$	13,529,456

Sales	$	3,876,912

RISK OF FOREIGN INVESTING

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

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated International Small Company Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 2000

Federated
Federated International Small Company Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor

Cusip 313916850

25671 (8/00)

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

We are pleased to present the first Semi-Annual Report of Federated Large Cap Growth Fund II, a portfolio of Federated Insurance Series.

This report covers the period from June 19, 2000 through June 30, 2000. It begins with a discussion by the fund's portfolio manager, James E. Grefenstette, Senior Vice President of Federated Investment Management Company, followed by a complete listing of the fund's growth stock holdings and financial statements.

The fund gives you the opportunity to pursue capital appreciation by owning shares of approximately 100 of the largest domestic companies in the growth universe--high-quality, well-established companies that have helped to power the stock market's exceptional growth in this past decade. These companies are typically world-class leaders with long histories of earnings and growth--vintage firms that have stood the test of time. They employ tens of thousands of people, have large domestic presences, and are expanding their markets around the globe. Their products are used worldwide, and their extensive distribution networks allow them to compete successfully in many countries and many industries. As the world continues to move toward a free market economy, these companies should be well positioned to benefit from growing overseas markets. At the end of the reporting period, the fund's portfolio held names like America Online, Bristol-Myers Squibb, Coca-Cola, Compaq Computer, Dell Computer, General Motors, Home Depot, Intel, Merck, Microsoft, Morgan Stanley Dean Witter, and Sprint.

During the very brief reporting period, the portfolio produced a total return of (2.10%) through a net asset value decrease of $0.21.¹ On June 30, 2000, net assets reached $4.1 million.

Of course, the fund is a long-term investment, and we continue to see significant day-to-day volatility in the stock market.

Thank you for entrusting a portion of your wealth to Federated Large Cap Growth Fund II. We welcome your comments and suggestions.

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

Investment Review

Federated Large Cap Growth Fund II was started as a fund on June 19, 2000. In the last two weeks of the quarter, the fund's total return was down (2.10%),¹ as was the Standard & Poor's ("S&P") 500 Index.²

The market's apprehension became manifest in March and was fueled by a variety of events, the most important of which was continued tightening by the Federal Reserve Board; with the prospects for more tightening through the summer. April and May were particularly challenging for faster growth stocks as inflation fears gained strength and investors fled higher price/earnings stocks in every sector. The beginning of June saw the start of a string of economic indicators that pointed to signs that the economy may be starting to cool off. The most prominent indicator was the non-farm payrolls, which showed that tight labor markets were starting to expand. With these signs, technology and other faster-growth stocks began to rally off their lows as we moved through June. The tale of the tape for the quarter, however, still belonged to the cyclicals and slower-growth stocks.

2 The S&P 500 Index 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.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Shares

Value

COMMON STOCKS--99.4%

Capital Goods--6.9%

1,700

General Electric Co.

90,100

2,100

Solectron Corp.

87,937

200

Sony Corp., ADR

18,862

1,800

Tyco International Ltd.

85,275

TOTAL

282,174

Communication Services--5.6%

600

Global Crossing Ltd.

15,788

300

Level 3 Communications, Inc.

26,400

300

NEXTEL Communications, Inc., Class A

18,356

300

Qwest Communications International, Inc.

14,906

1,500

Sprint PCS Group

89,250

300

Vodafone AirTouch PLC, ADR

12,431

200

VoiceStream Wireless Corp.

23,259

500

Williams Communications Group, Inc.

16,594

300

Worldcom, Inc.

13,763

TOTAL

230,747

Consumer Cyclicals--6.0%

500

Gap (The), Inc.

15,625

300

Home Depot, Inc.

14,981

1,500

Kohl's Corp.

83,438

300

Lowe's Cos., Inc.

12,319

200

Omnicom Group, Inc.

17,813

300

Target Corp.

17,400

1,500

Wal-Mart Stores, Inc.

86,438

TOTAL

248,014

Consumer Staples--12.8%

3,600

AT&T Corp. - Liberty Media Group, Inc., Class A

87,300

300

Cardinal Health, Inc.

22,200

300

Clear Channel Communications, Inc.

22,500

300

Coca-Cola Co.

17,231

1,500

Colgate-Palmolive Co.

89,813

400

Comcast Corp., Class A

16,200

300

Cox Communications, Inc., Class A

13,669

Shares

Value

COMMON STOCKS--continued

Consumer Staples--continued

500

Fox Entertainment Group, Inc., Class A

15,187

400

Infinity Broadcasting Corp., Class A

14,575

300

News Corp. Ltd., ADR

16,350

300

PepsiCo, Inc.

13,331

300

Safeway, Inc.

13,538

1,300

Viacom, Inc., Class B

88,644

500

Walgreen Co.

16,094

2,100

Walt Disney Co.

81,506

TOTAL

528,138

Energy--2.5%

300

Halliburton Co.

14,156

1,200

Schlumberger Ltd.

89,550

TOTAL

103,706

Financials--1.9%

300

Citigroup, Inc.

18,075

600

MBNA Corp.

16,275

300

Morgan Stanley, Dean Witter & Co.

24,975

500

Schwab (Charles) Corp.

16,813

TOTAL

76,138

Health Care--14.5%

1,300

Amgen, Inc.

91,325

300

Bristol-Myers Squibb Co.

17,475

200

Genentech, Inc.

34,400

500

HCA - The Healthcare Corp.

15,188

300

Immunex Corp.

14,831

900

Johnson & Johnson

91,688

1,000

Lilly (Eli) & Co.

99,875

1,200

Medimmune, Inc.

88,800

300

Medtronic, Inc.

14,944

300

Merck & Co., Inc.

22,988

1,900

Pfizer, Inc.

91,200

300

Pharmacia Corp.

15,506

TOTAL

598,220

Shares

Value

COMMON STOCKS--continued

Technology--47.2%

1,000

ADC Telecommunications, Inc.

83,875

200

Agilent Technologies, Inc.

14,750

900

Altera Corp.

91,744

300

America Online, Inc.

15,825

200

Analog Devices, Inc.

15,200

300

Apple Computer, Inc.

15,713

900

Applied Materials, Inc.

81,563

400

Broadcom Corp.

87,575

100

CIENA Corp.

16,669

1,500

Cisco Systems, Inc.

95,344

500

Compaq Computer Corp.

12,781

300

Computer Associates International, Inc.

15,356

300

Corning, Inc.

80,962

300

Dell Computer Corp.

14,794

1,200

EMC Corp. Mass

92,325

300

Exodus Communications, Inc.

13,819

300

Gateway, Inc.

17,025

200

General Motors Corp., Class H

17,550

700

Intel Corp.

93,581

800

JDS Uniphase Corp.

95,900

100

Juniper Networks, Inc.

14,556

300

LSI Logic Corp.

16,237

1,400

Linear Technology Corp.

89,512

300

Lucent Technologies, Inc.

17,775

300

Maxim Integrated Products, Inc.

20,381

400

Metromedia Fiber Network, Inc.

15,875

200

Micron Technology, Inc.

17,612

200

Microsoft Corp.

16,000

600

Motorola, Inc.

17,437

200

Network Appliance, Inc.

16,100

1,800

Nokia Oyj, Class A, ADR

89,887

1,300

Nortel Networks Corp.

88,725

1,100

Oracle Corp.

92,469

100

PMC-Sierra, Inc.

17,769

300

QUALCOMM Inc.

18,000

Shares or
Principal
Amount

Value

COMMON STOCKS--continued

Technology--continued

100

SDL, Inc.

28,519

100

Siebel Systems, Inc.

16,356

900

Sun Microsystems, Inc.

81,844

200

Sycamore Networks, Inc.

22,075

4,400

Telefonaktiebolaget LM Ericsson, Class B, ADR

88,000

300

Tellabs, Inc.

20,531

1,200

Texas Instruments, Inc.

82,425

200

VeriSign, Inc.

35,300

200

VERITAS Software Corp.

22,603

200

Xilinx, Inc.

16,512

100

Yahoo, Inc.

12,387

TOTAL

1,947,238

Utilities--2.0%

1,300

Enron Corp.

83,850

TOTAL COMMON STOCKS (IDENTIFIED COST $4,112,182)

4,098,225

REPURCHASE AGREEMENT--6.5%²

270,000

Warburg Dillon Reed LLC, 6.90%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

270,000

TOTAL INVESTMENTS (IDENTIFIED COST $4,382,182)³

4,368,225

1 Non-income producing security.

2 The repurchase agreement is fully collateralized by U.S. Treasury 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 $4,382,182. The net unrealized depreciation of investments on a federal tax basis amounts to $13,957 which is comprised of $108,181 appreciation and $122,138 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($4,123,713) at June 30, 2000.

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, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $4,382,182)

4,368,225

Cash

251

Receivable for investments sold

1,049,932

Income receivable

253

TOTAL ASSETS

5,418,661

Liabilities:

Payable for investments purchased

1,294,076

Accrued expenses

872

TOTAL LIABILITIES

1,294,948

Net assets for 421,138 shares outstanding

4,123,713

Net Assets Consist of:

Paid-in capital

4,205,320

Net unrealized depreciation of investments

(13,957

)

Accumulated net realized loss on investments

(68,580

)

Undistributed net investment income

930

TOTAL NET ASSETS

4,123,713

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$4,123,713 ÷ 421,138 shares outstanding

$9.79

See Notes which are an integral part of the Financial Statements

Statement of Operations

PERIOD ENDED JUNE 30, 2000 (UNAUDITED)¹

Investment Income:

Dividends

201

Interest

1,706

TOTAL INCOME

1,907

Expenses:

Investment adviser fee

918

Administrative personnel and services fee

3,757

Custodian fees

100

Transfer and dividend disbursing agent fees and expenses

100

Directors'/Trustees' fees

Auditing fees

106

Legal fees

Portfolio accounting fees

211

Share registration costs

107

Printing and postage

Insurance premiums

Miscellaneous

TOTAL EXPENSES

5,387

Waiver and Reimbursement:

Waiver of investment adviser fee

(918

)

Reimbursement of other operating expenses

(3,492

)

TOTAL WAIVER AND REIMBURSEMENT

(4,410

)

Net expenses

977

Net investment income

930

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(68,580

)

Net change in unrealized depreciation of investments

(13,957

)

Net realized and unrealized loss on investments

(82,537

)

Change in net assets resulting from operations

(81,607

)

1 Reflects operations for the period from June 19, 2000 (date of initial public investment) to June 30, 2000.

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Period Ended
(unaudited)
June 30, 2000

Increase (Decrease) in Net Assets

Operations:

Net investment income

930

Net realized loss on investments ($(68,580), as computed for federal tax purposes)

(68,580

)

Net change in unrealized depreciation of investments

(13,957

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

(81,607

)

Share Transactions:

Proceeds from sale of shares

4,205,320

Change in net assets

4,123,713

Net Assets:

Beginning of period

End of period (including undistributed net investment income of $930)

4,123,713

1 Reflects operations for the period from June 19, 2000 (date of initial public investment) to June 30, 2000.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

Period Ended
(unaudited)
June 30, 2000

Net Asset Value, Beginning of Period

$10.00

Income From Investment Operations:

Net investment income

0.00

Net realized and unrealized loss on investments

(0.21

)

Net Asset Value, End of Period

$ 9.79

Total Return³

(2.10%

)

Ratios to Average Net Assets:

Expenses

0.90

%⁴

Net investment income

0.86

%⁴

Expense waiver/reimbursement⁵

4.08

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$4,124

Portfolio turnover

1 Reflects operations for the period from June 19, 2000 (date of initial public investment) to June 30, 2000.

2 Represents less than $0.01 per share.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 portfolios. The financial statements included herein are only those of Federated Large Cap Growth 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

Repurchase Agreements

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more 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 a trade date basis.

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:

Period Ended
June 30, 2000

Shares sold

421,138

Shares issued to shareholders in payment of distributions declared

Shares redeemed

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

421,138

1 Reflects operations for the period from June 19, 2000 (date of initial public investment) to June 30, 2000.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.85% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and /or reimbursement at any time at its sole discretion.

Administrative Fee

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, annually, to compensate FSC. For the period ended June 30, 2000, the Fund did not incur a distribution services 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 (and in-kind contributions), for the period ended June 30, 2000, were as follows:

Purchases	$	5,230,693

Sales	$	1,049,932

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Large Cap Growth Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT
TO SHAREHOLDERS

JUNE 30, 2000

Federated
Federated Large Cap Growth Fund II
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com
Federated Securities Corp., Distributor

Cusip 313916835

25669 (8/00)

SEMI-ANNUAL REPORT

President's Message

Dear Shareholder:

We are pleased to present the first Semi-Annual Report to Shareholders for Federated Strategic Income Fund II, a portfolio of Federated Insurance Series.

This report covers the six-month reporting period from January 1, 2000 through June 30, 2000. It begins with commentary by the fund's portfolio manager, which is followed by a complete listing of the portfolio's holdings and its financial statements.

Federated Strategic Income Fund II is managed to offer shareholders generous income opportunities from three distinct bond markets--domestic high yield, U.S. high quality corporate bonds, and international corporate and government bonds.¹

During the six-month reporting period, the fund recorded a total return of 2.07%² and earned dividend income of $0.362 per share. Its net asset value declined from $10.37 at the beginning of the period to $10.22 at the end of the reporting period. As of June 30, 2000, the fund's net assets grew to $17.0 million.

Thank you for choosing Federated Strategic Income Fund II as a diversified, professionally managed way to participate in the income opportunities of three distinct sectors of the bond market.

Sincerely,

J. Christopher Donahue

J. Christopher Donahue
President
August 15, 2000

1 International investing involves special risks including currency risk, increased volatility of foreign securities, and differences in auditing and other financial standards. Lower rated bonds involve a higher degree of risk than investment grade bonds in return for higher yield potential.

Investment Review

The six-month reporting period was one of more moderate economic growth and mixed price performance for most high quality fixed income sectors. While the economy continued to move forward, the pace of advance slowed (5.00% annual rate) from the rapid acceleration experienced in the prior six months (7.00% annual rate). The Treasury yield curve inverted dramatically, on a significant pickup in Treasury debt buybacks and reduced new issuance, compared to being slightly positively sloped at year-end. Two-year Treasury yields rose 12 basis points during the first half of the year while 30-year Treasuries fell 58 basis points.

The Federal Reserve Board (the "Fed") increased the federal funds target rate at the February, March and May Federal Open Market Committee meetings, while concluding that no change was necessary at its late June meeting. The federal funds target rate now stands at 6.50%. Generally speaking, the six interest rate hikes executed over the past year appear to be having the desired effect of slowing consumer spending and thus, overall economic growth. Particularly noteworthy are slowdowns in such consumer indicators as housing and auto sales. Inflation continues to remain a concern, with a tight labor market and oil prices holding above $30 per barrel at quarter end, as was further accentuated by the Fed's narrative release after the June 28th meeting that a tightening bias remained in place.

Both the high yield and emerging debt markets produced strong returns in the month of June and may be poised to continue over the next quarter. High yield mutual fund cash flows moved positive late in the quarter; a continuation of positive flows would serve to strengthen the market. Emerging economies continued to rebound worldwide providing a fundamental underpinning to the market.

The fund passed the one year-old mark on July 7, 2000 with performance slightly behind the blended indices.¹ The fund had a total return of 2.07%² over the six-month reporting period compared to the blended indices' return of 3.35%. The bulk of the underperformance was due to the emerging markets and high yield components of the portfolio. The portfolio's performance was inline with most other fixed income indices, which experienced subdued total returns in the face of rising interest rates. For example, the Lehman Brothers Intermediate Govt./Corp. Bond Index had a total return of 3.23% and the Lehman Brothers Credit Bond Index had a total return of 2.68% for the first six months of the year.³

Looking ahead, transactions will focus on maintaining the equal weighting in all three sectors. Despite the fund's underperformance, our proprietary research still indicates this mix should be a winning combination over the long-haul. We view the high yield sector as one of the cheaper sectors in the bond market at this time and expect better performance from this portion of the portfolio later this year.

1 The J.P. Morgan Global (ex-U.S.) Government Index is the standard unmanaged foreign securities index representing major government bond markets. Lehman Brothers Single B Index is a proprietary unmanaged index of Single B rated securities. Lehman Brothers Mortgage-Backed Securities Index is an unmanaged index composed of all fixed securities mortgage pools by GNMA, FNMA and the FLHMC, including GNMA Graduated Payment Mortgages. Investments cannot be made in an index.

3 Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged index comprised of all bonds with maturities between 1 and 9.99 years. Lehman Brothers Credit Bond Index is an unmanaged index composed of all publicly issued, fixed-rate, nonconvertible, investment-grade corporate debt. Issues are rated at least Baa by Moody's Investors Service or BBB by Standard & Poor's, if unrated by Moody's. Collateralized Mortgage Obligations (CMOs) are not included. Investments cannot be made in an index.

Portfolio of Investments

JUNE 30, 2000 (UNAUDITED)

Principal
Amount

Value in
U.S. Dollars

U.S. CORPORATE BONDS--29.2%

Aerospace & Defense--0.3%

50,000

Anteon Corp., Sr. Sub. Note, 12.00%, 5/15/2009

46,000

Automotive--1.1%

50,000

Aftermarket Technology Corp., Sr. Sub. Note, Series D, 12.00%, 8/1/2004

50,250

50,000

American Axle & Manufacturing, Inc., Sr. Sub. Note, Company Guarantee, 9.75%, 3/01/2009

47,125

100,000

Lear Corp., Sr. Note, 8.11%, 5/15/2009

91,574

TOTAL

188,949

Banking--0.5%

100,000

GS Escrow Corp., Sr. Note, 7.125%, 8/01/2005

89,098

Broadcast Radio & TV--1.0%

100,000

Chancellor Media Corp., Sr. Sub. Note, Series B, 8.125%, 12/15/2007

100,875

50,000

Orion Network Systems, Sr. Note, 11.25%, 1/15/2007

29,250

50,000

Sinclair Broadcast Group, Sr. Sub. Note, 8.75%, 12/15/2007

44,250

TOTAL

174,375

Building & Development--0.2%

50,000

Formica Corp., Sr. Sub. Note, Series B, 10.875%, 3/01/2009

38,750

Business Equipment & Services--0.7%

50,000

Buhrmann US, Inc., Sr. Sub. Note, 12.25%, 11/01/2009

52,250

50,000

Fisher Scientific International, Inc., Sr. Sub. Note, 9.00%, 2/01/2008

46,625

50,000

U.S. Office Products Co., Sr. Sub. Note, 9.75%, 6/15/2008

11,250

TOTAL

110,125

Cable Television--3.0%

100,000

CSC Holdings, Inc., Sr. Sub. Note, 9.875%, 5/15/2006

101,000

100,000

Charter Communications, Inc., Sr. Disc. Note, 0/9.92%, 4/01/2011

57,250

100,000

EchoStar DBS Corp., Sr. Note, 9.375%, 2/01/2009

97,500

150,000

NTL, Inc., Sr. Note, 0/9.75%, 4/01/2008

94,500

50,000

Pegasus Communications Corp., Sr. Note, 9.75%, 12/01/2006

48,500

75,000

RCN Corp., Sr. Note, 0/11.00%, 7/01/2008

40,875

100,000

United International Holdings, Inc., Sr. Secd. Disc. Note, 0/10.75%, 2/15/2008

69,500

TOTAL

509,125

Principal
Amount

Value in
U.S. Dollars

U.S. CORPORATE BONDS--continued

Chemicals & Plastics--1.7%

50,000

Huntsman ICI Chemicals, Inc., Sr. Sub. Note, 10.125%, 7/01/2009

50,500

50,000

ISP Holdings, Inc., Sr. Note, Series B, 9.00%, 10/15/2003

46,500

100,000

Lyondell Chemical Co., Sr. Secd. Note, Series A, 9.625%, 5/01/2007

99,500

50,000

Polymer Group, Inc., Sr. Sub. Note, Series B, 8.75%, 3/01/2008

42,250

50,000

Texas Petrochemicals Corp., Sr. Sub. Note, 11.125%, 7/01/2006

42,750

TOTAL

281,500

Clothing & Textiles--0.2%

50,000

GFSI, Inc., Sr. Sub. Note, Series B, 9.625%, 3/1/2007

36,250

Consumer Products--2.2%

50,000

Albecca, Inc., Company Guarantee, 10.75%, 8/15/2008

42,250

50,000

Chattem, Inc., Sr. Sub. Note, 8.875%, 4/01/2008

40,250

50,000

Jostens, Inc., Unit, 12.75%, 5/01/2010

49,750

50,000

NBTY, Inc., Sr. Sub. Note, Series B, 8.625%, 9/15/2007

43,750

50,000

Playtex Family Products Corp., Sr. Sub. Note, 9.00%, 12/15/2003

48,750

50,000

Revlon Consumer Products Corp., Sr. Sub. Note, 8.625%, 2/01/2008

25,500

50,000

Sleepmaster LLC, Sr. Sub. Note, 11.00%, 5/15/2009

47,250

50,000

True Temper Sports, Inc., Sr. Sub. Note, Series B, 10.875%, 12/01/2008

49,250

50,000

United Industries Corp., Sr. Sub. Note, Series B, 9.875%, 4/01/2009

30,250

TOTAL

377,000

Container & Glass Products--1.1%

50,000

Huntsman Packaging Corp., Unit, 13.00%, 6/01/2010

51,500

100,000

Owens-Illinois, Inc., Sr. Note, 8.10%, 5/15/2007

93,984

50,000

Russell Stanley Holdings, Inc., Sr. Sub. Note, 10.875%, 2/15/2009

34,250

TOTAL

179,734

Ecological Services & Equipment--0.5%

50,000

Allied Waste North America, Sr. Sub. Note, 10.00%, 8/01/2009

42,000

50,000

Allied Waste North America, Company Guarantee, Sr. Note, 7.625%, 1/01/2006

43,750

TOTAL

85,750

Electronics--1.4%

50,000

Exodus Communications, Inc., Sr. Note, 11.625%, 7/15/2010

50,500

50,000

Fairchild Semiconductor Corp., Sr. Sub. Note, 10.375%, 10/01/2007

50,750

50,000

Flextronics International Ltd., Sr. Sub. Note, 9.875%, 7/01/2010

50,875

32,000

SCG Holding Corp., Sr. Sub. Note, 12.00%, 8/01/2009

34,400

50,000

Telecommunications Techniques Co. LLC, Sr. Sub. Note, 9.75%, 5/15/2008

46,250

TOTAL

232,775

Principal
Amount

Value in
U.S. Dollars

U.S. CORPORATE BONDS--continued

Farming & Agriculture--0.3%

50,000

Royster-Clark, Inc., 1st Mtg. Note, 10.25%, 4/01/2009

40,750

Food & Drug Retailers--0.2%

50,000

Del Monte Foods Co., Sr. Disc. Note, Series B, 0/12.50%, 12/15/2007

38,125

Food Products--0.6%

50,000

International Home Foods, Inc., Sr. Sub. Note, 10.375%, 11/1/2006

53,750

50,000

Triarc Consumer Products Group, Sr. Sub. Note, 10.25%, 2/15/2009

48,500

TOTAL

102,250

Food Services--0.5%

50,000

Carrols Corp., Company Guarantee, 9.50%, 12/01/2008

41,750

50,000

Domino's, Inc., Company Guarantee, Sr. Sub. Note, 10.375%, 1/15/2009

46,625

TOTAL

88,375

Health Care--2.0%

100,000

Columbia HCA Healthcare Corp., Sr. Note, 6.91%, 6/15/2005

91,454

50,000

CONMED Corp., Sr. Sub. Note, 9.00%, 3/15/2008

46,000

50,000

Hanger Orthopedic Group, Inc., Sr. Sub. Note, 11.25%, 6/15/2009

43,750

50,000

Hudson Respiratory Care, Inc., Sr. Sub. Note, 9.125%, 4/15/2008

35,250

50,000

Kinetic Concepts, Inc., Sr. Sub. Note, Company Guarantee, Series B, 9.625%, 11/01/2007

37,250

100,000

Tenet Healthcare Corp., Sr. Sub. Note, Series B, 8.125%, 12/01/2008

92,500

TOTAL

346,204

Hotels, Motels, Inns & Casinos--0.8%

50,000

Florida Panthers Holdings, Inc., Series 2009, Company Guarantee, Sr. Sub. Note, 9.875%, 4/15/2009

47,125

100,000

HMH Properties, Inc., Sr. Note, Series A, 7.875%, 8/01/2005

92,500

TOTAL

139,625

Industrial Products & Equipment--1.1%

50,000

Blount, Inc., Sr. Sub. Note, 13.00%, 8/01/2009

51,250

50,000

Neenah Foundry Co., Sr. Sub. Note, 11.125%, 5/01/2007

38,500

50,000

Unifrax Investment Corp., Sr. Note, 10.50%, 11/1/2003

46,750

50,000

WESCO Distribution, Inc., Sr. Sub. Note, 9.125%, 6/01/2008

46,000

TOTAL

182,500

Leisure & Entertainment--0.4%

100,000

Premier Parks, Inc., Sr. Disc. Note, 10.00%, 4/01/2008

68,750

Principal
Amount

Value in
U.S. Dollars

U.S. CORPORATE BONDS--continued

Machinery & Equipment--0.5%

50,000

Fairchild Corp., Sr. Sub. Note, 10.75%, 4/15/2009

33,750

50,000

United Rentals, Inc., Sr. Sub. Note, Company Guarantee, 9.25%, 1/15/2009

45,250

TOTAL

79,000

Oil & Gas--0.9%

50,000

Forest Oil Corp., Sr. Sub. Note, 10.50%, 1/15/2006

51,125

50,000

RBF Finance Co., Company Guarantee, Sr. Secd. Note, 11.375%, 3/15/2009

54,250

50,000

Triton Energy Ltd., Sr. Note, 8.75%, 4/15/2002

49,750

TOTAL

155,125

Printing & Publishing--0.3%

50,000

Garden State Newspapers, Inc., Sr. Sub. Note, Series B, 8.75%, 10/1/2009

45,750

Services--1.5%

50,000

Crown Castle International Corp., Sr. Disc. Note, 0/11.25%, 8/01/2011

31,250

50,000

Orius Capital Corp., Sr. Sub. Note, 12.75%, 2/01/2010

51,750

50,000

SITEL Corp., Sr. Sub. Note, 9.25%, 3/15/2006

45,750

50,000

SpectraSite Holdings, Inc., Sr. Disc. Note, 3/15/2010

27,750

100,000

URS Corp., Sr. Sub. Note, Series B, 12.25%, 5/01/2009

101,500

TOTAL

258,000

Telecommunication & Cellular--5.4%

100,000

Intermedia Communications, Inc., Sr. Sub. Disc. Note, Series B, 0/12.25%, 3/01/2009

59,500

100,000

Level 3 Communications, Inc., Sr. Note, 9.125%, 5/01/2008

90,250

50,000

McLeod USA, Inc., Sr. Note, 8.125%, 2/15/2009

45,250

50,000

Metromedia Fiber Network, Inc., Sr. Note, 10.00%, 12/15/2009

49,250

50,000

NEXTEL Communications, Inc., Sr. Note, 9.375%, 11/15/2009

48,250

150,000

NEXTEL Communications, Inc., Sr. Disc. Note, 0/10.65%, 9/15/2007

118,500

150,000

NEXTLINK Communications, Inc., Sr. Disc. Note, 0/12.25%, 6/01/2009

93,750

50,000

Northpoint Communications Group, Inc., Sr. Note, 12.875%, 2/15/2010

36,250

50,000

PsiNet, Inc., Sr. Note, 11.00%, 8/01/2009

47,000

50,000

Teligent, Inc., Sr. Note, 11.50%, 12/1/2007

39,750

50,000

Triton PCS Holdings, Inc., Sr. Sub. Disc. Note, 0/11.00%, 5/01/2008

36,750

50,000

Verio, Inc., Sr. Note, 10.625%, 11/15/2009

55,250

50,000

Viatel, Inc., Sr. Note, 11.50%, 3/15/2009

38,250

50,000

VoiceStream Wireless Corp., Sr. Note, 10.375%, 11/15/2009

52,250

50,000

Williams Communications Group, Sr. Note, 10.875%, 10/01/2009

49,000

Principal
Amount

Value in
U.S. Dollars

U.S. CORPORATE BONDS--continued

Telecommunication & Cellular--continued

74,000

WinStar Communications, Inc., Sr. Sub. Defd. Deb., 0/11.00%, 4/15/2010

35,520

25,000

WinStar Communications, Inc., 12.75%, 4/15/2010

24,250

TOTAL

919,020

Utilities--0.8%

100,000

CMS Energy Corp., Sr. Note, 7.50%, 1/15/2009

89,644

50,000

El Paso Electric Co., 1st Mtg. Note, Series E, 9.40%, 5/1/2011

52,726

TOTAL

142,370

TOTAL U.S. CORPORATE BONDS (IDENTIFIED COST $5,294,983)

4,955,275

INTERNATIONAL BONDS--35.0%

ARGENTINA--1.6%

Sovereign--1.6%

300,000

Argentina, Government of, Bond, 11.75%, 6/15/2015

272,250

BELGIUM--0.3%

Telecommunication & Cellular--0.3%

50,000

Hermes Europe Railtel B.V., Sr. Note, 11.50%, 8/15/2007

44,000

BERMUDA--0.6%

Surface Transportation--0.3%

50,000

Gearbulk Holding Ltd., Sr. Note, 11.25%, 12/1/2004

50,625

Telecommunication & Cellular--0.3%

50,000

Global Crossing Holdings Ltd., Sr. Note, 9.50%, 11/15/2009

48,250

TOTAL

98,875

BRAZIL--6.3%

Sovereign--6.3%

125,000

Brazil, Government of, Brady DCB, 7.00%, 4/15/2012

92,255

651,000

Brazil, Government of, Brady EI, Series EI-L, 6.94%, 4/15/2006

594,038

490,000

Brazil, Government of, 10.125%, 5/15/2027

384,650

TOTAL

1,070,943

BULGARIA--1.2%

Sovereign--1.2%

250,000

Bulgaria, Government of, Brady Disc., 7.06%, Series A, 7/28/2024

199,971

Principal
Amount

Value in
U.S. Dollars

INTERNATIONAL BONDS--continued

CANADA--1.2%

Telecommunication & Cellular--0.9%

100,000

Call-Net Enterprises, Inc., Sr. Disc. Note, 0/9.27%, 8/15/2007

47,870

100,000

Rogers Cantel, Inc., Sr. Sub. Note, 8.80%, 10/1/2007

100,000

TOTAL

147,870

Real Estate--0.3%

50,000

Trizec Finance, Sr. Note, 10.875%, 10/15/2005

50,500

TOTAL CANADA

198,370

LUXEMBOURG--0.2%

Telecommunication & Cellular--0.2%

50,000

Millicom International Cellular SA, Sr. Disc. Note, 0/13.50%, 6/1/2006

42,750

MEXICO--6.8%

Sovereign--4.2%

850,000

Mexico Government of, Brady Par, Series W-B, 6.25%, 12/31/2019

709,750

Telecommunication & Cellular--2.6%

500,000

Alestra SA, Sr. Note, 12.625%, 5/15/2009

450,000

TOTAL

1,159,750

MOROCCO--3.4%

Sovereign--3.4%

639,474

Morocco, FRN, 6.84%, 1/1/2009

572,329

NETHERLANDS--0.1%

Cable Television--0.1%

50,000

United Pan-Europe Communications, Sr. Disc. Note, Series B, 11/01/2009

24,500

PANAMA--0.7%

Sovereign--0.7%

150,000

Panama, Government of, Bond, 8.875%, 9/30/2027

126,324

PERU--3.4%

Sovereign--3.4%

950,000

Peru, Government of, Brady Bond, 4.50%, 3/07/2017

571,188

PHILIPPINES--1.4%

Sovereign--1.4%

250,000

Philippines, Government of, 8.875%, 4/15/2008

231,056

Principal
Amount

Value in
U.S. Dollars

INTERNATIONAL BONDS--continued

RUSSIA--2.7%

Sovereign--2.7%

200,000

Russia, Government of, Series REGS, 11.00%, 7/24/2018

148,055

200,000

Russia, Government of, Unsub., Series REGS, 12.75%, 6/24/2028

172,436

175,000

Russia, Government of, Unsub., Series REGS, 8.75%, 7/24/2005

135,063

TOTAL

455,554

SOUTH AFRICA--2.0%

Sovereign--2.0%

350,000

South Africa, Government of, Sr. Unsub., 9.125%, 5/19/2009

342,125

SWEDEN--0.3%

Surface Transportation--0.3%

50,000

Stena AB, Sr. Note, 8.75%, 6/15/2007

44,000

TURKEY--1.2%

Sovereign--1.2%

200,000

Turkey, Government of, Sr. Unsub., 11.875%, 1/15/2030

212,500

VENEZUELA--1.6%

Sovereign--1.6%

200,000

Venezuela, Government of, Bond, 9.25%, 9/15/2027

131,690

178,570

Venezuela, Government of, FRN Deb., 12/18/2007

145,758

TOTAL

277,448

TOTAL INTERNATIONAL BONDS (IDENTIFIED COST $5,722,992)

5,943,933

U.S. GOVERNMENT AGENCIES--31.8%

Long-Term Government Obligations--31.8%

953,678

Federal Home Loan Mortgage Corporation, 6.50%, 4/1/2015

920,004

1,548,752

Federal National Mortgage Association, 6.50%, 4/1/2029

1,460,178

945,619

Federal National Mortgage Association, 7.00%, 6/1/2029

912,815

238,152

Federal National Mortgage Association, 7.50%, 10/1/2029

234,727

153,285

Government National Mortgage Association, 7.00%, 9/15/2029

149,022

837,564

Government National Mortgage Association, 7.50%, 2/15/2028

831,542

Principal
Amount

Value in
U.S. Dollars

U.S. GOVERNMENT AGENCIES--continued

Long-Term Government Obligations--continued

403,742

Government National Mortgage Association, 8.00%, 12/15/2023

410,177

216,623

Government National Mortgage Association, 8.00%, 8/15/2029

218,924

124,602

Government National Mortgage Association, 8.00%, 2/15/2030

125,925

137,196

Government National Mortgage Association, 8.50%, 11/15/2029

140,412

TOTAL U.S. GOVERNMENT AGENCIES (IDENTIFIED COST $5,481,250)

5,403,726

REPURCHASE AGREEMENT--2.6%²

440,000

Warburg Dillon Reed LLC, 6.900%, dated 6/30/2000, due 7/3/2000 (at amortized cost)

440,000

TOTAL INVESTMENTS (IDENTIFIED COST $16,939,225)³

16,742,934

3 The cost of investments for federal tax purposes amounts to $16,939,225. The net unrealized depreciation of investments on a federal tax basis amounts to $196,291 which is comprised of $406,999 appreciation and $603,290 depreciation at June 30, 2000.

Note: The categories of investments are shown as a percentage of net assets ($16,977,469) at June 30, 2000.

The following acronym is used throughout this portfolio:

FRN	--Floating Rate Note

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JUNE 30, 2000 (UNAUDITED)

Assets:

Total investments in securities, at value (identified and tax cost $16,939,225)

16,742,934

Cash

1,344

Income receivable

261,699

Receivable for investments sold

130,748

Prepaid expenses

32,499

TOTAL ASSETS

17,169,224

Liabilities:

Payable for investments purchased

180,748

Accrued expenses

11,007

TOTAL LIABILITIES

191,755

Net assets for 1,660,705 shares outstanding

16,977,469

Net Assets Consist of:

Paid-in capital

16,643,231

Net unrealized depreciation of investments

(196,291

)

Accumulated net realized loss on investments

(162,836

)

Undistributed net investment income

693,365

TOTAL NET ASSETS

16,977,469

Net Asset Value, Offering Price and Redemption Proceeds Per Share:

$16,977,469 ÷ 1,660,705 shares outstanding

$10.22

See Notes which are an integral part of the Financial Statements

Statement of Operations

SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)

Investment Income:

Interest

763,613

Expenses:

Investment adviser fee

69,753

Administrative personnel and services fee

62,137

Custodian fees

2,712

Transfer and dividend disbursing agent fees and expenses

9,806

Directors'/Trustees' fees

417

Auditing fees

6,140

Legal fees

3,213

Portfolio accounting fees

19,494

Share registration costs

Printing and postage

8,016

Insurance premiums

631

Miscellaneous

2,637

TOTAL EXPENSES

185,000

Waiver and reimbursement:

Waiver of investment adviser fee

(69,753

)

Reimbursement of other operating expenses

(45,134

)

TOTAL WAIVER AND REIMBURSEMENT

(114,887

)

Net expenses

70,113

Net investment income

693,500

Realized and Unrealized Loss on Investments:

Net realized loss on investments

(162,055

)

Net change in unrealized depreciation of investments

(180,154

)

Net realized and unrealized loss on investments

(342,209

)

Change in net assets resulting from operations

351,291

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

Six Months
Ended
(unaudited)
June 30,
2000

Period Ended
December 31,
1999

Increase (Decrease) in Net Assets

Operations:

Net investment income

693,500

586,334

Net realized gain (loss) on investments ($(162,055) and $3,560, respectively, as computed for federal tax purposes)

(162,055

)

3,415

Net change in unrealized depreciation

(180,154

)

(16,137

)

CHANGE IN NET ASSETS RESULTING FROM OPERATIONS

351,291

573,612

Distributions to Shareholders:

Distributions from net investment income

(586,795

)

Distributions from net realized gains

(3,870

)

CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS

(590,665

)

Share Transactions:

Proceeds from sale of shares

1,451,182

15,587,172

Net asset value of shares issued to shareholders in payment of distributions declared

47,213

Cost of shares redeemed

(440,875

)

(1,461

)

CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS

1,057,520

15,585,711

Change in net assets

818,146

16,159,323

Net Assets:

Beginning of period

16,159,323

End of period (including undistributed net investment income of $693,365 and $586,660, respectively)

16,977,469

16,159,323

1 For the period from July 7, 1999 (date of initial public investment) to December 31, 1999.

See Notes which are an integral part of the Financial Statements

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Six Months
Ended
(unaudited)
June 30,

Period Ended
December 31,

2000

1999

Net Asset Value, Beginning of Period

$10.37

$10.00

Income From Investment Operations:

Net investment income

0.40

0.38

Net realized and unrealized loss on investments

(0.19

)

(0.01

)

TOTAL FROM INVESTMENT OPERATIONS

0.21

0.37

Less Distributions:

Distributions from net investment income

(0.36

)

Distributions from net realized gains

(0.00

)²

TOTAL DISTRIBUTIONS

(0.36

)

Net Asset Value, End of Period

$10.22

$10.37

Total Return³

2.07

3.70

Ratios to Average Net Assets:

Expenses

0.85

%⁴

0.85

%⁴

Net investment income

8.45

%⁴

7.89

%⁴

Expense waiver/reimbursement⁵

1.40

%⁴

1.73

%⁴

Supplemental Data:

Net assets, end of period (000 omitted)

$16,977

$16,159

Portfolio turnover

1 For the period from July 7, 1999 (date of initial public investment) to December 31, 1999.

2 Less than $0.01 per share.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JUNE 30, 2000 (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 13 portfolios. The financial statements included herein are only those of Federated Strategic 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 seek a high level of current income.

SIGNIFICANT ACCOUNTING POLICIES

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

Investment Valuations

U.S. government securities, listed corporate bonds, (other fixed income and asset-backed securities), and unlisted securities and private placement securities are generally valued at the mean of the latest bid and asked price as furnished by an independent pricing service. 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

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. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more 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. 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 a trade date basis.

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:

Six Months
Ended
June 30,
2000

Period Ended
December 31,
1999

Shares sold

141,670

1,558,185

Shares issued to shareholders in payment of distributions declared

4,628

Shares redeemed

(43,630

)

(148

)

NET CHANGE RESULTING FROM SHARE TRANSACTIONS

102,668

1,558,037

1 Reflects operations for the period from July 7, 1999 (date of initial public investment) to December 31, 1999.

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.85% 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.

Under the terms of a sub-adviser agreement between the Adviser and Federated Global Investment Management Corp. ("FGIMC"), FGIMC receives an allocable portion of the Fund's adviser fee. Such allocation is based on the amount of foreign securities which FGIMC manages for the Fund. This fee is paid by the Adviser out of its resources and is not an incremental Fund expense.

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. For the six-month period ended June 30, 2000, the Fund's shares did not incur a 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 shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. For six-month period ended June 30, 2000, the Fund's shares did not incur a shareholder services fee. 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.

Interfund Transactions

During the six-month period ended June 30, 2000, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions complied with Rule 17a-7 under the Act and amounted to $1,248,914 and $975,016 respectively.

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 (and in-kind contributions), for the six-month period ended June 30, 2000, were as follows:

Purchases	$	5,728,998
Sales	$	4,773,367

Trustees

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

JOHN F. CUNNINGHAM

J. CHRISTOPHER DONAHUE

LAWRENCE D. ELLIS, M.D.

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

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

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

AMANDA J. REED

Assistant Secretary

Federated
World-Class Investment Manager

SEMI-ANNUAL REPORT

Federated Strategic Income Fund II

Federated Insurance Series

SEMI-ANNUAL REPORT TO SHAREHOLDERS

JUNE 30, 2000

Federated
Federated Strategic 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 313916868

25670 (8/00)